RCKS Talk

09-May-2019

Norvista Capital Corp

RCKS Nugget: Norvista Capital Corp

Recent news from Norvista Capital caught our attention.

Norvista’s asset sale to Rockcliff positions the company with an aggregate 27.4% stake in Rockcliff Metals Corp (CSE:RCLF).
Norvista Capital Corp (TSXV:NVV) is a resource-based merchant bank with investee companies such as Rockcliff Metals Corp (CSE:RCLF), Nevada Zinc Corp (TSVX:NZN) and Minera Alamos Inc (TSXV:MAI) with assets in countries such as Canada, the United States and Mexico.

09-May-2019

RNC Minerals

Developing Below the Father's Day Vein

Impact: Mildly Positive

RNC has provided important updates regarding the ramp-up of its mining operations and the pending completion of its Higginsville acquisition. Importantly, the company highlighted that it plans to mine, directly below the Father’s Day vein, later this month. The combination of: 1) the Higginsville mill acquisition and 2) the re-ramp up at Beta Hunt, should drive RNC towards a +100k oz/yr gold producer.
Highlights:

  • Getting ready to mine beneath Father’s Day Vein area. In May, the company plans to develop and mine beneath the Father’s Day Vein (~30k oz mined), following up on drill intercept of 1,406 g/t Au over 0.5m (announced January 2019 – 7m below the known zone). Should RNC drift into a zone that is mildly similar to the original Father’s Day vein, we would expect the stock to jump on the news. Such a discovery would demonstrate repeatability of the deposit model and could materially improve the company’s working capital.
  • Production starting off slow; full ramp up post-updated resource. RNC produced 3.2k oz (34k tonnes at 3.4 g/t Au + 69oz of coarse gold) and indicated that they have ramped up to a 40,000 oz/year run-rate in April. At this run-rate, RNC’s cash burn at Beta Hunt would have materially slowed and could have the operation close to cash neutral for Q2. We expect the company to further ramp-up operations post the resource update (Q2/19) and once the Higginsville acquisition has been completed (Q2/19).
  • Higginsville settlement extended. The company announced that the extension of its purchase option agreement to acquire the Higginsville operations has been extended to May 12, 2019 as both parties finalize deal terms and due diligence. We continue to view this transaction as accretive for the company as it could push RNC to +100k oz/year. The acquisition is expected to close in June.
Valuation:
Catalysts in place to re-rate towards our fair value estimate (C$0.93/sh - unchanged).
We expect ongoing drill results and progress on the Higginsville mill acquisition, including providing clarity on the acquisition funding, to be important catalysts for the company and should drive the share price towards our fair value estimate (expected to increase once Higginsville is incorporated). Upcoming catalysts include 1) Ongoing drill results 2) Resource update (Q2/19) 3) Completion (including funding of Higginsville acquisition (Q2/19) 4) Full restart of mining at Beta Hunt (H2/19)

08-May-2019

SolGold Plc

Chical Again Highlights Regional Potential

Impact: Mildly Positive

SolGold has released results from yet another potential high-grade copper-gold system near the company’s flagship Cascabel project. Exploration continues to demonstrate the regional potential of SolGold’s property in Ecuador. In addition, we believe that a corporate takeout is imminent, and another discovery would only accelerate potential corporate activity. Highlights:
  • Surface sampling uncovers high-grade copper and gold at Chical. Geochemical and surface exploration at Chical have outlined a 5.8 km2 area hosting the Pascal, La Esperanza and Espinoza prospects. Rock chip sampling across La Esperanza returned 1.04% Cu, 0.42g/t Au and 0.88% Mo and have been found to exhibit the preliminary hallmarks of a large porphyry system. Sampling has also uncovered additional peripheral gold-rich epithermal veins to the north of La Esperanza (Figure 2).
  • Exploration beyond Alpala proving to be fruitful. Located in northern Ecuador nearby SolGold’s flagship Cascabel project, Chical is one of many discoveries made throughout the company’s large land holdings. SolGold has 11 priority targets and 42 geologists dispersed throughout its 72 concessions and we expect a discovery beyond Alpala is likely. We continue to believe that the surfacing of value through exploration could accelerate a potential takeout.
  • Near-term catalysts expected to generate re-rating. The company is planning to drill in southern Ecuador while simultaneously working towards a maiden PEA at Alpala; both in Q2/19. Additionally, we are expecting a formal bid from SolGold to acquire Cornerstone Capital Resources (TSXV:CGP).

Valuation:
Expecting coming PEA to provide positive catalyst for the company . We are maintaining our C$1.35 fair value estimate based on 0.90x our C$1.50 NAVPS8% estimate (was C$1.47 - up on Q4/18 financials). SolGold currently trades closely in line with peers (0.43x NAV, peers 0.42x). We expect the pending PEA should drive the stock higher. Upcoming catalysts : 1) Maiden PEA for Alpala (Q2/19) 2) Formal bid for Cornerstone and 3) Ongoing exploration results.
08-May-2019

Rockcliff Metals Corp

Armed and Dangerous

Impact: Positive

A new sheriff in town. Rockcliff has completed a transformational transaction involving Greenstone Resources II LP (“Greenstone”) and Norvista Capital Corporation (“Norvista”) which has injected ~C$29M into the restructured company’s coffers. As part of the deal, Rockcliff also acquired the Tower and Talbot projects, significantly de-risking its portfolio of base metal and gold assets in the Snow Lake Mining Camp in Manitoba. With cash in hand, Rockcliff is about to embark on an extensive 100,000m drilling program which we believe can expand existing resources and potentially lead to a discovery in the Snow Lake South Emerging Mining Camp (“SLSEMC”).
Highlights:

  • Cashed up and ready to drill. With ~C$29M in the bank, the company is about to embark on a 100,000m drilling program over the next 20 months. The objective will be to infill and expand resources at a number of deposits within the portfolio in addition to drilling for a discovery in the SLSEMC.
  • Portfolio de-risked; puzzle pieces falling into place. By acquiring Tower (2.34Mt at 3.5% CuEq) and Talbot (4.23Mt at 3.53% CuEq) from Norvista, Rockcliff significantly de-risks its portfolio. With economic studies and permitting underway, the projects are more advanced than Rockcliff’s other assets. In all, 34,000m of drilling are planned and we note that with seven-year lease agreement secured at the nearby permitted Bucko mill facility, visibility to production and cash flows has become eminently nearer.
  • Blue sky. Earlier this year Rockcliff doubled its SLSEMC property holdings to 300,000 ha. Desktop work is ongoing for generating and prioritizing targets in this highly prospective region of the Snow Lake Camp which occurs beneath cover. The potential for a major VMS discovery is of particular interest to us.
Valuation:
Radically restructured Rockcliff offers tremendous base metal option value.
With funding now in place to commence an aggressive 100,000m drill program across its extensive asset base in the world class Snow Lake base metal camp, we have revised our valuation upward to C$0.40/share (was C$0.32/share). This reflects potential both to grow resources and to make a significant discovery in the SLSEMC. Upcoming catalysts: (1) Infill and Expansion drilling from Talbot/Tower (Q3/19) and (2) Expansion drilling at Rail, Bur, Lon and Morgan (Q4/19) and (3) Drilling the SLSEMC (H2/20).

07-May-2019

SolGold Plc

Porvenir Potential Continues to Grow

Impact: Mildly Positive

With the discovery of a large, shallow and high-grade target at its Porvenir project, SolGold has identified a potentially game-changing drill target. We believe that should drilling yield a discovery (Q2/19), it could drive SolGold’s share price higher. This exploration optionality is underpinned by the world-class Alpala deposit, that we believe is undervalued by the market. We continue to believe that large mining companies are positioning to potentially acquire SolGold (Newcrest - 15% & BHP - 11%). 


Highlights:
  • Initial results suggest another large porphyry. At Porvenir, rock saw sampling intercepted economic grades of 0.64% CuEq over 147.8m which included a high-grade interval including 0.96% CuEq over 82.6m. Through a combination of sampling methods, the target has a footprint of 1200m by 800m (Figure 3). Exploration work suggests the mineralization at Porvenir could be large shallow porphyry with similar to Alpala and is one of several targets identified.
  • Drilling should give us clarity on potential. The company plans to complete ground magnetic surveying alongside drilling to test Target 15 in Q2/19. With good initial grades from surface sampling, we expect drilling could be key in proving the potential scale at Porvenir, by determining the depth extent.
  • Another large porphyry discovery could be game changing. We currently ascribe a value of US$100M for the company’s Southern Ecuador exploration projects; however, wide intercepts (>250m) at economic open-pit grades (>0.5%CuEq) could make Porvenir worth multiples of our current estimates. In our view, demonstrating this exploration upside is likely to make SolGold even more attractive.
 
Valuation:
Surfacing value at Porvenir could accelerate the expected takeout
. We are maintaining our C$1.35 fair value estimate based on 0.90x our C$1.50 NAVPS8% estimate (was C$1.47 - up on Q4/18 financials). SolGold currently trades closely in line with peers (0.43x NAV, peers 0.42x). We expect the pending PEA should drive the stock higher. Upcoming catalysts: 1) Maiden PEA for Alpala (Q2/19) 2) Formal bid for Cornerstone and 3) Ongoing exploration results.

 

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