De Grey Mining Ltd

Setting the Table for a Takeout

We believe De Grey is worth A$0.30/share based on our initial NAVPS estimate of A$0.44/share and a multiple of 0.70x. In our view, De Grey is one of the few development companies with a path to produce plus 100koz/year, have exceptional exploration upside in +200km of shear zones and trading at a steep discount to its peer group. We believe that the Pilbara Gold Project is of a scale and has the exploration upside that we believe makes De Grey an attractive target for mid-tier producers.

Investment Thesis: 

  • Already +100k/year potential. We believe that with a planned throughput of 2Mtpa (~5,500tpd) De Grey would produce 143koz per year at cash costs of US$621/oz for initial capex of US$98M. Our estimates assume production starts in CY2022E and includes production from multiple deposits, with 59% from open-pits and 41% from underground.
  • Room to grow, a lot. The company’s 1.4Moz resource is spread over 5 main deposits (12 total). Drilling has focused on growing these deposits near surface; however, most remain open along strike and all are open at depth. De Grey believes the resource could grow to over 3Moz and with +200km of favourable structure, of which less than 10% has been properly tested with RC and diamond drilling, we believe this is very possible.
  • The right ingredients to be a target. With continued exploration success and project de-risking, De Grey is making itself more attractive. We believe the project is now at a large enough scale to matter to most mid-tier producers and has major exploration upside that potential acquirers look for. KL Gold already owns 9.2% and we believe that other cashed up Aussie mid-tier producers are also potential acquirers (Figure 5).

 We expect De Grey to progressively re-rate to our fair value estimate of A$0.30/sh. Our fair value is based on 0.70x our NAVPS8% estimate of A$0.44. We expect the company to progressively re-rate as it de-risks the +100koz/year production scenario, with engineering and additional studies. As well, we expect that continued exploration success, demonstrating the resource potential of the project to drive the share price higher. In our view, as the company surfaces its potential (both development and exploration), it should become an attractive takeout target for a mid-tier producer. Upcoming catalysts: 1) Ongoing development updates, 2) Ongoing exploration results, 3) Updated resource (Q4/19) and 4) New economic study (Q1/20).  



Coro Mining Corp.

Atahualpa Confirms Growth Potential

Impact: Positive

Coro has announced the second batch of drilling results from Atahualpa with a banner intercept returning 150m at 1.18% CuT (from surface) in oxides. Today’s news further supports our thesis that a viable copper heap leach story is going to expand materially with more drilling. As the company advances its Phase II drilling program it looks increasingly plausible that La Atómica and Atahualpa could double resources at the Marimaca Project.

  • High grade copper oxide core expands north. Results today further confirm that the Marimaca high grade oxide core extends ≈400m to the north of previous resource envelope with highlight intercepts including 150m at 1.18% CuT (ATR-39), 74m at 0.71% CuT (ATR-40) and 46m at 0.88% CuT (ATR-29). Importantly, within this zone a substantial (300m x 300m) brochantite rich core exceeding 1.0% CuT has been reported by Coro. Given high grades and high metallurgical recoveries attributable to this mineral phase a material boost to project economics would seem plausible.
  • Marimaca oxide footprint expands 44%. Coro’s Phase II drilling program to date has grown the surface area of the mineralized copper oxide zone by 44% - extending northward from the Marimaca 1-23 property into the La Atomica and Atahualpa properties. Overall dimensions of mineralized footprint now extend 1200m in a NW to SE direction and reach 600m in width (NE to SW).
  • Testing Blue sky beyond Marimca. Coro will keep the drill rigs turning as part of its Phase II and Phase III drilling program. The company is well funded to keep testing various satellite targets defined by surface mapping and geochemistry on the greater Marimaca property, which extends for 6 km north to south (See Figure 2). Coro expects to have three rigs turning by March and will continue to deliver assay results as exploration advances.
We view Coro as a growing exploration story in a favourable jurisdiction whose potential has yet to be fully priced by the market. Coro currently trades at US$0.108/lb (peers US$0.025). We believe exploration success to date more than justifies this premium as the company continues to deliver assay results demonstrating it’s the deposits growth potential. We believe the company may re-rate higher as the market begin to see growth potential beyond the pricing. Upcoming Catalysts include 1) Integrated resource in Q3/19 and 2) Ongoing Drilling Results from Phase II and III drilling.

Magna Terra Minerals Inc

Drill Results Just the Start

Impact: Positive

Drill results from the first of eight holes at Magna Terra’s Luna Roja project are encouraging. We look forward to results for 7 holes which are pending given the company is testing what could be a large epithermal precious metal system. We view Magna Terra as an early stage explorer in Argentina’s prolific Santa Cruz Province, with a strong potential to re-rate with positive drilling news.


  • Technical success with the first hole. Drilling at the project is targeting the Cruz Del Sur, Orion and Estrella del Norte targets which overly the north-northwest striking Via Lactea fault system. Assay results from the first hole drilled returned 51.4m at 0.26 g/t Au (LR-DDH001). Results are shy of being ore grade but encouraging given disseminated sulphides within hydrothermally altered volcanic rocks observed throughout. Assays are pending for 7 remaining holes to the north; visual inspection has identified wide intervals of disseminated sulphides and alteration in these holes which bodes well - but the proof will be in the pudding. 
  • Geophysics and geochem point to a large system. The company is drilling three target areas which cover 1.8km of strike within a 3km structural corridor. Results to date, suggest a large epithermal system is at work. Moreover, geophysics has identified an extensive 1km chargeability anomaly in the southern portion of this corridor near the Cruz del Sur target. We note that Hole LR-DDH001 terminates in disseminated sulphides in a dacitic dome within this chargeability anomaly.
  • Exploring in elephant country. Magna Tera’s Luna Roja project is situated in Argentina’s prolific Santa Cruz province. A number of major mining companies are operating in the region, including Goldcorp (Cerro Negro), AngloGold Ashanti (Cerro Vanguardia) and Yamana (Cerro Morro). OceanaGold recently joint-ventured Mirasol Resources Ltd’s La Curva project, which bears similarities to Luna Roja.  
We believe that Magna Terra is providing mounting evidence it could make a significant discovery. With a market cap of only C$3.2M a significant ore grade intercept, should cause Magna Terra to re-rate significantly. Results from its ongoing drill program should begin to shed more light on the upside potential of this project. Upcoming catalysts include 1) Assay results from 7 remaining holes (Q1/19)



Mawson Resources Ltd

Drilling and Geophysics Work; More to Come

Impact: Mildly Positive

Results released from the first portion of drill results from Mawson’s Rajapalot project suggest that the large conductive plates identified beneath the current resource outlined at Raja, Palokas and South Palokas could extend significantly at depth. Our fair value estimate of Mawson values the company’s shares at C$0.79/sh and we expect that the eventual tabling of a sizeable gold-cobalt discovery Rajapalot to re-rate the stock.

  • Successful drilling in to large conductive plates at Raja. Drill highlights from Raja returned 3m at 2.3 g/t Au drilled 130m down plunge from the existing resource (482koz at 2.4g/t AuEq (1.7g/t Au and 0.041% Co)). The large conductive plates at Raja suggest the mineralization could double down dip from the current resource outline. Additionally, the results offer encouragement that the conductors identified at Palokas, South Palokas and beyond could also be associated with further mineralization (Figure 1).  
  • Similar size potential at Palokas and South Palokas. Drill hole PAL0173 is the deepest hole drilled at South Palokas and returned 17m at 3 g/t Au (Figure 2). Drilling at both Palokas and South Palokas will target the large plunging conductors recently identified as extending 450m down plunge and 100m wide and we expect similar hits to continue as the company tests the extremities of these anomalies. 
  • Drilling continues to target resource expansion. This recent update encompasses only 6 holes of the 18 completed to date (6,003m). With results from 12 holes pending and another ~9000m to drill. As well, additional TEM surveying is underway focusing on targets such as the Rumajärvi area and Terry’s Hammer area. The company expects expand the resource at Palakos and Raja while advancing its less advanced targets.
Currently valuation barely reflects the maiden resource; initial results support our view that the resource is set to grow and support our fair value estimate of C$0.79/sh. Based solely on its maiden resource Mawson is trading at US$47/oz AuEq relative to peers at US$46/oz AuEq. We believe that ongoing drill results are likely to demonstrate the upside that we see and should re-rate the stock towards our estimated value. Upcoming catalysts include 1) Results from WUSA drilling (Q1/19) 2) Ongoing results from 15km drill program



Red Pine Exploration Inc

Results Point to Third Ore Shoot

Impact: Positive

Red Pine has announced some of the best drill intercepts we have seen from its Wawa Gold Project, which point to the emergence of a potential third ore shoot on the fringes of the current resource envelope. We continue to believe the Wawa Gold Corridor hosts a large gold system and that Red Pine is positioned to deliver multiple gold discoveries.

  • Potential third ore shoot. Hole SD-18-255 returned 10.6g/t Au over 12.7m on the margins of the Surluga resource envelope. This intercept occurs in the vicinity of a high-grade interval reported on September 13th from previously unsampled historic core which returned 1.74m grading 22.8g/t Au. Overall, results point to a possible third ore shoot emerging above (or up dip) the two main shoots defined to date which should be additive for the upcoming resource estimate expected in Q2 2019.
  • High grade shoots appear to be coalescing and growing. Holes SD-18-251 (2.9m grading 4.0 g/t), SD-18-254 (6.3m grading 2.1 g/t) and SD-18-258 (3.1m grading 5.2 g/t) targeted gaps within or down plunge extensions of the high grade (3 g/t Au cut-off) resource envelope at Surluga. These holes returned grades and widths amenable to bulk underground mining methods and further validate the company’s structural model.
  • Surluga resource update on the way. The upcoming Surluga resource update expected in Q2 2019 will be designed with a bulk underground mining operation in mind, given vein thickness have ranged between 3m to 30m at grades above 3 g/t Au. We note that much of the Surluga deposit is proximal to historic workings which should help reduce future development costs of an underground mining project at Surluga.

Despite ongoing exploration success Red Pine trades at US$17/oz AuEq versus peers at US$39/oz AuEq . We note that the company is well funded with roughly C$5M – continued exploration success should close the valuation gap to peers. Additionally, we view the eventual consolidation of the projects ownership structure to likely be a major catalyst for Red Pine. Upcoming catalysts include 1) Pending assay results for 23 holes completed at Surluga 2) Updated Surluga Resource estimate in Q2 2019 


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