While more numerous than the feasibility stage projects covered in the first article in this series, PFS-stage projects still represent a finite universe of quality ventures moving towards development.

Mining Journal has identified 18 PFS-stage projects in the Americas in the hands of junior miners, representing some 83Moz of aggregate potential production, some 3.4Moz of potential annual gold production, and US$14.7 billion of initial capital expenditure, an average capital efficiency of $141.8/oz, average AISC of $787.7/oz, and IRR of 23.53%.

There are nine projects in Latin America, five in Canada and four in the US.

In summary: two projects have already been taken over, five look set to be developed by their current owners, and six are going nowhere fast.

Top of the reserves list are KSM (38.8Moz), Metates (18.3Moz) and Lobo Marte (6.4Moz). In terms of grade, the leaders are Copperstone (6.8 grams per tonne), Romero (4.9g/t) and Bradshaw (4.8/t). The costliest projects to develop are KSM ($5 billion), Metates ($3.5 billion) and Livengood ($1.8 billion) with the least capital efficient projects being Livengood ($270/oz), Lobo Marte ($221.1/oz) and Metates ($212.6/oz).

The lowest AISC is Romero at $595/oz, followed by Gramalote at $648/oz and Springpole at $645/oz. At the other end of the scale San Francisco is $1,204/oz, Fenix $997/oz and Livengood $976/oz. Hasbrouck has the highest IRR of 43% followed by South Railroad and Copperstone with 40%.

So much for the numbers, but which projects are likely to be built or acquired?

The projects at PFS stage represent a mixed bag of development opportunities: 12 projects feature production of more than 80,000oz a year, with five at about 300,000oz/y or above. Five have capex of around $1 billion or more and four are decidedly marginal with IRR in single digits and two that don't even have an IRR!

Poor IRR removes Metates, KSM, San Francisco and Livengood from consideration as development possibilities or acquisition targets, although, as noted in the previous article, metals prices are considerably higher now than the $1,250-1,400/oz reference prices used in their studies. These are marginal projects with room for improvement and have maximum leverage to higher gold prices. That said, a negative net present value at Livengood and negative cash flows at San Francisco are non-starters under their current project concepts.

Metates and KSM (Kerr, Sulphurets, Mitchell) have large-scale production potential but are hampered by excessive initial capital requirements of $3.5 billion and $5 billion, respectively, which, economics aside, make them challenging projects to finance. Chesapeake Gold has a market cap of C$257 million and Seabridge C$1.9 billion. In a market where the gold majors continue to exercise capital discipline projects with such capex would be challenging even with amazing economics. Cognisant of this fact, Chesapeake Gold entered into an agreement to acquire private mining technology company Alderley Gold in December 2020 to gain access to an innovative precious metals processing technology which may create a path towards a low-cost sulphide heap leach development for its Metates gold-silver-zinc deposit in Durango, Mexico.

KSM in British Columbia, Canada, may be the world's largest undeveloped project by gold resources but Seabridge Gold has also looked to pivot through the $100 million acquisition of the nearby Snowfield deposit in late 2020. Snowfield has a measured and indicated resource of 25.9Moz and 9Moz inferred, plus copper, and is expected to enhance KSM project economics. Seabridge is working on an updated PFS to incorporate Snowfield into the KSM mine plan, which could bring higher-grade gold into the initial phase of mining, extend the years KSM produces over 1Moz/y of gold and potentially postpone the capital-intensive development of the Iron Cap and Deep Kerr block caves until much later.

The PFS stage projects have an aggregate IRR of 29.4%, compared with the 29% average for the feasibility stage projects, with the five standouts being Hasbrouck (43%), Copperstone (40%), South Railroad (40%), Valentine (36%) and Blackwater (34.8%), which are all in either Canada or the USA.

Blackwater leads the pack in the context of this article as it was acquired in 2020 by Artemis Gold for C$190 million as a foundational asset for the company, which was spun out of Atlantic Gold when it was acquired by St Barbera in 2019. With 9.5Moz of resources, Blackwater promises to be a long-life asset with production of 248,000oz/y for 23 years following a $592 million initial investment. With a market cap of C$775 million, Artemis would be tough to acquire for cash, especially since major gold producers have only recently got their balance sheets in order following their excesses of the previous gold cycle. It is questionable whether investor appetite for large transactions exists yet.

Marathon Gold's Valentine project in Newfoundland is a clear acquisition target with its promise to produce 145,000oz/y for 12 years following a $196 million initial investment. The company is looking to break ground by year end with a feasibility study to be completed in the first quarter, with project financing and permitting expected to follow mid-year. ASX-listed St Barbara bought Atlantic Gold for C$722 million as it brought its Moose River mine in Nova Scotia into production, so will history repeat itself?

In the past, Gold Standard's market cap has been as high as C$600 million which would have deterred many potential suitors, but now at $210 million that is no longer the case

Gold Standard Ventures' Railroad project promises higher production compared to Valentine at 156,000oz/y, but for only eight years. The project is in Nevada and has a reasonable initial capital of $133 million. The project has been at an advanced stage for quite some time and is on the Carlin trend which one would think would make it a sure thing for acquisition, yet no one has made a move. Why? In the past, Gold Standard's market cap has been as high as C$600 million which would have deterred many potential suitors, but now at $210 million that is no longer the case.

The creation of Nevada Gold Mines in 2019 through the merger of Barrick Gold and Newmont Nevada assets would also have been a knock by reducing two potential candidates to one, and that one being occupied with digesting a merger. There are other large players in the state so will 2021 be the year for some action for Gold Standard?

Also in Nevada, West Vault Mining's Hasbrouck oxide heap leach project near Tonopah is a clear contender for production and possible acquisition given it received a record of decision (RoD) from the Bureau of Land Management, the final major permitting step to allow construction. The company believes Hasbrouck would yield an after-tax IRR of 106% at current gold prices from production of 71,000oz a year for eight years for an all-in sustaining cost of $709/oz following an initial capex of $46 million. Its relatively modest annual output of 74,000oz/y would be too small for larger companies but there are several small- and medium-sized producers in the state which would benefit from its addition to their portfolios. However, West Vault's shareholders are content to wait for a 10-15% increase in the gold price before building it, and so any M&A overture would require a significant premium.

Arizona Gold's (formerly Kerr Mine) Copperstone project in Arizona, USA, looks at annual production of less than 40,000oz/y and a sub five-year mine life which is likely too small to elicit M&A attention. While a $23 million capex is affordable, the project really needs to stretch its potential life.

In Colombia, both the Marmato and Gramalote projects look set to advance into production. Marmato was spun out of Gran Colombia Gold to form Caldas Gold in 2020 and having secured $148 million in stream financing from Wheaton Precious Metals and an C$85 million in financing it is all set to develop the Marmato Deeps deposit and produce 135,000oz/y for 14 years following initial capex of $269.4 million. Dealmaker Serafino Iacono has already transacted the company which is set to become Arias Gold under the leadership of Neil Woodyer—who was formerly head of Leagold Mining—and an all-star board as soon as Caldas secures a 30-year extension to its mining title, which is expected shortly.

Gramalote is a joint venture between B2Gold and AngloGold Ashanti with a feasibility study due to be completed in early 2021 for an openpit operation heap leach. The project could produce 284,000oz/y for 14 years following a $901 million capex. The pre-feasibility used a $1,350/oz gold price and yielded an IRR of 18.1% and so at current gold prices, and with the feasibility likely to use a higher reference gold price, Gramalote will almost certainly move into B2Gold's mine build pipeline, which is timely since its mine build team completed the expansion of its Fekola mine in Mali in September 2020 and needs another big project to get its teeth into.

Mine building activity also looks set to ramp-up in the Maricunga gold district of Chile where several players are advancing projects. Kinross recently restarted its La Coipa mine which will produce into 2022 and 2023, and while this is a short life it can provide a stepping-stone into its other organic opportunities in the region such as Lobo Marte. Kinross is looking to make a construction decision in 2025 for an operation which could produce 300,000oz/y for 15 years following a $995 million capex.

Rio2 is looking at a quicker development timeline for its nearby Fenix project, which could produce 85,000oz/y for 16 years following a capex of $111 million. Rio2 management has successfully built openpit heap leach projects in the past in Peru (Shahuindo and La Arena) during their previous gig at Rio Alto Mining, but with other larger players in the region including Kinross and Hochschild Mining, Rio2 is a clear M&A candidate.

As with the feasibility list, the pre-feasibility list also includes projects that face clear obstacles related to permitting and communities, such as Springpole, Romero, Cerro de Gallo and La India.

First Mining Gold's Springpole project looks attractive on paper, but as some projects do it has a challenge which could become an Achilles Heel, in this case the need to build two coffer dams on one corner of Springpole Lake as part of the deposit is underneath the northern bay of the lake. The two coffer dams total be about 940m and have a maximum height of 17m and about 150 hectares which needs to be dammed and dewatered. While First Mining studies say there are no endangered species in the lake, it is popular with recreational fly fisherman who will no doubt be concerned about any disturbance. In any event, the $718 million capex is just under three times the company's $289 million market cap, and as it will be a single asset company, financing the project will be a challenge.

GoldQuest Mining's Romero project in Dominican Republic was a standout takeover candidate in 2017 when Agnico Eagle Mines made a strategic investment into the junior due to its attractive economics and district scale exploration potential. But it lacks a crucial piece of paper: an exploitation licence. Its exploitation licence received mining ministry approval in January 2018 but has since languished on the desk of the national president awaiting a signature. Without this, the company cannot advance to the environmental impact assessment and feasibility study. The delay has cost GoldQuest many key members of its management team, and while the company's fortunes could turn around at the stroke of the pen, few are holding their breath.

Argonaut Gold's Cerro de Gallo project in Guanajuato, Mexico, is also stuck in permitting as environmental authority Semarnat refused to permit the project in early 2020. This roadblock saw the company subsequently pivot to acquire Alio Gold for its Florida Canyon mine in Nevada and greenlight the development of its Magino mine in Ontario, Canada.

Condor Gold faces a different challenge at its La India gold project in Nicaragua. The project is permitted but it has to acquire all the necessary surface rights before it can commence construction, which as of December 2020, some 7% were still outstanding.

La India would produce 79,300oz/y for eight years following a $110 million capex.

Condor's approach has been to continue ticking-off the list of pre-development activities but it clearly wants to sell it rather than develop it. While the number of companies potentially interested in setting-up shop in Nicaragua is limited there are recent precedents: Calibre Mining obtained its Libertad and Limon mines in Nicaragua through acquisition in 2019, and Mako Mining merged with Golden Reign Resources in 2018 to obtain San Albino which it is building and on the verge of commencing production.

Both are currently focused on implementing their respective business plans and exploring the concessions they have, and so are not immediate contenders. Will Condor have to undertake the final derisking activity and build La India in order to find a buyer?