Mawson Resources Ltd

Gold-Cobalt and Plenty of Potential

Impact: Positive

Mawson’s newly released maiden mineral resource estimate at its Rajapalot Project in northern Finland provides a good start to the project’s lifecycle and leaves plenty of room for growth. This maiden resource underpins Mawson’s value but does not account for the significant growth potential that we see at Rajapalot.

  • Maiden Resource confirms high-grade potential. The unconstrained inferred maiden resource contains 482koz at 2.4g/t AuEq (1.7g/t Au and 0.041% Co) at a 0.4g/t cut-off grade (Figure 1 & 2). We view this resource as a positive first step for a project that we believe has significant exploration upside. The company has tested only 20% (or 800m) of the 4km known mineralized trend (Figure 3) and the deposits remain open down-dip (Figure 4 and 5).
  • Strength in grade and tonnage. The resource is supported by high open pit and underground grades at 2.8 g/t AuEq and 5.2 g/t AuEq, respectively. The unconstrained inferred mineral inventory at various cut-off grades is shown in Figure 2, which we believe demonstrates a robust resource, particularly at underground only cut-off grades. Additionally, 28% of the unconstrained resources are provided from a cobalt by-product strategically positioning Mawson as the only source of cobalt in Finland close to one of the world’s largest cobalt refineries.
  • Resource expected to grow with 2019 drilling. Based on our recent site visit, we believe this project has transitioned from exploration to resource development. As a result, we expect 2019 drilling has a high likelihood of doubling the existing resource. Additionally, we believe that recent geophysics point to the potential for a subsequent doubling just from these two deposits. We note that balance of Rompas-Rajapalot project has prospective areas where follow-up testing could provide further upside potential.
Market pricing in the maiden resource but does not account for exploration potential that we expect to be demonstrated in early 2019. We continue to believe that the Rompas-Rajapalot project hosts a large high-grade mineralized system. Based on the maiden resource, the company is trading at US$38/oz AuEq, peers US$47/oz AuEq (Figure 6). In our view, this does not properly account for the exploration upside that we expect to be demonstrated with the winter 2019 drill program. Upcoming catalysts include 1) Results from WUSA drilling (Q1/19), 2) Drill permits for winter Rajapalot program (Q1/19) and 3) 15,000m drill program at Rajapalot (Q1/19).



GT Gold Corp

Saddle North Extends to Surface

Impact: Positive

GT Gold has announced additional drill results from Saddle North, extending the mineralized envelope to surface. Results continue to demonstrate the size and grade potential of Saddle North and support our view that the company has made a significant porphyry discovery that is not reflected in the share price.

  • Potentially open-pitable deposit. Highlight holes include 0.93g/t AuEq over 324m from 4m depth (Hole TTD108 – Figure 3), which suggest that the mineralization extends to surface. Given that these are ore grades near surface with good continuity, we now see some open pit potential to the northeast.
  • Grades improve at depth, looking forward to hole TTD109. While the mineralization at surface has now been demonstrated to be ore grade, drilling to date (9 holes) suggests that the grade of the mineralization at Saddle North also increases at depth, highlighting further underground block cave potential. We await assays from hole TTD109 (expected in January) but the results from the surrounding holes, suggests that good results are likely. We highlight that with so few holes completed to date, additional results at better grades, would positively impact our estimates.
  • Rough estimate points to significant scale potential. Using the data released to date we estimate the total mineralized envelope could be ~1.47Bt at 0.75 g/t AuEq (~35 Moz AuEq - Figure 1) with the higher-grade core at ~290Mt at 1.25 g/t AuEq (~11Moz AuEq – Figure 2). This is approaching the size of Red Chris when it was put into production (1.82Bt @ 0.84g/t AuEq) and is of similar grade/scale of other block cave operations (Figure 3). We highlight that with only 9 holes complete, Saddle North is at a very early stage and our estimates are very preliminary.
Market is not pricing in this sizeable discovery. Based on the drilling to date, our rough estimate for Saddle South is ~750k-1M oz AuEq, based on C$50-75/oz for peers, this implies a value of C$37.5-75M. This suggests a value of C$0-9.5M for the Saddle North porphyry target. We believe that if future results match what we have seen to date, this implied valuation materially undervalues this targets potential. Upcoming catalysts include 1) Assays from drill hole TTD109 (Q1/19) and 2) Saddle South exploration update (Q1/19).



Callinex Mines Inc

Results Validate Thesis, More Drilling Needed

Impact: Mildly Positive

Assay results from two widely spaced holes testing an IP anomaly 1.2km to the east of the Nash Creek deposit returned massive sulphides, supporting the theory of a potential mineralized eastern limb to the Nash Creek syncline. While not ore grades, we look forward to follow-up holes in 2019 to vector into higher grade zones in this ~1900m by 400m “Central Zone” target area. Results support our view that the company is on track for significant resource growth in a prolific VMS mining camp (Figure 1).

      • Technical success in the Central Zone. The company announced assays from two drill holes targeting an IP anomaly situated 1km to the east of the current resource, which may represent the mineralized eastern limb of the Nash Creek stratigraphy. While ore grades were not returned, holes NC17-301 and NC17-302 intersected semi-massive sulphides similar to Nash Creek’s Hickey Zone thus supporting this thesis. We look forward to follow-up drilling aimed at vectoring into higher-grade zones in the Central Zone target area, which currently spans ~1900m by 400m as defined by the 2018 IP Survey.
      • On the verge of demonstrating district-scale potential. Initial results from follow-up drilling on the IP anomalies validate our theory of synclinal repetition of the Nash Creek deposit to the east in addition to validating IP surveying as an effective geophysical exploration method for targeting near-surface sulphides on the property. With the knowledge that VMS deposits often occur in clusters, we are awaiting IP survey results (Q1 2019) from the remaining 18km of the underexplored 20km trend to identify additional targets in the Bathurst Camp.
      • Incremental resource expansion potential at Nash Creek. The drilling campaign successfully returned encouraging results in step outs to the east and west of the current mineralized footprint, highlighting the potential for incremental expansion of the current Nash Creek deposit with further drilling.
    The market fails to realize the potential of Callinex’s growing asset portfolio in the Bathurst Mining District. Callinex currently trades at a significant discount to peers ($0.001/lb vs. peers at $0.003/lb ZnEq). Considering our expectation for further resource growth at Nash Creek beyond the recent update, we expect the upcoming drill results in addition to the IP survey could close the valuation gap to peers. Upcoming catalysts: 1) District scale IP results 2) Exploration update for Pine Bay Project in Flin Flon. 

Novo Resources Corp

Bulk Samples Coming to Town

Impact: Mildly Positive

Novo provided an update on multiple projects, suggesting steady news flow through year-end and into 2019. The news is expected to include bulk sample results from Egina, Karratha and Beatons Creek, the mineralization report from Karratha, a resource update at Beatons Creek and additional exploration results from the new Talga Talga prospect. In our view the share price, does not reflect value the potential of the company’s Karratha, Egina or wider Pilbara projects and is mostly underpinned by Beatons Creek.

  • Egina – heading in to systematic bulk sampling. Novo has completed initial bulk sampling as it prepares to begin much larger sampling across the Egina gravels in 2019. The company completed a 170t bulk sample which is being processed with results expected before year-end. Detailed metallurgical test-work is being completed on smaller samples to develop a processing scheme for the Egina gravels. 
  • Karratha – approaching a mining lease. While more bulk sample results are pending, the next key catalyst is the creation of a mineralization report for Comet Well and Purdy’s Reward (Karratha project), which is a key element needed to convert these exploration leases into mining leases. The report is expected to be delivered in Q1 2019. 
  • Beatons Creek – resource update expected to add significant value.
    We expect the pending exploration results could result in a material grade increase (25-50%) which could make Beaton’s Creek a stand-alone project. The resource update is expected in Q1/19 and we highlight that our current value estimate of C$1.10-1.40/sh does not include higher grades at Beaton’s Creek.  
  • Talga Talga – a new hardrock target. Located 110 km north of Beatons Creek, this project adds a hard-rock exploration target to the company’s portfolio. Rock chip sampling and detailed mapping have defined a 3km long mineralized corridor (Figure 1). The company expects to pursue diamond drilling in 2019 following further geological interpretation. 
Adding Egina to our estimates would be accretive to our preliminary valuation of C$2.40-4.80/sh. We currently ascribe no value for Egina or Talga Talga in our estimate; however pending exploration results may alter our view, in particular the pending bulk sample results from Egina. With Karratha likely 6-12 months away from larger scale bulk samples, news flow from the company’s other projects is expected to be key. Upcoming catalysts include, 1) Larger scale bulk sampling (H2/19), 2) Ramp-up of exploration work at Egina (Q1/19) and 3) Beatons Creek resource update (Q1/19).



Seabridge Gold Inc

Iron Cap Success Should Improve Mine Economics

Impact: Mildly Positive

Seabridge has announced that it has once again extended the Iron Cap mineralization down plunge to the northwest, which is already defined a 49Moz AuEq deposit within the wider KSM property in BC. Results align with our thesis that Seabridge is in possession of a major-scale gold-copper project in a premier jurisdiction that we expect to attract major partners.

  • Seabridge delivers on 2018 exploration objectives. The 2018 exploration program that was focused on the Iron Cap Deposit has successfully extended the mineralization down-plunge from the high-grade core and tested the southern limits of the Iron Cap Deposit, as defined by a 2018 resource update. Highlights include 548m grading 1.30g/t AuEq (0.63g/t Au and 0.44% Cu) in hole IC-18-83, which exceeded the average KSM reserve grade of 0.89g/t AuEq and average Iron Cap resource grade of 0.83g/t AuEq.
  • Expansion of high-grade core should improve project economics. With permits in-hand, that allow the company to mine +2B tonnes of ore, the objective is mine the most profitable tonnes first. We would expect that Iron Cap’s growing higher-grade core may play is likely to be mined sooner and for longer than was outlined in the 2016 PEA, which we think would improve project economics, particular since it is so close to the planned Mitchell-Treaty Tunnel.
  • Another resource update for Iron Cap is now underway. We view the growth of Iron Cap as a game-changing addition to the KSM Project as increased grades in early years with minimal development capital required allows for enhanced project economics. With a high-grade core of 635Mt grading 1.34g/t AuEq at Iron Cap already defined earlier this year, we expect that the resource update currently underway is likely to enhance the already exceptional size and grade of the deposit.
Improving grade and major scale should see this project trade closer to peers. Based on KSM reserves alone, Seabridge is trading at US$11/oz AuEq compared to peers at US$45/oz AuEq on a total resource basis. Given the scale of KSM, and the fact that it is permitted, we believe the company should trade closer to peers. Upcoming catalysts: 1) Iron Cap resource update (H1/19), 2) Iskut exploration results (Q1/19), and 3) Updated project economics (H2/19)


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