The $520-million sale of Kaminak Gold Corp. marks yet another success for mining entrepreneur Eira Thomas, whose companies have been on a major winning streak of late.
“I’m really fortunate that I’ve had the opportunity to be involved in some terrific projects,” Kaminak’s chief executive said in an interview.
Ms. Thomas, 48, is known as the “Queen of Diamonds” because she discovered the Diavik diamond mine in the Northwest Territories in 1994. But her recent track record is just as notable.
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She co-founded Lucara Diamond Corp., which made headlines around the world last year when it discovered the second-largest gem-quality diamond in history. Stornoway Diamond Corp., which she co-founded and led for several years, is close to bringing Quebec’s first diamond mine into production. They are two of the mining sector’s only bright spots of the past few years.
And now Kaminak is being sold to Goldcorp Inc. for roughly triple its value at the start of 2016. The all-stock deal represents a 32 per cent premium to its closing price on Wednesday.
Like its peers in the junior gold mining sector, Kaminak was left for dead by most investors over the last few years. But the Vancouver-based firm staged a massive rebound in 2016 as gold prices rose and it released a promising feasibility study for the Coffee gold project in the Yukon. The study indicated Coffee could produce more than 200,000 ounces of gold a year for several years at low all-in sustaining costs of US$550 an ounce.
Thomas, who joined Kaminak in 2013, acknowledged she is stunned how far the company has come in a short period. Now that a brutal four-year bear market for gold stocks is finally ending, the top companies are separating themselves from the pack and enjoying big share price gains.
“You start to lose faith that you’ll ever see the light of day,” she said.
“So it’s nice to come out the other end and realize that we’re not crazy, that our conviction is justified and that we have a really great project.”
The estimated construction cost for Coffee is a manageable $317 million, and Thomas said Kaminak had planned to take it right to production. But when Goldcorp came calling with a big premium offer, the company changed course.
Goldcorp produces about three million ounces of gold a year, so adding another 200,000 annually is a very small deal by its standards. But there are more exploration opportunities at the Coffee site, and Goldcorp will do more drilling to try to boost the reserves. The project currently has three million ounces of indicated gold resources, and another 2.2 million ounces of inferred resources.
“We have long held the view that Coffee possesses significant exploration upside outside the current resource base,” Raymond James analysts Phil Russo and David Sadowski said in a note. They see “moderate” risk of a rival bid.
The acquisition is David Garofalo’s first big move since he became Goldcorp’s CEO at the end of February. It fits the company’s longstanding strategy of buying low-cost ounces in politically safe jurisdictions in the Americas, despite the relatively small size.
After the success of Kaminak, Stornoway and Lucara, Thomas said she has not decided what to do next.
“I’m really pleased that we’ve got a stronger market upon us and we’re starting to see some interest back in the sector, and I’m excited to turn my mind to the next one.”