Marathon’s Valentine gold project gets OK from the feds

Three years after kicking off its environmental assessment work, Marathon Gold (TSX: MOZ) has received environmental assessment approvals from both the federal and provincial governments for its Valentine gold project in central Newfoundland. 

Minister of Environment and Climate Change Canada Steven Guilbeault’s positive decision announced on Aug. 24 follows the provincial government’s approval on Mar. 17. 

“The completion of environmental assessment for an important new mine like Valentine is a significant milestone, and we now look forward to advancing the project towards construction and mining,” Matt Manson, Marathon’s president and CEO, stated in a press release. 

Craig Stanley, an analyst covering Marathon for Raymond James, models first gold production at Valentine in the first quarter of 2025 and believes the company could be coveted by other companies. 

“We believe Marathon is an acquisition target given its large resource in mining-friendly Newfoundland, fully permitted, relatively low capex, long mine life, large land position and diversified shareholder base,” the analyst wrote in a research note. 

With the EA approvals in hand, Marathon can proceed with site-specific permitting and arrange the remainder of financing needed to build the project.

A feasibility study in April 2021 outlined an open pit mine and milling operation with a 13-year mine life and average annual production of 173,000 oz. gold for the first nine years. All-in sustaining costs were pegged at US$833 per oz. and life-of-mine total cash costs at US$704 per ounce. 

The study forecast initial capex of $305 million could be paid back after-tax in 1.9 years, and estimated an after-tax net present value of $600 million (at a 5% discount rate) and internal rate of return of 31.5% using a gold price of US$1,500 per ounce. 

The company expects to complete an updated feasibility study in the fourth quarter that will incorporate an updated resource estimate released in July. The project has measured and indicated resources (inclusive of reserves) of 64.6 million tonnes grading 1.9 grams gold per tonne for 4 million oz. contained gold and 20.8 million inferred tonnes grading 1.65 grams gold for another 1.1 million ounces. 

Valentine, a series of five mineralized deposits along a 20 km system about 80 km southwest of the mining communities of Millertown and Buchans, will be the largest gold mine in Atlantic Canada once in production, the company says. 

Marathon ended the second quarter with $62 million in cash and no debt. 

In June, the company secured US$81 million of equipment financing with Caterpillar Financial Services for Caterpillar trucks, excavators, graders, loaders and dozers. The financing followed an announcement at the end of March that Marathon had closed a 6.5-year, US$185-million term loan credit facility with Sprott Private Resource Lending for construction, development and working capital requirements. 

Michael Fairbairn, an analyst at Canaccord Genuity, estimates the company will fund Valentine through a combination of debt, equity and cash on hand.  

“We currently forecast the remaining financing gap will be filled with a C$260M equity raise at C$1.53/share,” he wrote in an August 25 research note. “Notably, MOZ may be able to lessen its upcoming equity financing by leveraging its 2% royalty with FNV, which has a buy-back of 0.5% available for US$7M before year-end 2022. We believe this buy-back could potentially be waived for a payment from FNV, which would lessen the company’s upcoming capital requirements and increase cash available for project construction.” 

Over the last year, Marathon’s shares have traded in a range of $1.12 and $3.73 and at press time in Toronto were changing hands at $1.81. The company has about 257 million common shares outstanding for a market cap of $443.2 million. 

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