Bluebird Merchant Ventures Ltd, a gold company primarily focused on bringing historic mines back into production, announces its Interim Results for the six-month period ended 30 June 2023.
Overview:
Developments across the gold project portfolio to fulfil strategy to become a producing entity in both South Korea and the Philippines. Scoping Study for two Korean projects indicated post-tax NPV of USD181 million, free cash of USD50 million per annum, an IRR of 111% and a USD630 per oz All in Sustaining Cost (USD1,750 per oz gold price). MTUP at Kochang referred to the Board of Audit and Inspection, Korea for adjudication – all legal and regulatory requirements had been covered in Bluebird’s initial c.800-page submission. JV partner identified to jointly develop Gubong Gold Project, the larger of Bluebird’s two South Korean gold projects – estimated to have in excess of 1.3Moz Au. Local JV partner secured with decades of mining experience in-country to develop the Batangas Gold Project in the Philippines – recognised the potential of the project and new mining environment. Certificate of Approval from the Mines and Geosciences Bureau for its Two-Year Community Development Plan granted for Batangas. Raised GBP1,215,000 – this followed the raising of GBP230,000 in December 2022. Reduced overhang following long term shareholder and supporter Catalyse Capital buying out Southern Gold’s shareholding. Company now debt free with all loans paid off and cash at bank – low overheads with JV model and directors’ salary sacrifice scheme in place until MTUP grants.
CHAIRMAN’S STATEMENT
The six-month period under review, although not without its challenges, has witnessed significant developments for your Company both in South Korea and the Philippines as we look to become a gold producing entity and deliver long term value for all stakeholders.
During the period, the Company published a Scoping Study highlighting the potential of the Gubong Gold Mine (‘Gubong’) and Kochang Gold and Silver Mine (‘Kochang’) in South Korea, secured a local JV partner in the Philippines to advance the Batangas Gold Project (‘Batangas’), raised capital and cleared all corporate debt. However, as shareholders will be aware, the issuance of the Mountain
Temporary Use Permits (‘MTUPs’) for Gubong and Kochang has taken far longer than anticipated, particularly in light of the fact that both projects have already received extraction licences.
South Korea
The Gubong and Kochang licences remain first class assets and fit our model, being low CAPEX, high grade opportunities where we believe production can be recommenced quickly and existing resources can be expanded to facilitate long term, high value returns. In February, the potential of the two projects was highlighted in the publishing of the Scoping Study, which reported a post-tax NPV of USD181 million, free cash of USD50 million per annum, an IRR of 111% and a USD630 per oz All in Sustaining Cost. This was conducted on a USD1,750 per oz gold price against the current gold price of c. USD1,930 per oz.
However, in order to advance, the Company needs the grant of the MTUPs. Throughout the period, the Board was focussed on the granting of these, which are the last part of the legal requirements needed to commence ringing the mines back into production. The Company’s lawyers andpermitting consultants frequently reiterated their confidence in the likely granting of these MTUPs and emphasised that all legal and regulatory requirements had been covered in Bluebird’s initial c.800-page submission. Despite the supply of additional information, including community engagement and clarity on environmental impact, the issuance of the MTUP at Kochang was referred to the Board of Audit and Inspection, Korea. Its adjudication is mandated to take 60 days, so is scheduled for September. However, as previously reported, this timeline is not guaranteed and following advice from our legal advisors, it can often be materially different from what is mandated. When the Board receives an official response, we will communicate this to the market. It is extremely frustrating that while the Company has support from the local landowners and community, and the submission covered all the legal requirements, the granting has not occurred. The Board remains confident but believe this has become regionally political and therefore we welcome the audit procedure.
As a result of the above, we paused the submission for a MTUP at Gubong to evaluate all permutations encountered at Kochang. The politicising of events led us to the conclusion that there was a need for more South Korean representation and accordingly we identified a local partner to look to jointly develop the larger of our two projects. It recognises the scale and potential of the asset, which we estimate to have in excess of 1.3Moz Au and believe that it can both assist in the securing of the permit and the funding of the development of the mine to production. Notably, a similar JV model has been successful at Batangas in the Philippines where our partner has been instrumental in securing the recently announced Certificate of Approval.
Batangas
We remain extremely positive about the development potential of this high-grade project in the Philippines. This was our original listing asset, whose development was placed on hold due to a deterioration of political support for mining in the Philippines. With the election of President Marcos in June 2022, this situation has ameliorated translating into the project being primed for development. Accordingly, we signed a JV with a Philippine company, which has decades of mining experience in-country and recognised the potential of the project.
The JV covers the entire Batangas Project area, which has a total JORC compliant resource of 440,000 ounces, including a maiden ore reserve of 128,000 ounces (including silver credits), although work will initially focus on the Lobo area, implementing the necessary work with a view to advancing it to construction. Lobo has a JORC Compliant Ore Reserves of 171,000 tons at 6.6 g/t for 36,000 oz Au, an 82,000 oz Au inferred resource plus multiple epithermal and high-grade targets identified over 14km of identified mineralised structures. Grades include high-grade surface trench intersections of 8.35m @ 18.4 g/t Au, 2.6m @ 28.6 g/t Au and 3m @ 22.2 g/t Au.
The JV structure provides Bluebird with a free carry to a production decision at Lobo in return for 60% of the project equity. To provide context in terms of value, on top of the identified ounces and expansion potential, exploration expenditure to the tune of c.USD20 million has been invested across the Batangas licence to date. In the initial prospectus, the Company had an option to farm into 51% of the project and will now have a free carry to construction decision and maintain a 40% interest.
Since signing the JV, we have received the Certificate of Approval from the Mines and Geosciences Bureau for its Two-Year Community Development Plan. This represents a significant step forward and underlines the importance of the Company’s local development partner in navigating the regulatory environment to allow the Lobo underground mine to be advanced to a production decision. Importantly, the Company already has two 25-year Mineral Production Sharing Agreements covering this area.
The next steps for the JV partner include a new drilling campaign to increase the resource, the development of an underground mine plan, and the application for an Environmental Compliance Certificate. We are working closely with our partners to achieve these objectives, generate consistent news and advance to a decision to mine as quickly as possible.
Corporate
Early in the period we raised GBP1,215,000 through SI Capital via a placing and subscription for 60,750,000 New Ordinary Shares at 2 pence per share. This followed the raising of GBP230,000 in December 2022. The capital raise was to fully fund proof-of-concept production at Kochang but, with the delays with permitting, we took the decision to pay down our existing loans to become debt free.
They Directors remain significant shareholders of the business owning a cumulative 166,176,351 shares in the Company.
The Company recognises the importance of cash preservation and being responsible custodians of our assets, to protect the capital structure of the Company where possible. Accordingly, the Board has taken measures to reduce spend and again the directors’ renumeration will be taken in equity which means cash overheads are low. Therefore, with a free carry in the Philippines too, we don’t envisage having to return to the market anytime soon. Additionally, on granting of licences in South Korea, multiple financing opportunities should be available; it is just about deciding which is in the best interest of shareholders.
More recently Catalyse Capital Ltd (‘Catalyse’), a long running and supportive shareholder of Bluebird, has agreed to acquire Southern Gold Limited’s (‘Southern Gold’) 122.5 million shares in the Company. The Board believes that the share purchase by Catalyse, that recognises the truen potential of the Company’s South Korean and Filipino gold projects, will remove a significant perceived ‘overhang’ in the trading of Bluebird’s shares. Southern Gold’s selling, caused by their strategic shift away from gold and into critical metals, has undoubtedly affected our share price, and to ameliorate the Southern Gold situation is good news for Bluebird and will allow investors to focus on the inherent value of our three-project portfolio.
Conclusion
The sum of the parts of the business, three high grade gold projects, an estimated 1.5m oz Au in South Korea, close to 450,000 oz Au in the Philippines where we have a free carry to a production decision, defined paths to production, supportive local partners, a heavily invested management, cash, and no debt, are not reflected in our current price. We await progress on all three projects and believe that by the time I report next, we will have full clarity on our potential as we look to build value and reward shareholders for their patience.