Firesteel to buy, restart Laiva gold mine

Firesteel Resources (TSXV: FTR) intends to  purchase and reactivate the past-producing Laiva gold mine located in central Finland, near the Gulf of Bothnia, in early December and begin producing gold in August 2018.

To fund the project, it has entered a definitive, prepaid, forward-gold purchase agreement with Pandion Mine Finance for US$20.6 million. Already a 10% owner, Firesteel intends to buy another 50% interest in Nordic Mines Marknad, making it a 60% owner of Nordic, itself the 100% owner of Laiva.

The company says it will execute its option to buy out the remaining 40% interest by issuing 66 million shares when it receives the cash.

An aerial view of the Laiva gold mine in Finland. Credit: Firesteel Resources.

“It’s not an undaunting project by any means,” Firesteel president and CEO Michael Hepworth says. “There are some mining challenges, but we think we’ve got answers to it. We’re just waiting for the cash to come in and we’ll start operating in January.”

Firesteel will use US$4 to US$6 million of the money to refurbish Laiva’s plant.

“The leach tanks need some work,” Hepworth says. “Some of the conveyors need work, some of the pumps need to be replaced.”

A look inside the processing plant at the Laiva gold mine. Credit: Firesteel Resources.

Pandion will advance the money in one tranche in December as partial consideration for a total 67,155 oz. gold delivered within 17 to 60 months.

Firesteel has not completed a feasibility study or reserve estimate at Laiva. It will move forward with historical data and its own resource estimate.

“We are basing our numbers and production plans on reports done by [consulting firms] JT Boyd and RPM Global,” Hepworth says.

“JT Boyd has been working with us since March and has done extensive calculations and financial modeling for us. Unfortunately because these numbers are not National Instrument 43-101 compliant, I can’t release the information. That said RPM and JT Boyd agree on the numbers and Pandion is doing the gold-forward sale based on the numbers. We are currently working to have this information converted into a prefeasibility study and will release the details as soon as it is ready, but it won’t be for several months.”

Firesteel’s resource estimate shows 3.8 million measured and indicated tonnes grading 1.2 grams gold per tonne for 151,000 contained oz. gold, plus 9 million inferred tonnes grading 1.5 grams gold for 445,000 contained oz. gold.

It plans to infill drill another 20,000 metres to convert inferred resources to probable reserves.

Laiva would have two open pits operating at 6,000 tonnes per day. The 17 sq. km project is already fully permitted.

Hepworth says he sees this as the first step in a company transition from being an explorer to a junior producer.

“We’re looking for less risk and potentially bigger upside,” Hepworth says. “Here’s a project that’s had €220 million spent on it and we’re picking up 60% of it for $20 million — it’s a lot less than 10% — and the project is largely de-risked. Now if we were to spend $20 million on one of our other exploration properties, we still wouldn’t know whether we had a mine.”

The open pits at Laiva gold mine in Finland. Credit: Firesteel Resources.

Nordic spent $300 million on the project before shutting it down. Production at Laiva peaked in the second quarter of 2013 at 12,344 oz. gold. The mine cast first doré in 2011 but closed in early 2013. Nordic released an updated reserve report in 2015 and a preliminary economic assessment in 2016.

Hepworth says Laiva shut down for several reasons, including: insufficient understanding of the metallurgy; poor recoveries; ineficient plant use; mining practices that resulted in severe dilution; and a €70,000,000 hedge book that turned against them.

He intends  for Firesteel to mine more selectively than Nordic, which he says blasted ore and waste at the same time and brought too much oversized material through the mills.

“These came together like a perfect storm and very quickly put them out of business,” Hepworth says. “Their all-in sustaining costs were around US$1,760 per ounce.

“It’s just an unusual set of circumstances where we’ve got a bankrupt company, but all the work has been done and it’s been thoroughly checked.”

Laiva’s host rock is dominated by intermediary to basaltic volcanic rock and quartz diorites. Nordic also owns three exploration properties within 2 km of Laiva totalling 43 sq. km.

“It’s built into our budget that we will be exploring those,” Hepworth says. “And it’s permitted for exploration.”

Nordic acquired Laiva in 2005 and completed the last reserve estimate in January 2015. It estimates Laiva contains 9.4 million proven and probable tonnes grading 1.19 grams gold for 395,000 contained oz. gold. A November 2013 report estimated 24.3 million indicated tonnes at 1.13 grams gold (885,000 contained oz. gold), and 4.37 million inferred tonnes at 1.64 grams gold for 231,000 contained oz. gold.

Trading of Nordic shares was discontinued in July 2017. It recorded no revenue in 2017.

Firesteel shares are trading at 13¢ with an $11-million market capitalization.