Nick Hodge,
Publisher
Nov. 28, 2024
Revival Gold (TSX-V: RVG)(OTC: RVLGF) acquired the Mercur gold project from Ensign Minerals in April for C$21.9 million in stock.
The transaction made Revival one of the leading gold developers in the western United States, with two brownfield projects that come with over six million ounces of gold resources and millions of dollars worth of data and infrastructure. It, along with a concurrent C$7 million financing, also took Revival’s share basic count to 197.6 million, and to 241.2 million fully diluted.
Those shares have spent much time glued to C$0.30 in the past few months, putting the company’s market cap at C$60 million.
My third-grade daughter is writing division problems. If Revival has a C$60 million market cap and 6.2 million ounces of gold resources, what valuation is it getting on a dollar-per-ounce basis? The calculator says C$9.56. In strong Trumpian dollars that works out to US$6.81.
I spent a recent weekend at Mercur with the entire Revival Board and field team to see what gives.
Perhaps I didn’t need to do that. With my arms on elbow rests it’s easy to determine the company is down to a couple million in cash, and will need to raise more by the time the PEA it’s working on at Mercur is complete.
But sometimes you need to put your boots on the ground and your belly to the bar to get the full picture.
The Mercur project sits 35 miles southwest of Salt Lake City. It was discovered in 1870, before Utah was a state. Originally a mercury and silver mine as the project’s name implies, it ended up producing 920,000 ounces of gold from high-grade underground deposits between 1883-1912.
The project was also the site of the first commercial use of cyanide when it was mined by Getty in the 1980s in an open pit and carbon-in-leach (CIL) mill complex, before selling it to Barrick, which operated the mine through 1998. Ultimately, the mine had produced 2.6 million ounces of gold when it was closed due to low gold prices.
Since then the majors have largely moved on to Nevada. But Utah remains a prime mining destination. In fact, in 2023 the Fraser Institute ranked Utah “the top jurisdiction in the world for investment based on the investment attractiveness index, which takes into account the impact of both policy factors and mineral endowment.” Rio Tinto’s nearby Bingham Canyon is currently the deepest open pit mine in the world at over 1,200 meters.
Over at Mercur, which is now understood to be a Carlin-type system, drilling has only gone down to 200-250 meters while Carlin deposits in Nevada are now being found down to 900 meters. So there is blue sky drilling and resource potential evidenced by the pink targets in this conceptual cross-section versus the red areas of known mineralization.
But it’s the leach pads and Utah’s permitting process that has Revival most excited in the near-term.
Drilling is expensive and hasn’t been fetching results in the market in terms of share price, especially when Revial already has millions of ounces of gold.
When Barrick left, there were still mineable ounces in its pits, most notably some 300,000 ounces at Mercur South. As it stands, Mercur hosts 1.64 million ounces of inferred gold that comes from 89.6 million tonnes of rock grading 0.57 grams per tonne.
Data for that comes from 1,900 drill holes, the results of which have been verified and scanned from dozens of bankers boxes full of records. Revival has also done significant metallurgical testwork with excellent results showing that 90% of the gold is leached after just five days with 84% overall recoveries.
Geological modeling is now underway, and resource estimation and financial models will happen in the next few months ahead of the PEA’s completion in Q2 2025.
The new resource is likely to be more constrained. That is, it will have fewer ounces but be higher grade. And the PEA will improve upon some of the things that Barrick did in haste that ultimately yielded non-optimal recoveries.
For example, Barrick put ~80% of its material through the carbon-in-leach plant, meaning ~20% went to the heap leach pads. The problem with that is some of the ore is carbonaceous, which can rob from a pregnant cyanide solution. Revival is using multiple methods to identify the carbonaceous ores. As CEO Hugh Agro, a mining engineer, told the Mining Journal during the trip, “We want to make sure we get recoveries defined for each block of material, not just grade. A lot of failures in this business are because folks don't fully understand their deposits before they start to mine them," said Agro.
The new leach pad design is also being optimized for permitting, not just metallurgy.
Trade-off studies and process know-how have led the team to place the pad behind the existing pad that is already permitted. That would keep the operation on private ground where the lead permitting agency is a Utah state agency called the Department of Oil, Gas and Mining (DOGM). When Barrick permitted the mine through this agency it received a “Finding of No Significant Impact” on the operation so it did not need to complete an Environmental Impact Statement (EIS). Revival would like to keep it that way rather than move the pad to another area or create a larger footprint that would trigger a federal process.
John Meyer, who is Revival’s VP of Engineering and Development, noted that Barrick only sent uncrushed ore to the leach pad that had a recovery of 50%. Crushing the existing material would allow Revival to re-leach ounces that are already on the pad, plus putting crushing in place would enhance recoveries in a restarted operation.
And that’s where Revival is heading. With a streamlined permitting process, Mecur could be shovel ready in 36 months, bringing it full circle from its boomtown days in 1910.
The sentiment I got from management is that they want to head to production at Mercur to generate cash flow, which would force a rerating of the stock in their eyes.
They can see an operation at Mercur that produces 80,000 to 100,000 ounces per year at Mercur after an approximate capex of ~$200 million.
And they want to use the capital they have to show and prove that to the market.
That probably means raising smaller money for the feasibility portion of the project and foregoing a strategic partner for now. The reasoning I was given is that any mid-tier or major mining partner would want the company to drill to show size, which the management and board doesn’t believe is best for the share price.
What’s clear is that Revival now controls two assets that can be gold mines at current prices.
It also has the people to do it.
I mentioned John Meyer already. He’s quarterbacking Mercur. He is an engineer with 30 years of experience permitting and developing both open pit and underground mines. He was most recently with Perpetua (formerly Midas Gold), which recently received a positive permitting decision to build the large Stibnite gold-antimony project in Idaho. He also worked on Fruta del Norte in Ecuador, and held senior roles at Barrick Gold and Kinross Gold.
Wayne Hubert is a Director. He is the one who consolidated the Mercur project, putting it all under one company for the first time with Ensign. He was chairman of Revival, but stepped down from that role to avoid conflict with the acquisition. He’s a South African living in Utah, and was the CEO of Andean Resources from 2006 to 2010 when it was acquired by Goldcorp for $3.5 billion.
Larry Radford is a miner. And his quiet confidence in the project and team impressed me. As a second generation Idahoan miner, he started underground with Coeur D’Alene Mines in 1984. He then worked for 14 years with Barrick at the Goldstrike mine in Nevada before moving to Kinross, where he was the Vice President & General Manager of the Fort Knox mine in Alaska, Vice President of Strategic Mine Planning and Vice President of South American Operations. After that, he served as VP and COO of Hecla, where he managed a global portfolio of operating mines, including Lucky Friday and asa Berardi. Then he served as COO of Gold Standard Ventures, leading development of the South Railroad Project ahead of its takeout by Orla Mining. And he most recently served as President and CEO of Argonaut Gold ahead of it being taken out by Alamos Gold.
This is a mine-building team.
Commodity and stock prices go up and down for all sorts of reasons.
One of the lessons that has served me well in this business is to invest in projects and people of merit.
Revival isn’t some moose-pasture junior run by former brokers.
It has gotten itself into a bit of misalignment in terms of capital structure, but bringing some of Barrick’s lost mercurian gold into a mine plan during a gold bull market might just put it back into orbit.
Utah isn’t the only site visit I’ve gone on recently. I was alongside Gerardo as we journeyed to Peru to see what he believes could become what of the hottest copper-gold discoveries of the decade. Check out the video of the trip here.
Call it like you see it,
Nick Hodge
Publisher, Daily Profit Cycle