Banks Island Gold's New Mine Could Increase Cash Flow By $1.5M Month

We joined Ben Mossman, CEO of Banks Island Gold (BOZ.TO) on a site visit to his Red Mountain and Yellow Giant mining properties in Northern British Columbia last week. It was an awe-inspiring tour of BCs Coastal Mountains by helicopter, and an opportunity to learn more about a junior mining company that is different from most – BOZ should cash flow by the end of this year. (audio interview with Ben)

Mossman is a mining engineer, not a promoter. He is a career underground mine builder with a track record of delivering mines as intended. Fellow board members are also industry men and combined they own about 20% of the company.

Banks intends to put the Yellow Giant mine into production this December. Yellow Giant will be a small, high-grade underground mine with very low Capex costs (~8 million) and payback in less than one year. The mine is projected to cash flow $1.5 million per month to the company and produce for 25 months, however there is considerable exploration upside, Ben told us. Banks owns a drill rig and is currently exploring known and new targets on the property.

The focus of Banks now is finding another $2-$4 million (they have ~$3.5 million in cash currently) to finish construction at Yellow Giant and get that mine into production. Our site visit and time spent with the understated Ben gives us reasonable confidence in the likelihood of that outcome.

Banks Island’s second property, Red Mountain, has a bigger resource and very positive economics but will cost more. A production decision on that property is being deferred until results of a feasibility study in 2014 and will be a lot more likely should the company be successful at Yellow Giant.

“[Banks is] starting small on just the kind of high-grade project Mossman has experience with, with the potential to leverage success there into much larger stakes,” mining analyst Louis James of Casey Research commented in his bullish September 2012 report on BOZ.

Apart from the Casey subscribers, the company is not well-known to the market, having only gone public last fall.

While most mining stocks remain in the penalty box, BOZ intends to move forward on its own terms. The company offers investors a different way to play the junior markets: BOZ has exposure to the gold price and exploration upside without the exploration risk. More importantly, the company can ignore the market if they’re cash-flowing. That puts them in a totally different space compared to 98% of other juniors. The bet now is whether they can execute.

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