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A Brief Look at US GoldMining Inc.
According to an S-1 registration statement, US GoldMining Inc. (USGO) has applied to raise $20 million in an initial public offering of its common stock and warrant entities.
The Company is an exploration-stage mining company focused on gold mining at the Whistler Project in Alaska.
USGO is a highly speculative stock and there is a significant risk of not finding or mining gold in a timely manner or at a reasonable cost.
While the IPO may attract day traders looking for volatility, I will forgo it.
Overview of US gold mining
US GoldMining Inc., based in Vancouver, Canada, was formed as a subsidiary of GoldMining Inc. (GLDG) to exploit the Whistler Project, a gold-copper project in the Yentna Mining District of Alaska.
Management is led by President and CEO Tim Smith with the Company since September 2022 and previously served as Vice President Exploration for parent company GoldMining and Regional Director Generative Exploration, North America for Newmont Corporation.
The following map shows the Whistler Property in yellow on the left, northwest of Anchorage, and comprised 377 mining claims totaling approximately 53,700 acres:
Map of the Whistler project area (SEC)
As of November 30, 2022, US GoldMining has booked a fair market value investment of $3.8 million from investors including parent company GoldMining Inc.
The following table shows a mineral resource estimate as prepared by Moose Mountain Technical Services as of September 22, 2022:
Mineral Resource Estimate (SEC)
US GoldMining Market and Competition
According to a Resource Development Council market research report, there were approximately 192 active placer mines in Alaska. In 2018 they produced a total of 60,690 ounces of gold with an estimated gross production value of US$77 million.
Mining in Alaska requires a significant investment of time during the permitting process.
“When a plan is submitted for approval, a multi-year process begins involving 11 federal and state agencies, over 60 individual approval requirements, and multiple and ongoing opportunities for public input.” (Source: Resource Development Council)
Key contestants or other industry participants include:
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Donlin Gold
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Kinross Gold
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I count HOURS
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NovaGold Resources
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graphite one
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Other.
US GoldMining Inc. Financial Performance
The following are relevant financial results arising from the company’s registration statement:
Operating Invoice (SEC)
As of November 30, 2022, US GoldMining had $54,508 in cash and $1.5 million in total debt.
Details of US GoldMining Inc. IPO
US GoldMining intends to raise $20 million in gross proceeds from an initial public offering of its units, consisting of common shares and one warrant, offering at a proposed price of $10.00 per unit.
Each US GoldMining Inc. (USGOW) warrant is immediately exercisable for up to three years from the date of issuance and the exercise price is $13.00 assuming the initial public offering is $10.00.
No existing shareholder has expressed an interest in purchasing shares at the IPO price.
Assuming a successful IPO, the Company’s enterprise value at IPO would be approximately $103.5 million, excluding the impact of underwriters’ over-allotment options.
The free float to outstanding share ratio (excluding over-allotments by underwriters) will be approximately 16.48%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.
Management says it will use the net proceeds from the IPO as follows:
IPO Proposed Use of Proceeds (SEC)
Management’s presentation of the company’s roadshow is available here until the IPO is completed.
With respect to pending legal proceedings, management says that the company is not involved in any proceedings that would have a material adverse effect on it.
The listed bookrunners for the IPO are HC Wainwright & Co., BMO Capital Markets and Laurentian Bank Securities.
Comment on US GoldMining IPO
USGO is looking to invest in the US public capital market as it seeks to divest its parent company, GoldMining Inc., to raise funding for its exploration efforts.
The Company’s financials show no revenues and significant exploration and G&A expenditures related to its start-up effort.
The company currently plans not to pay dividends in order to retain future profits for reinvestment in its growth and working capital needs.
The Alaskan gold mining market opportunity is relatively large and the potential for significant gold deposits at the Whistler Project is significant.
HC Wainwright & Co. is the lead underwriter and there is no data on IPOs led by the firm in the last 12 months.
Risks to the Company’s prospects as a public company include regulatory permitting risk, gold price volatility risk, and mining discovery and extraction risk.
As for valuation expectations, management is asking investors to pay an enterprise value of over $100 million despite the lack of earnings.
US GoldMining Inc. shares are highly speculative and there is a significant risk of not finding or mining gold in a timely manner or at a reasonable cost.
Although US GoldMining Inc.’s IPO may attract day traders looking for volatility, I will refrain from doing so.
Expected IPO pricing date: March 14, 2023
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