RNC Minerals

More High-Grades from Western Flanks

Impact: Positive

New drill results from Beta Hunt’s Western Flanks and A Zones continue to demonstrate Beta Hunt’s high-grade gold and bulk mining potential. Results continue to support our current fair value estimate at C$0.97 (unchanged). We continue to expect ongoing exploration and development work to be the key catalysts for demonstrating the potential that we see at Beta Hunt.

    • More high-grade gold from Western Flanks. Drill results from the Western Flanks zone delivered sediment hosted high-grade coarse gold with highlights including 395.9g/t Au over 4.75m (including 2,210g/t Au over 0.85m at WFN-063). Importantly, this zone, located 8m from previously drilled WFN-029 of 7,621g/t Au over 0.22m (Figure 2). It is not known yet, whether these intercepts represent two high-grade veins or one very large one but with their occurrence only 45m from current underground infrastructure, we expect to find out in Q2/19. 
    • Good results from bulk mining targets. Most of the drilling intersected the shear zone, which is expected to be the underpinning bulk mining target. Results were highlighted by 7.84g/t Au over 5.63m (AZ15-034), which extended the current strike of the A Zone to the south. The company has completed 16,670m of the 40km drill program, with assays results from 8,139m pending.  
    • Board changes add significant high-grade gold operating experience. In a separate release, the company announced that Mr. Paul Huet has become Executive Chairman of RNC Minerals. We view this positively as, Mr. Huet’s experience at the very high-grade Fire Creek mine, while building Klondex Mines, is going to be invaluable as the company develops its plan for Beta Hunt.
    Ongoing drilling success support our base case (C$0.97/sh – unchanged) and provides early indications that our upside case (C$1.32/sh – unchanged) could be achievable. Our fair value estimate is based on our probability-based valuation method for Beta Hunt (C$0.93/sh), plus the company’s other assets (C$0.04/sh). However, our, upside valuation which hinges on the idea that Beta Hunt can repeat the success of the Father’s Day Vein suggests (along with a 2.5M oz resource) suggests that Beta Hunt could be worth C$1.28/sh and the company C$1.32/sh. In our view continued drilling success is the key to closing the valuation gap to our estimates. Upcoming catalysts include: 1) Drilling and development results from Beta Hunt (every 4-6 weeks), 2) Balance sheet update (Q1/19) and 3) Resource update (mid-2019)

Gran Colombia Gold Corp

Results Point to Reserve and Resource Growth

Impact: Mildly Positive

Gran Colombia has provided generally positive news with a first look at production results for 2019 and final details from its 2018 drill season. This update supports the company’s strong outlook for 2019 which we expect to be affirmed with continued production and drilling success. We believe the market has still not priced in this company’s turnaround and as Gran Colombia executes operationally, we expect it re-rate towards peers. 


  • Drilling for resource growth. The company released results from the remaining 8,043m of its 2018 drill program highlighting growth at the El Silencia, Providencia and Sandra K systems which make up the company’s Segovia operations (86% of 2017 gold sales). Exploration efforts to date have been targeting growth below existing operations, based on the results to-date we expect the company grow reserves and resources with the pending update.
  • First month of production results in line with mid-range guidance for 2019. The company’s January production update of 17,941oz Au provides a good start to 2019. This update aligns with the mid-point of 2019 guidance of 210,000-225,000 oz Au. We believe operating execution, along with solid financial results are key to Gran Colombia closing the significant valuation gap to peers. 
  • Upcoming catalysts should drive momentum. Gran Colombia is expected to release its Q4 and full financial results by March 27, 2019, after a reserve and resource update which is expected shortly. Along with operating and financial results, ongoing exploration could be an important catalyst for the company as it works to demonstrate the company’s longer-term potential.

Gran Colombia’s shares poised to continue re-rating higher. Based on 2019 guidance and historical costs the company appears to trade at 2.5-3.0x 2019E EBITDA (1.7x consensus estimates), which is a steep discount to peer’s which trade at 5.1x. We believe that with the balance sheet repaired and operations improved, we expect Gran Colombia to progressively re-rate as it executes operationally. Upcoming Catalysts include 1) Resource and Reserve update (Q1/19), 2) 2018 Financials (Q1/19), 3) Exploration results (ongoing)



De Grey Mining Ltd.

Bigger Throughput Pushes Project Over 100k oz pa

Impact: Positive

De Grey announced an increase in the scale of the its Pilbara Gold Project from 1Mtpa to 2Mtpa plant throughput based on 2018 exploration success and improved metallurgy. As well, the company announced that it expects the resource to grow to 2Moz by year-end. Both these updates support our view that De Grey is continuing to improve the scale and economics of its Pilbara project, which we expect is likely to start attracting the interest of mid-tier gold miners in Australia.

  • +100koz pa potential. Following a recent resource update that saw an increase in resources from 1.2 to 1.4Moz Au plus the recovery improvements announced last week, the company has announced that plans to advance the project around a 2Mtpa plant, which based on our estimates should translate to +100koz pa production. In our view, this is an important threshold, is the project is now of a size that matters to mid-tier producers, making De Grey a more attractive takeout target.
  • Resource expected to be ~2Moz by year end. De Grey reiterated the company’s corporate goals of building a 3Moz resource in the Pilbara with the first step of defining 2Moz by year-end (an additional 600koz). With two drill rigs already drilling both open pit and underground targets at Withnell, to be followed by Toweranna, we expect these 2019 goals to be easily achievable at these two deposits alone. We highlight that step-out drilling is also planned for Malina and Mt, Berghaus.
  • More news coming. Having recently announced higher expected recoveries and now doubling the expected throughput, we see 2019 as a transformative year for the company as it continues to highlight the projects potential. Along with ongoing drill results, we expect further updates on capital costs, operating costs and an expected mine plan to further support this theory.
Valuation does not reflect Pilbara Gold projects potential. Our preliminary estimate for De Grey’s hard rock assets are worth at least A$0.30/sh. These estimates do not account for the optionality the company has with its conglomerate targets. We believe that as the company demonstrates the exploration upside and scale potential of PGP, it is likely to become a takeout target for larger peers. Upcoming catalysts: 1) Ongoing exploration results and 2) Project development updates.


Novo Resources Corp.

Beatons Creek Resource Getting Ready to Grow

Impact: Positive

Novo has announced a positive update from Beatons Creek, which includes initial bulk sampling results and wireframe modelling. Average bulk sample grades are in line with resource grades and updated wireframe model points to a substantial increase in the mineralized footprint of the deposit. Both updates contribute to additional upside we see at Beatons Creek beyond the C$1.10-1.40/sh of our preliminary model, which underpin the company’s current value.

  • New wire frames suggest deposit could be much larger. The new wireframe released today, implies the mineralized footprint of Beaton’s Creek could be 50 to 100% larger than the current 667k oz (8.4M tonnes at 2.4 g/t). Assuming grades are constant, this would increase our preliminary valuation by 40 to 80%, which justify the majority of Novo’s current market cap of C$414M.
  • Grades in-line with current resource. A total of 45 bulk samples weighing ~2 tonnes each were collected from outcropping areas across the project with a weighted average grade of 2.55g/t Au, which confirms and is slightly above the resource grade of 2.44g/t Au. The company is still waiting on an additional 20 bulk samples, which contains samples of lower-grade subordinate conglomerate. If these rock layers return ore grade assays, they could be additive to the growing resource base at Beatons Creek.
  • Plenty of news still expected in 2019. In addition to Beatons Creek, we expect further news to come this year from Karratha as the company refines its ore sorting parameters and gets ready for even larger bulk sampling. Additionally, bulk sampling at Egina is scheduled to resume this quarter, with first results expected shortly thereafter.
As Novo continues to prove out its technology and grow its resource base, we expect positive upward momentum. Our preliminary DCF valuation for Beatons Creek alone underpins an estimated value of C$1.10-1.40/sh and a combined value of C$2.40-4.80/sh for Karratha and Beatons Creek. A valuation gap is evident as Novo currently trades at C$2.53/sh and we believe steady newsflow from all projects should drive the stock towards the top-end of our valuation range. Upcoming catalysts include, 1) Filing of the mineralization report for Karratha (Q1/19) 2) Bulk sampling at Karratha (H2/19), 3) Systematic bulk sampling work at Egina (Q1/19) and 4) Beatons Creek resource update (Q1/19).



Coro Mining Corp.

Sorpresa Adds Fuel to the Fire

Impact: Positive

Coro Mining announced results from the Sorpresa area of its Marimaca Project in the Antofagasta Region of Chile. Sorpresa occurs ~2km south of Coro’s Marimaca oxide-copper deposit. Today’s results at Sorpresa define a 350m by 100m zone of copper oxide mineralization which remains open and supports our thesis that a viable copper heap leach story is going to expand materially through the drill bit. 

  • A substantial mineralized footprint. A total of 2,450 samples were collected from the Sorpresa underground workings, averaging ~0.50% CuT with highlight intercept: 77m grading 1.0% CuT (SS-01-10). While still early days, the discovery of a 350m long by 100m wide mineralized zone 2km south of the Marimaca deposit is the first sign that a large (potentially kilometers in scale) mineralized system may be at work in the area.
  • Drill rigs turning at Sorpresa. Having confirmed the presence of ore grade copper oxide mineralization in the Sorpresa workings (See Figure 1) the company has initiated a 12 hole (3,000m) RC drilling program to test strike and depth extensions. If successful, this small drill program may reveal the potential for delineating an open pittable satellite oxide copper deposit which would be additive to the main Marimaca operation.
  • Sorpresa hints at blue sky beyond La Atómica and Atahualpa. Over the last few months Coro has released positive drill results from the La Atómica and Atahualpa areas to the northwest and north of the Marimaca deposit which we believe may double the current Marimaca resource base. We note that this doubling does not take into account blue sky potential on the greater property as demonstrated today by Sorpresa.
Expected resource growth justifies current premium to peers – continued exploration success is likely to widen the gap. Coro currently trades at US$0.049/lb (peers US$0.023). We believe exploration success to date more than justifies this premium and with three rigs expected to be turning by March Coro should 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. Upcoming Catalysts include 1) Maiden La Atómica Resource in Q1/19 2) Maiden Atahualpa Resource in Q4/19 3) Ongoing results from Phase II drilling.


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