RCKS Talk

31-Jan-2019

Novo Resources Corp

Sorting Results Continue to be Positive

Impact: Mildly Positive

Novo continues to demonstrate the viability of its ore sorting technology which, has the potential of lower processing costs at its Karratha gold project. With much of Novo’s current value underpinned by its Beatons Creek resource, we believe the market undervalues the company’s Karratha, Egina and wider Pilbara projects. 

Highlights: 
  • Grades continue to fall within the typical range for bulk samples. Results from ore sorting returned good grades highlighting up to 2.97g/t Au and an overall weighted average grade of 1.76g/t Au. These results are slightly below the weighted average head-grade of previous samples (2.4 g/t Au) but above the minimum grades that we estimated from preliminary results. Moving forward, Novo will aim to improve Au recovery via ore sorting in the sorting process by optimizing crush size.
  • Improving potential economics. While crush size still needs to be optimized, preliminary indications are the ore sorting may work to concentrate the material mined, prior to processing which would reduce costs. It appears that both oversized and undersized unsorted material, would need to be processed in the same way as sorted material. However, we would still expect this in a material costs saving, depending on how well crush size can be controlled. 
  • Plenty of news still expected in 2019. 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. The company is also completing 58 2t+ bulk sample at its Beatons Creek project which we expect to be complete in February. Together with recent drill data, we expect a resource update from Beatons Creek beyond the current 4.6 Mt at 2.3 g/t Au (345 koz) in Q1/19.
Valuation:
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$2.75/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).

 

31-Jan-2019

SolGold Plc

SolGold Targets 100% Interest in Cascabel

Impact: Mildly Positive

SolGold has announced its intention to make an offer to acquire all the outstanding common shares of Cornerstone Capital Resources (TSXV:CGP), the 15% owner of SolGold’s flagship Cascabel Project. We view this all-share transaction as a sensible and logical step forward, as consolidated ownership puts the shareholders of both companies in the best position to optimize the value of the world-class Alpala Deposit as would be suitors come calling.

Highlights: 
  • Offer looks attractive; when you investigate the details. SolGold intends to offer 0.55 SolGold shares for every Cornerstone share, representing an 18% premium to yesterday’s close and valuing Cornerstone at ~US$170M. While at first this may appear to undervalue Cornerstone, the details suggest otherwise. Cornerstone’s passive 15% interest is debt-carried, such that the anticipated US$200M in expenditures prior to the completion of a feasibility study is repaid out of project cash flows. Post feasibility, we estimate Cornerstone would need to pay ~US$500M prior to first cash flow, which could be highly dilutive. If Cornerstone elects not to fund its pro-rata share it would eventually dilute to a 0.5% NSR, which SolGold can fully acquire for US$3.5M. We highlight that Cornerstone’s shareholders would also be getting exposure to SolGold’s exploration projects, which we value at US$150M. 
  • Smart strategic move for SolGold. Should the transaction go through as outlined, our NAVPS estimate would increase by ~15%, particularly since SolGold would be purchasing 170M (~9%) of its own shares with the acquisition of Cornerstone. Additionally, the acquisition of Cornerstone eliminates the ability of would be suitors to get a stake in the project via Cornerstone, all would have to come through SolGold, likely increasing competitive tension, resulting in a higher price for the shareholders of the combined company.
  • First steps of what is expected to be a complex process. With two potential outside bidders with demonstrated interest in the project restricted (BHP until Oct-2020 and Newcrest until Oct-2019) and Cornerstone indicating that 50% of its share holders are not interested, it is likely to take several months for a transaction to be completed, if at all.
Valuation:
Estimates unchanged, but SolGold is still cheap. SolGold trades at 0.42x NAV, a discount to peers at 0.50x. Given the world class nature of the Alpala deposit and the interest from majors, we believe a 0.90x NAV multiple applied to our C$1.47 NAVPS estimate would be appropriate implying a value of C$1.32/share. Upcoming catalysts: 1) Ongoing exploration and 2) Maiden PEA for Alpala (Q1/19).

 

31-Jan-2019

GoviEx Uranium Inc

Going Solar & Improving Economics

Impact: Neutral

GoviEx announced a memorandum of understanding (MOU) with Windiga Energy to evaluate the feasibility of developing a solar-diesel energy power plant to supply the Madaouela project with low-cost renewable energy. While this is likely to only have an incremental impact on project economics, GoviEx remains one of the few late-stage development uranium companies positioned to start production in the next uranium up-cycle.

Highlights:
  • MOU potentially provides a low-cost green energy option. The recently signed MOU to study the feasibility of a 20MW hybrid solar-diesel power plant at the company’s Madaouela project that would offer an environmentally sound and lower-cost power to supply for this project. Upon the completion of a feasibility study by Windiga, the two companies will discuss a potential 21-year power purchase agreement with optional renewal by GoviEx. 
  • Incremental improvement to operating costs expected. The collaboration could incrementally improve operating costs by supplying power that is roughly 25% less expensive than its coal fire alternative. Power costs currently represent 4% of the expected operating costs of US$24.49/lb U3O8, suggesting the improvement would be minor. The company acquired its extraction rights for the Madaouela project 2016 and with 60.54 Mlbs of U3O8 of probable mineral reserves, we expect this it to transition quickly from development in to production once the uranium price should the long-term uranium price makes sustained move above US$60/lb U3O8. 
  • Leverage to an improving uranium price environment. We believe GoviEx
    has strong leverage to the uranium price and is well positioned to transitioning into production during the next uranium price up-cycle. In our view, we believe the uranium price has bottomed, but a significant move-up is dependent on utilities starting to sign new long-term supply agreements.  
Valuation:
GoviEx currently trades at a substantial discount to peers, that is unwarranted given its short path to production in the next cycle. GoviEx trades at US$0.19/lb U3O 8Eq relative to peer developers at US$0.81/lb U3 O8Eq. In our view, GoviEx has meaningful leverage to rising uranium price, and we believe the stock is likely to outperform during the coming up-cycle. As well, during the next up-cycle we believe GoviEx is well positioned to become a significant African producer with its permitted Madaouela project in Niger and other African projects.

 

31-Jan-2019

Atico Mining Corp

Guidance Suggests More than the Market Cap Implies

Impact: Positive

Atico reported production results for Q4/18 setting records for both the quarter and the full-year 2018. We expect the steady ramp-up at El Roble to continue with 2019 guidance suggesting the company is poised to have another record year. We view Atico as an undervalued low-cost copper-gold producer, with significant exploration upside that we expect to generate significant free cash flow in 2019.
Highlights:
  • Record Q4, the result of a progressive ramp-up. The company produced 5.81 Mlbs Cu and 2.913 koz Au. Copper production was up 8% QoQ, and 9% YoY, while gold production was down 3% QoQ, and 2% YoY (Figure 1). The company’s continuous operating improvements have lead to a strengthened balance sheet allowing the for aggressively exploration of its very prospective land package in 2019 (Figure 2).
  • 2019 guidance points to the potential for another record year. With throughput steadily improving, the company finished 2018 strong. While corporate guidance suggests production is likely to be roughly flat in 2019 (20-21M lbs Cu, 10.-10.7koz Au) as compared to 2018 (21.9M lbs Cu, 11.3koz Au), we expect this historically conservative management team to at the very least hit the top end of guidance and likely beat.
  • 2019 guidance suggests the company is going to out perform its current valuation. Based on 2019 guidance, our preliminary estimates suggest the company should generate US$12-15M in EBITDA and US$4-5M in free cash flow at current copper prices. This is substantial when you consider the company’s current market cap (C$33.5M) and enterprise value (C$34.3M).
Valuation:
Atico currently trades at a steep discount to peers. Based on our preliminary estimates, Atico trades 1.7x-2.1x EBITDA or at an 12-15% FCF yield. When you consider that other base metal producers trade at 6.3x EBTIDA, Atico appears to be severely discounted. In addition, we believe this property has significant exploration upside and the company’s solid balance sheet (US$4.4M in cash and growing) has it well position to test the numerous targets that have developed over the years. Upcoming Catalysts include 1) Exploration update (Q1/19), 2) 2018 Financial results (April 2019) and 3) Q1 Operating results (Q2/19).
28-Jan-2019

Standard Lithium Ltd

Adding Tonnes in Arkansas

Impact: Mildly Positive

With the announcement of a second maiden resource at its South-West Arkansas Project, Standard Lithium now has a sizeable aggregated resource providing a future growth opportunity while driving its flagship South-Central Arkansas Project towards production. With the added tonnes from the second maiden resource the company trades at a further discount to peers despite being a low-risk lithium developer in North America.

 Highlights: 
    • Better grades at the South-West Arkansas Project. Using a combination of historical results, and pump tests on existing wells, Standard Lithium has assembled an inferred maiden resource of 802kt of LCE at an average concentration of 199 mg/L Li. We highlight this project represents future growth for the company, as it is focused on its South-Central Arkansas Project. This update increases the company’s total resource tonnage and grade across to 3.88Mt of LCE at a weighted average concentration of 172 mg/L.
    • Approaching production South-Central Arkansas Project. We expect important near-term progress to come from the company’s flagship South-Central Arkansas Project where a potential JV with Lanxess should allow the company to implement its lithium extraction and crystallization technology on Lanxess’ existing bromine operations. Standard Lithium is mobilized to begin construction of its crystallization Pilot Plant on the property by late Q1/19 which following commissioning and testing, should be fully permitted and ready for production.
    • Strong share performance since the beginning of year expected to continue with coming updates. We expect coming updates from the company to continue creating positive momentum for the stock. This includes commissioning of the pilot plant in Q2/19 and a PEA on the South-Central Arkansas Project in H1/19, demonstrating what we think could be very robust economics.
Valuation:
Discounted valuation does not reflect Standard Lithiums lower risk path to production. Standard Lithium trades at US$16/t LCE a steep discount to peers at US$38/t  LCE. In our view, this discount is unwarranted, since the company has virtually no permitting risk, significant existing infrastructure, and a large partner ready to fund the project to production. Upcoming Catalysts include 1) Further results from ongoing test-work (Q1/19), 2) Completion of definitive agreement with LANXESS (H1/19), 3) Pilot plant commissioning (mid-2019) and 4) PEA expected in H1 2019.

23-Jan-2019

RNC Minerals

Sediment Does Host High-Grades

Impact: Positive

Initial results from the ongoing 40,000m drill program at Beta Hunt have returned exceptional grades. The results suggest that our upside case is modestly more likely, with our current fair value estimate at C$0.97 (was C$0.94). We continue to expect ongoing exploration and development work to be the key catalysts for demonstrating the potential that we see at Beta Hunt.

Highlights: 
    • Specimen gold intersected near the sediment/shear contact on a second shear. RNC may have identified a second specimen zone on the Western Flanks shear, after hole WFN-029 intersected 1,017 g/t Au over 2m including 7,621 g/t Au over 0.27m (Figure 3). This result supports the company’s geologic thesis on these zones which in our view increases the odds that another Father’s Day Vein type are is found. Additionally, the company intersected 119.37 g/t Au over 6.4m below the Father’s Day vein (A-zone shear), suggesting there may be a higher-grade area around this specimen gold zone (Figure 4). 
    • Other results support our view, that a higher-grade bulk mining resource is developing. The balance of the intercepts continues to return better than > 3g/t Au (historic mining grade 2-3 g/t Au) supporting our view, that the company should be able to develop a significant bulk mineable resource at better than historic grades. While the specimen gold drill results are impressive, in our view the definition of a bulk mineable resource at Beta Hunt is key. 
    • Steady flow of drill results expected. RNC has drilled only 10km of the 40km
      program and only released results from 5,766m. Consequently, we expect steady newsflow over the next 6 months as the company works as the company works towards creating an updated resource and restarting the mine.  
    Valuation:
    Based on initial drilling success we are increasing our fair value estimate to C$0.97/sh (was C$0.94/sh). Our fair value estimate is based on our probability-based valuation method for Beta Hunt (C$0.93/sh, was C$0.89/sh), plus the company’s other assets (C$0.04/sh, was C$0.05/sh). Based on the company’s initial success, we have increased the probability of our upside case C$1.28/sh (was C$1.31) to 22.5% (was 15%). As well, we have adjusted our estimates for the recent financing. Ongoing exploration and development work at Beta Hunt are key to demonstrating the potential for additional “specimen zones” and a bulk mineable resource. Upcoming catalysts include: 1) Drilling and development results from Beta Hunt, 2) Balance sheet update (Q1/19) and 3) Resource update (mid-2019).
23-Jan-2019

NxGold Ltd

Moving Forward at Mt Roe

Impact: Mildly Positive

NxGold is advancing its Pilbara projects towards a maiden drill program. We continue to believe that the current enterprise value (EV) of the company does not reflect ongoing exploration success or the potential that this company has to make a gold discovery in the Pilbara. With funding in-place to advance this project through initial drilling, we believe the market is providing investors an with opportunity as it has yet to price in this company’s fair value.  

Highlights:
    • Closing in on hardrock targets at Sholl tenements. The company is following up on a number of anomalous soil samples from its Hawk, Eagle, and Swan areas where it is closing in on vein structures thought to be associated with primary gold mineralization. The company has newly granted tenements adjacent to its current holding at Mt Roe (Figure 1) where, alongside its slightly more advanced Prinsep property, it will apply systematic surface exploration to assess the geological potential.  
    • Applying systematic approach to Prinsep tenements. The company sampled an additional 300m to the west of a previously reported 500m strike segment and returned assay results of up to 4.8 g/t Au. NxGold has identified a potential strike length of up to 1,800m at Prinsep which it will investigate using systematic sampling techniques such as soil grid sampling followed by potential trenching or drilling.
    • Progressing towards drilling. In early 2019, NxGold plans to complete another round of surface work at its Mt. Roe projects, ahead of drilling. The objective is to do sufficient work on the recently granted tenements, to properly define the first drill targets. The company has enough money to fund Mt. Roe through a maiden drill program. 
    Valuation:
    NxGold still trades at near shell value and is overdue for a re-rating. Early stage exploration companies typically have EV’s between C$5-10M, while publicly listed shells normally have EV’s between C$1-2M. Considering NxGold has C$3.5M in cash and securities and is continuing to move what we view as a prospective project forward, the current valuation is unwarranted. This does not account, for what we view as a free option on Kuulu, as we expect the restoration of surface access rights to drive a significant re-rating.  Upcoming catalysts include 1) Ongoing Surface sample results from Mt. Roe, 2) Scout drilling at Mt. Roe (H1 2019) and 3) Surface access update at Kuulu.
21-Jan-2019

Bonterra Resources Inc

Moving Ahead in the Urban Barry Camp

Impact: Neutral

Bonterra is continuing to advance towards a company-wide mineral resource estimate encompassing its Gladiator, Barry and Moroy deposits. The company will move all three projects ahead simultaneously in the aim of creating a development plan which incorporates the company’s nearby Urban Barry Mill. We believe Bonterra could uncover large high-grade system at Gladiator which alongside Moroy and Barry, underpins the company’s ~190koz/year production potential by 2020E.

Highlights:  

  • Growing Gladiator. Bonterra continues to increase expansion potential at its Gladiator deposits following a recent JV with Beaufield Resources which allowed the company to consolidate historical databases and begin to delineate the Titan extension (Figure 1). Highlights from recent drilling include BA-18-116 which returned 12.4 g/t Au over 5.3 m drilled northeast along strike at the Titan extension. The mineralized zones at Coliseum and Titan are open in all directions and reflect similar characteristics to the Gladiator main deposit suggesting a potential 3.8x strike extension of Gladiator to a total strike length of 5 km.
  • Updates on Barry and Moroy. While the company pursues expansion at Gladiator, it is assembling geological models at both its Barry and Moroy deposits which are expected to be included in the pending mineral resource estimate. With a small underground ramp installation at Barry for future bulk sampling and drilling as well as existing workings from the historic underground Bachelor Mine at Moroy the company has access to complete underground development work to define both deposits at depth.
  • News coming in 2019. This year’s 2019 drill program will focus on
    validating the potential strike extension at Gladiator and completing infill drilling at the main deposit in order to contribute to the coming resource estimate. The company is currently refining drill targets for 2019 with the aim of improving potential project economics and growing its indicated mineral resources.
Valuation:
We anticipate a resource update should highlight the scale of the mineralized system to the market. Based on currently reported resources for Gladiator, Barry and Bachelor, Bonterra trades at US$46/oz, a premium to peers but once we factor in our estimate of ~C$50M for the Bachelor mill, and what we estimate could be a ~2M oz Au deposit at Gladiator, Bonterra would trade at a substantial discount to peers at US$16/oz. Upcoming catalysts include, 1) Resource update and 2) Ongoing exploration results

 

21-Jan-2019

FireFox Gold Corp

Initial Results Demonstrate the Potential of Mustajärvi

Impact: Positive

Phase I of drilling at FireFox’s Mustajärvi project successfully intersected high grade gold at depth and validated historic exploration results near surface. In our recent report on Finland, we outlined FireFox as having a potential value of C$0.63/share contingent on continued exploration success at Mustajärvi. As the company moves in to Phase II of drilling, we view this progress as aligning well with our estimates. 

Highlights:  
  • Depth extension beyond historic drilling. The company drilled 18MJ010 at 125.5m of depth and returned assays of 45.1 g/t Au over 2m highlighting the success of its first attempt at testing the deeper mineralization at Mustajärvi. With historical drilling constrained above 40m of depth, 18MJ010 confirmed a deep and highly altered mineralized zone measuring over a potential interval of 5m. 
  • Validating historic results. The company is following-up on drill holes completed by Outokompu and has a number of near-surface drill targets identified through recent IP surveying and magnetics. Results from the shallow portion of the drill program tested below an artisanal pit at Mustajärvi and returned similar grades and mineralization-styles seen in the historic drill holes completed by Outokompu. This news aligns well with the company’s geologic interpretation of the area and is beginning to bring proof of the potential we see at Mustajärvi.
  • Assays pending and Phase II underway. With great success coming from Phase I and despite challenging winter weather conditions, the FireFox will forge ahead in to a second phase of drilling at Mustajärvi. The company has plenty of catalysts coming in the near-term with assay results pending on 4 additional drill holes from Phase I and further drilling to begin with Phase II. Additionally, the company is rapidly defining a number of drill targets at its Jeesiö and Seuru projects.
Valuation:
FireFox is advancing Mustajärvi while accumulating a promising land package in the Central Lapland Greenstone Belt and we expect the market is likely to reconsider the discounted valuation on this newly public company’s potential. As mentioned, we value FireFox at potentially C$0.63/share (Figure 1). At C$0.28/share, the company has an EV of C$6.2M and a significant land package in the CLGB and continues to warrant a positive outlook for exploration success. Upcoming Catalysts include 1) Phase II results from Mustajärvi 2) Further exploration and commencement of drilling at Jeesiö and Seuru.

 

21-Jan-2019

Mawson Resources Ltd

Ready, Set, Drill

Impact: Positive

With renewed exploration permits for the next 3 years, four drill rigs, a ~C$ 4.5M budget and a 70-person workforce mobilized we expect that Mawson will begin to showcase the potential we see in their ability to uncover a significant gold deposit at Rajapalot. In our recent report on Finland, we highlighted our belief that Mawson could be worth C$0.79/share and we expect coming newsflow to prove this.

Highlights: 
  • Drilling permits enable action and reduce risk. The Kairamaat 2-3 1,462 ha exploration permit overlain by the Rajapalot project area should allow the company to focus its 15km drilling program on growing the Rajapalot Maiden Resource. With 18% of its claims overlapping protected Natura 2000 land, the permit defines clear agreement terms that should allow Mawson to undertake exploration methods including diamond drilling, base of till drilling and geophysics while minimizing any environmental concerns associated to the exploration of the area. 
  • Large electromagnetic targets to be confirmed with drilling. The company is continuing to collect geophysical data across the entire 4km Rajapalot trend where it has mapped a number of conductive anomalies (Figure 2). The current unconstrained inferred maiden resource encompassing the Palokas and Raja prospects contains 482koz at 2.4g/t AuEq (1.7g/t Au and 0.041% Co) and has significant potential to grow with drilling. Geophysics now to be followed by drilling should support our theory that Rajapalot hosts a significant gold mineralization.
  • 2019 to focus on resource expansion. Mawson’s current resource could double with results from its winter drilling program which is set to commence immediately following ground preparation. The company will focus its efforts on the large conductive plates down dip at Raja which has shown potential to extend further down than previously drilled. Mawson is now well positioned to pursue resource development with a viable system for translating its numerous geophysical anomalies (Figure 2) in to drill targets.
Valuation:
Current pricing reflects maiden resource but does not account for exploration potential to be demonstrated in early 2019, we estimate Mawson could be worth C$0.79/share. Based solely on its maiden resource Mawson is trading at US$37/oz AuEq relative to peers at US$45/oz AuEq. We believe that this recent news moves the company closer to the upside that we expect to be confirmed with the winter 2019 drill program. Upcoming catalysts include 1) Results from WUSA drilling (Q1/19), 2) 15,000m drill program results from Rajapalot (H1/19).

 

21-Jan-2019

Finding our Way in Finland

We believe Finland has the potential to yield multiple major gold discoveries. We recently had the opportunity to visit several projects in Finland which was highlighted by the fact that despite having a long and significant mining tradition, there has been a late move (1990’s) to commercial gold exploration creating opportunity in this top-notch jurisdiction. Our favourite Finland focused gold exploration companies include: Mawson Resources Ltd (TSX:MAW), FireFox Gold Corp (TSXV:FFOX), and Aurion Resources Ltd (TSXV:AU). We visited a number of other quality projects discussed in-detail within this report.

Summary:
    • Finland is a tier-1 country for mining and underexplored for gold. The combination of exceptional infrastructure, mining culture and favourable financial regime is the reason this country ranks among the best in the world for mining. That being said, with historic exploration effectively driven by the government and with a focus on base metals and iron ore, its gold potential has never been systematically tested providing current explorers an exceptional opportunity.
    • Mawson Resources Ltd (TSX:MAW): Maiden resource is just the start. Mawson has been advancing its Finnish projects for multiple years, and we believe the company has just unlocked the geologic controls for gold at Rajapalot. With an unconstrained inferred maiden resource of 482koz grading 2.4g/t AuEq (1.7g/t Au and 0.041% Co), the project is off to a good start and we expect the resource to grow materially with the next drill program. We believe the company is potentially worth C$0.78/share.
    • FireFox Gold Corp (TSXV:FFOX): Ready to discover. Uniquely, FireFox’s management team is predominantly Finnish, and have been actively exploring in Finland for more than 10 years. This company has acquired a number a of prospective projects in the Central Lapland Greenstone Belt (CLGB) and are poised to make a discovery with drilling underway. We believe the company is potentially worth C$0.64/share.
    • Aurion Resources Ltd (TSXV:AU): Thinking big in the CLGB. Aurion was one of the first to pursue and systematically explore for gold in the CLGB. The company has some very prospective ground and has been quickly advancing its Aamarusko project from gold-in-boulders to gold-in-core to the beginnings of a deposit. Our site visit suggests that the results to-date may only be the tip of the iceberg. We believe the company is potentially worth C$2.29/share.
    • To get exposure, majors need to come through the few active juniors. The land rush is effectively over, and other than Aginco Eagle (TSX,NYSE:AEM), the other major and mid-tier producers would likely have to acquire one of the active juniors to get exposure to this opportunity. This is supported by investments by Kinross (TSX:K) in Aurion and by Goldcorp (TSX:G) in Mawson.
18-Jan-2019

Red Pine Exploration

Beefing up Resources at Wawa

Impact: Mildly Positive

With promising deposits at both Minto South and Surluga, Red Pine’s drilling continues to de-risk Surluga while also pointing to growth beyond current resources. Today’s results support our view that the Wawa corridor hosts a large gold system which may encompass multiple gold deposits.


Highlights:
  • Surlaga deposit model holding up under scrutiny. Red Pine infill Hole SD-238 encountered thicker mineralization than predicted by the current resource model and returned 12.6m (true width) at 4.33 g/t Au. Similarly, holes SD-237 and SD-239 encountered mineralization as predicted by the Surluga model at grades and widths in line with expectations: 2.41m @ 6.26 g/t Au and 3.76m @ 1.69 g/t Au, respectively. Assay results for 42 infill holes are pending at Surluga and we expect them to validatie the current model in addition to identifying zones with growth potential.
  • Upside within the Jubilee Shear Zone. Hole SD 18-238 intercepted mineralization in the footwall of the Jubilee Shear Zone returning 1.74m @ 5.31 g/t Au within the Surluga Road Shear Zone plus 5.9m @ 0.67 g/t Au from a newly discovered structure at 293m downhole. Although not economic, this latter intercept highlights potential for discovery of new structures at depth, where further drilling may well vector to better grades.
  • Let’s not forget Minto South. Following the Minto South maiden resource (100 koz at 6.8 g/t), hole SD-18-219 has identified a new high grade zone in the Minto South hanging wall which returned 1.2m @ 17.66 g/t Au. We note that the current Minto South resource accounts for only 20% of the mineralized structure at Minto South and we expect further drilling to shed light on additional upside at this emerging deposit.
Valuation:
Red Pine continues to trade at a discount to peers (US$9/oz versus peers at US$32/oz). We note that the company is well funded and is undertaking a 23km drill program in 2019. We believe ongoing exploration success and a resolution to projects ownership should drive a re-rating. Upcoming catalysts include 1) Pending assay results (Q1/19) and 2) Updated Surluga Resource estimate (Q2/19).

17-Jan-2019

Coro Mining Corp

Growing Marimaca into a Potential Mining District

Impact: Positive

Coro Mining Corp announced a second batch of drilling results from La Atómica which continue to demonstrate the potential to expand oxide copper resources at its Marimaca project in Chile. With cash in the bank and 30,000 meters of drilling planned in 2019, we think Coro is well positioned to create value as it steps out to test targets on trend and contiguous to its Marimaca oxide-copper deposit (M&I: 47Mt @ 0.65% CuT).

Highlights: 

  • Expansion of Marimaca resource towards La Atómica likely. Results to date from La Atómica suggest mineralization extends a further 300 meters northwest of Coro’s Marimaca deposit. Highlights include LAR 63 which returned 98 meters of copper oxide mineralization at 0.63% CuT and LAR 44 with 44 m @ 0.79% CuT. Overall, we expect La Atómica will contribute to expansion of resources at Marimaca – a maiden La Atómica resource estimate is anticipated by end of Q1 2019. 
  • Attention now shifting to Atahualpa. With the Phase II drilling at La Atomica now complete, Coro will be shifting focus to Atahualpa, where 18,000 meters are planned for H1 2019. We note that small scale artisanal workings extend for at least 500 meters to the north of Marimaca within the Atahualpa property. The first batch of Atahualpa drill results are expected as early as two weeks and should shed light on the potential of this area to host additional oxide copper resources. 
  • Cash in the bank and drilling underway. With its 45,000 meter Phase II drilling program fully funded we believe Coro is well positioned to create value through 2019 as it tests both near-mine and distal targets on its recently consolidated property package. Steady drilling news flow and resource updates at La Atómica and Atahualpa if positive, should eventually begin to raise market profile of this Company. We will publish more detailed thoughts on geological potential following our site visit next week.
Valuation:
Coro Mining trades at a premium to peer explorers – drilling progress and resource expansion key to re-rating. We view Coro mining as a growing exploration story in a favourable jurisdiction whose potential has yet to be fully priced in by the market. Upcoming Catalysts include 1) Resource estimate incorporating La Atómica Q1/19 2) Drill results from SW part of Atómica Q1/19 and Phase II.

 

17-Jan-2019

Mawson Resources Ltd

Ready to Grow in 2019

Impact: Mildly Positive

Mawson’s newly released electromagnetic survey results from South Palokas add a potential doubling of the second component of the company’s current resource at Rajapalot. With 15km of drilling to commence shortly, we can expect significant resource growth as the company follows-up on two large conductive plates at both South Palokas and Raja. We continue to believe that Mawson is nearing a significant Au-Co discovery beyond the current maiden resource which will be confirmed with coming drilling.

Highlights: 
  • Surveying points to a doubling beyond the South Palokas resource footprint. The conductive body extends 250m beyond the deepest drillhole PAL0016 which returned 8.4m at 5.7g/t AuEq (Figure 2) and remains open down dip to the northwest. The company is continuing to collect geophysical data across the entire 4km Rajapalot trend where it is mapping a number of additional conductive anomalies (Figure 1) supporting our theory that Rajapalot hosts a significant gold mineralization.
  • Results impact growth potential of current resource. The current unconstrained inferred maiden resource encompassing the Palokas and Raja prospects contains 482koz at 2.4g/t AuEq (1.7g/t Au and 0.041% Co) which with recent news has significant potential to grow with the down dip extension at South Palokas. The company has already highlighted a potential doubling at Raja with previous TEM results (released prior to the completion of it’s maiden resource) demonstrating the successful use of geophysical surveying for identifying Au-Co drill targets.
  • Expect resource expansion with 2019 drilling. The company will test the South Palokas and Raja conductive bodies with its coming drill program in late January. Mawson is now fully transitioned in to resource development with a refined process for translating geophysical surveying in to successful drill targets. As a result, we expect 2019 drilling to deliver a potential doubling of the existing resource.
Valuation:
Current pricing reflects maiden resource but does not account for exploration potential to be demonstrated in early 2019. Based solely on its maiden resource Mawson is trading at US$37/oz AuEq relative to peers at US$46/oz AuEq. We believe that this recent news demonstrates exploration upside that we expect to be confirmed 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).

 

17-Jan-2019

Anaconda Mining Inc

Q4/18 Production Beats Estimates

Impact: Mildly Positive

Anaconda Mining reported record gold production for 2018, exceeding both our estimates and the company’s 2018 guidance. Financials have yet to be released but we expect these results to generate cash that would support the development efforts at the Goldboro project. We continue to believe that Anaconda’s share price still fails to account for the growth that Goldboro is expected to deliver starting in 2021.

Highlights:  

  • Strong production growth in Q4/18 up 32% Qtr/Qtr (Figure 1). Anaconda produced 6,125 oz Au in Q4/18, which compares favourably to the 4,632 oz in Q3/18 indicating a successful transition to the higher-grade Stog’er Pit. Fourth quarter production beat our estimate of 5,690 oz Au by 8%, which was driven by higher grades processed at the Pine Cove Mill (1.93g/t versus 1.80g/t) as the company processes more ore from Stog’er Tight and less from the Pine Cove pit stockpiles.
  • Positive impact on our Q4/18 financials estimates. As result of the higher grades in Q4/18 and the additional revenue from gold sales, we have modestly adjusted our financial estimates for the quarter (Figure 1). That being said, we await Q4 financials to highlight cash costs in Q4 and fiscal 2018. Higher grades from Stog’er Tight should help fuel production and financial performance over the next 12 months.
  • 2019 production expected to be similar to 2018. The company announced 2019 guidance of 19-20koz Au at US$800-835/oz. This is slightly lower than our expected 22.1koz Au at US$707/oz. As a result, we have adjusted our 2019 estimates to reflect more lower grade ore being processed that wasn’t previously accounted for (Pine Cove Pit pushback). We now model 19.8koz Au at US$800/oz for 2019E.
Valuation:
Anaconda continues to trade a steep discount; development progress and operating execution key to re-rating. As a result of operating results and revised 2019 outlook our NAVPS estimate has increased to C$1.37 (was C$1.31). However, Anaconda still trades at a steep discount to peers (0.19x vs. 0.60x). In our view near-term positive operating updates, along with the continued progression of Goldboro towards production are the keys to re-rating. Upcoming catalysts: 1) Q4 Financial Results, 2) 10kt bulk sample results at Goldboro Q2/19 and 3) Goldboro resource update (H2/19).

 

16-Jan-2019

Rockcliff Metals Corp

Blue Sky Just Got Bluer

Impact: Positive

Rockcliff today announced a dramatic increase to its holdings in the Snow Lake South Emerging Mining Camp (“SLSEMC”), increasing its position by 51% to 290,000 hectares. The SLSEMC represents the underexplored extension of the Snow Lake VMS Mining Camp beneath cover and has the potential to host multiple VMS discoveries. We like Rockcliff’s balanced risk/reward profile with high probability that 2019 drilling is likely to expand resources alongside exciting “Blue Sky” potential on the now super-sized Snow Lake South (SLS) projects (SLS #1,2,3&4).

Highlights: 
  • Growing land position in a world-class base metal camp. Rockcliff just acquired an additional 174,379 ha by staking its SLS #3 & 4 properties, more than doubling the company's current land holdings in the SLSEMC (Figure 1). The strategic importance of this portfolio can't be over-stated, given the Snow Lake Camp is among the world's most prolific VMS districts and home to Hudbay Minerals (TSX:HBM) who need to secure feed for their facilities.

  • Blue sky potential of the Snow Lake South Emerging Camp. We note that the SLSEMC represents the underexplored southern extension of the Snow Lake camp. Over 60Mt of copper-zinc sulphide ore have been produced from the exposed northern half of the camp. It stands to reason that yet undiscovered VMS clusters may occur to the south beneath the limestone cover. Minimal exploration in the SLSEMC has already led to a handful of discoveries including Hudbay's Reed Lake Mine, the Talbot and Tower deposits, as well as Hudbay's Kof and Sylvia deposits, which occur on trend with Rockcliff's SLS#1 property.
  • Targets on the radar with more to come. On its SLS#2 property Rockcliff has already identified eight potential targets based on interpretation of previous geophysical data and incorporating litho-structural information from nearby VMS deposits. Rockcliff intends to drill the best of these targets by late 2019 / early 2020, after further detailed follow-up work on the ground. But we expect new targets to be defined on SLS#1, #3 and #4, with further compilation work and collection of new geophysical data.  
Valuation: 
Rockcliff trades at a discount to our estimates plus plenty of “Blue Sky” potential. Based on Rockcliff’s portfolio of deposits and royalties, we have arrived at a conservative fair value estimate of C$0.33/sh, which does not account for the “Blue Sky” exploration potential. Upcoming catalysts include 1) 2019 Drilling Results at Bur 2) Ongoing news flow from Kinross Gold (TSX:K) drilling at Laguna. 3) Follow-up drilling on SLS Properties late in 2019

 

16-Jan-2019

FireFox Gold Corp

New Targets Defined at Seuru

Impact: Mildly Positive

FireFox has announced the discovery of two new mineralized targets just north of its more advanced Mustajärvi and Jeesiö projects. In a rapidly emerging mining jurisdiction, FireFox is strategically positioning itself with a highly prospective land portfolio in the Central Lapland Greenstone Belt (CLGB) of Finland. We expect positive drill results and further surface sampling to generate the momentum needed for a re-rating of this newly public company. 
Highlights: 
  • Advancing a third project in Finland. FireFox has identified a 1km and 1.4 km-long mineralized target at Selkä-E and Selkä-W respectively (Figure 1). Firefox’s efforts follow-up on previous work which identified a 20km gold in-till anomaly, extending from Agnico Eagle’s Kittilä Mine. Prior reconnaissance drilling completed at Selkä-E included 1m at 3.06 g/t Au and trenching has returned 6m of 14.2 g/t Au. Surface work completed by FireFox confirms historic results and the company plans to follow-up with additional surface exploration. 
  • Adding land around more advanced projects. Firefox also is growing its land package by applying for reservations proximal to its more advanced Mustajärvi and Jeesiö project. Additionally, the company has applied for exploration permits on six Seuru mineral reservations which when granted, would allow more advanced exploration work (trenching and drilling).
  • Pending results are expected from all projects. Firefox is planning magnetic surveying and further IP surveying to help close in on potential drill targets at Seuru.
  • More importantly, we expect drill results from the company’s most advanced project, Mustajärvi to be an important catalyst in the near-term (Q1/19) while it is also following-up on five new gold targets at its Jeesiö project.
Valuation: 
As FireFox advances its projects, a re-rating is expected. At C$0.30, the company has an EV of C$6.8M with $2M in cash and a significant land package in the CLGB. Seeing as similar stage peers in Finland have multiples to FireFox’s market cap, we believe drilling success in the short-term is likely to have a significant positive impact on the share price. Upcoming Catalysts include 1) Drill results from Mustajärvi Q1/19 2) Further exploration and commencement of drilling at Jeesiö and Seuru.

 

 

14-Jan-2019

Anaconda Mining Inc

Goldboro Expected to Grow in 2019

Impact: Positive

Anaconda provided an exploration update on Goldboro and the results continue to support our view that the company is poised to grow this resource in 2019 and advanced it towards production. We continue to believe that Anaconda’s share price still fails to account for the growth that Goldboro is expected to deliver starting in 2021. 

Highlights:  

  • Drill results confirm continuity, point to resource expansion. Results from the company’s 10km 2018 drill program which focused on the West Goldbrook Gold System (Figure 1) helped to establish continuity throughout the deposit and demonstrate further resource growth potential at depth. The infill drilling which highlighted 78.07 g/t over 1.1m (BR-18-63) should help to move the company’s current inferred mineral resources in to the indicated category. Furthermore, expansion drilling successfully extended the mineralization to new depths (up to 450m).
  • Goldboro progressing down the development path. The company has initiated a new 5000m drill program at Goldboro; however, in our view the most important catalysts are results from the ongoing 10,000 tonne bulk sample (Q2/19), followed by a resource update (H2/19) and feasibility study shortly after. The company is also working to complete the major permits by the end of 2019. In our view, as the company de-risks Goldboro, the market should progressively add it to the company’s share price.
  • Q4 operating results and 2019 outlook expected shortly. We currently model 5.7k oz Au at US$797/oz for Q4/18 and now forecast 22.1k oz at US$835/oz in 2019. We have updated our 2019 estimates as we expect the higher grade Stog’er Tight pit to contribute less ore than previously thought in 2019. Importantly, continued operating execution is key, as the funds generated from operations at Point Rousse, should support ongoing development work for Goldboro.
Valuation:
Anaconda continues to trade a steep discount; development progress and operating execution key to re-rating. As a result of our revised 2019 outlook our NAVPS estimate has decreased to C$1.31 (was C$1.36). However, Anaconda still trades at a steep discount to peers (0.16x vs. 0.61x). In our view near-term positive operating updates, along with the continued progression of Goldboro towards production are the keys to re-rating. Upcoming catalysts: 1) Q4 results & 2019 Outlook, 2) 10kt bulk sample at Goldboro Q2/19 and 3) Goldboro resource update (H2/19).

 

10-Jan-2019

Standard Lithium Ltd

Standard Lithium Produces Battery Grade LCE

Impact: Mildly Positive

Standard Lithium is quickly assembling all the pieces to move into production at its South Central Arkansas Project following the successful production of battery quality lithium . As it moves its sights to commissioning a full-scale Pilot Plant, we believe the market is currently undervaluing the potential of this company which has lower risk than peers.
Highlights: 
  • Robust system for producing battery grade lithium. This final stage of test-work demonstrates the robustness of the crystallization system prototype which produced battery quality purity (>99.56%) lithium carbonate. The current feed solution used at the prototype pilot plant was known to be less pure than the feed solution expected to come out of the company’s patented lithium extraction system which is also in the pilot phase. Following further optimization of the crystallization process parameters, the plant will be refined to receive feed from the pilot extraction plant and ready for full scale construction.
  • One piece left before full-scale commissioning. A Lithium extraction mini pilot plant being designed and built by Zeton Inc, will provide feed concentrate to the crystallization plant as brines are extracted from the underlying brine fields. Both parts are to be combined and constructed in Arkansas in late Q1/19 which the company is expecting to begin commissioning starting in late Q2/19.
  • Positioned for a quick move from construction to production. Having recently announced a maiden resource of 3.1Mt LCE at its flagship project in Arkansas, the company will have ready access to fully permitted and operational facilities through its likely JV with LANXESS. The proposed agreement with LANXESS would not only benefit the company by providing permits, significant infrastructure and funding but also partners it with a large chemical company, that is selling other products to battery producers.
Valuation:
We believe Standard Lithium to be one of the best lithium companies in its space with a sizeable resource and the potential for a large partner to support progress. Standard Lithium has access to 180,000 acres of brine fields where majors have been in operation for brine extraction for decades. The company currently trades at US$20/t LCE in contrast to brine exploration and development peers at US$39/t LCE. Upcoming Catalysts include 1) Resource update at SE Arkansas (Q1/19), 2) Completion of definitive agreement with LANXESS (H1/19), 3) Pilot plant commissioning (mid-2019) and 4) PEA expected in H1 2019.

 

10-Jan-2019

GT Gold Corp

Saddle North Continues to Impress

Impact: Positive

GT Gold released assay results from hole 109 at their 100% owned Saddle North deposit located in BC, Canada, intersecting an extremely wide 1,150m grading 1.12g/t AuEq from surface. We consequently updated our in-house grade shell model of this deposit. Our preliminary economic estimates suggest that this project is very likely to be an economic mine at some point in the future.

We continue to believe that GT Gold has made an exceptional porphyry gold-copper discovery. Importantly, our view is that very little (if any) value is being ascribed by investors for that discovery in GT’s current share price. Further, we expect continued exploration success at Saddle North.
Highlights:

  • Grade shell model points to sizeable high-grade resource. Using Leapfrog Geo, we have created our own grade shell model of the Saddle North deposit and have defined high-grade (for a porphyry-style deposit) and very high-grade resource estimates of 365Mt grading 1.21g/t AuEq (0.8g/t AuEq cut-off) and 77Mt grading 1.81g/t AuEq (1.5g/t AuEq cut-off), respectively (Figure 1).
  • High-grade core emerging at depth (Figure 1, 3, 4 & 5). Hole 109 confirmed that grades get better at depth, returning 342m @ 2.1 g/t AuEq (starting at 740m). Though still early days, our 3D model reveals the emergence of a high-grade zone 500m below surface with grades above 1.5 g/t AuEq, which extends for 450m along strike, 600m down plunge. We stress that the zone remains open at depth and laterally and grades may improve further still with deeper drilling as the core of the system is approached.
  • Saddle North likely to become a mine. After comparing our estimates for Saddle North to other block cave projects and the nearby Red Chris Mine, our preliminary view is that this project should be economic to mine (Figure 2). Using the high-grade resource, and based on a 30,000tpd operating rate (~400k oz AuEq/year) we roughly estimate the after-tax NPV5% for Saddle North to be C$2.4B, and its IRR would be 19%. See Figure 6-8, for our assumptions and sensitivities.
Valuation: 
Is the market getting it wrong on Saddle North? Our rough numbers point to a project NPV at over C$2B. Even with conservative estimates for further dilution and time to get the construction phase, GT Gold appears to be significantly undervalued at a market capitalization of just C$66.9M. We note that in our view, current drilling at Saddle South alone justifies the current market cap (~750-1Moz AuEq at C$50-75/oz implying C$37.5-75M), suggesting negligible value ascribed to Saddle North. Upcoming catalysts include 1) Saddle South exploration update (Q1/19).

07-Jan-2019

Novo Resources Corp

Sumitomo Likely to Provide Funding for Next Steps

Impact: Positive

The now extended and expanded MOU between Novo and Sumitomo Corporation (TYO:8053) proposes an agreement which could bring the needed cash, confidence and expertise for furthering the company’s Australian projects. We believe the market continues to undervalue the com pany’s Karratha, Egina and wider Pilbara projects, with much of the current value underpinned by an improving Beatons Creek project.

Highlights: 
  • Agreement should add confidence and provide some future funding. In the near-term the continued interest from Sumitomo should provide investors confidence with respect to the merits of Novo’s Australian projects. As well, adding Sumitomo’s expertise and capital, should help this small company move its projects from the development to production stage. Consequently, we view the expansion of this agreement positively, particularly as the company is likely to be conducting large scale bulk sampling later this year at its Karratha project and we expect the next resource update from Beatons Creek to drive an updated economic study followed by a likely production decision.
  • Provides technical expertise and cash. Following the establishment of project development plans and a potential transaction structure, the current MOU stipulates that Sumitomo could commit up to ~C$61.4M (¥ 5.0B) through an option to purchase interest. Sumitomo would then be offered a right of first refusal (ROFR) providing it with security for maintaining its interest in the company. A successful agreement would bring significant technical support and a major piece of the equity funding needed to a bring one of Novo’s projects into production.  
  • A vote of confidence ahead of a busy 2019. Novo is advancing multiple projects in 2019, with bulk sample results expected from Egina, Beatons Creek and Karratha. Additionally, a resource update demonstrating higher grades is expected in Q1/19 from Beatons Creek. As well, the company continues to advance Karratha to a larger sale bulk sampling with a Native title agreement and mineralization report expected in H1/19.
Valuation:
Steady newsflow from Novo in 2019 should provide lift. 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$2.75/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) Bulk sampling at Karratha (H2/19), 2) Systematic bulk sampling work at Egina (Q1/19) and 3) Beatons Creek resource update (Q1/19).

 

03-Jan-2019

FireFox Gold Corp

High Grades Near Surface at Mustajärvi

Impact: Mildly Positive

Sampling at FireFox’s Mustajärvi project has successfully increased both the size and grade potential of the company’s drill targets for 2019. FireFox benefits from being in one of the best mining jurisdictions in the world and is strategically positioned as a significant land holder in the Central Lapland Greenstone Belt (CLGB). We expect positive drill results to generate the momentum needed for a re-rating of this newly public company. 

Highlights:  
  • High-grade mineralization near surface. Sample results point to expanding the near surface zones of the mineralization at Mustajärvi. Grab samples highlighted gold grades of >1g/t in 16 of the 66 samples across the property. The company also completed 42 chip channel samples successfully identifying two potential structures. The primary structure of was found to extend for 45m along strike at an average grade of 21.6 g/t Au (ranging from 0.66 to 140.5 g/t Au). The second northwest striking structure was identified for its potential to significantly increase the size of the target.
  • Advancing historical prospects in ready to drill targets. The company is following-up on drillholes completed by Outokompu from 1991 to 1992 (Figure 2) and is rapidly expanding its range of possible near-surface drill targets at Mustajärvi. Results from its 2017 and 2018 field seasons have succeeded in increasing the company’s understanding of the controls of the high-grade mineralization and diamond core drilling is currently underway.
  • Drill results and coming catalysts to shed light on potential. As its most advanced target, we expect drill results from Mustajärvi to be an important catalyst in the near-term (Q1/19). The company also recently provided an update on its Jeesiö project (Figure 1) where it is following up on five new gold targets.
Valuation:  
As FireFox moves closer to a potential discovery it should close the material valuation gap to peers. At $0.29, the company has an EV of C$6M with $2M in cash and a significant land package in the CLGB. Despite this, the company is currently significantly discounted relative to peers. Upcoming Catalysts include 1) Drill results from Mustajärvi Q1/19 2) Further exploration and commencement of drilling at Jeesiö.


 

03-Jan-2019

Red Pine Exploration Inc

Moving Forward at Wawa

Impact: Mildly Positive

Following its maiden resource of 100 koz at 6.8 g/t at its Minto South project, Red Pine is now filling in the gaps at its larger Surluga project alongside high grade discoveries at Minto South demonstrating its potential for future growth across its projects. The results support our view that the Wawa corridor hosts a large gold system which may encompass multiple gold deposits.

Highlights:
  • Continued success of Surluga infill drilling bodes well. RPX announced 2.9m at 32 g/t Au and 1.9m at 6.5 g/t Au from ongoing infill drill program at Surluga targeting gaps within the existing Surluga resource envelope (Figure 1). The results validate Red Pine's structural model and suggest drilling is increasingly becoming more predictive. This should bode well for future drilling results and may cause incremental expansion of the Surluga deposit.
  • Surluga's future increasingly underground.
    As new drill data is incorporated, it looks increasingly like the Surluga deposit may be amenable to bulk underground mining given vein thicknesses of 3m to 30m and grades above 3 g/t Au. We note that the Surluga deposit occurs in the vicinity to historic underground workings, which could lessen capital costs for future mining operations.
  • Plenty of Upside left. Drilling within the Minto Stockwork at Minto South has led to discovery of two high grade quartz veins returning 1.0m at 16.5 g/t Au and 1.1m at 14.1 g/t Au. We note that Red Pine announced a maiden resource at Minto South in Q4 2018 (Figure 2) which only covered 20% of the Minto South structure. These results highlight the potential for expansion of the Minto South resource and potential for discovery of new zones at Minto South and on the numerous other structures within the Wawa Gold Corridor which have seen limited drilling.
Valuation:
Red Pine continues to trade at a discount to peers (US$8/oz versus peers at US$33/oz) due to ongoing uncertainty regarding ownership structure. We note that the company is well funded with over C$5M in cash and continues to drill. Upcoming catalysts include (i) Results from ongoing drilling program in addition to results expected for 23 holes drilled at Surluga (ii) Updated Surluga Resource estimate in Q2 2019 

 

02-Jan-2019

SolGold Plc

Beyond Alpala

Impact: Positive

Sampling results from SolGold’s Porvenir porphyry targets in Southern Ecuador provide exciting new prospects for SolGold as it continues to demonstrate its copper-gold expertise in Ecuador. These results support our thesis that SolGold may be in possession of not one but multiple world class copper discoveries in an emerging mining jurisdiction (Figure 1).
Highlights: 

  • High-grade discovery. Results from initial rock-saw channel sampling across the exposed outcrops at Porvenir include an open intersection of 62m grading 1.16% CuEq at Target 15 (Figure 2). The outcrop appears to be well-preserved and thus could be the top of a vertically extensive system. The intersection discovered within an 800m wide by 1200m long mineralized corridor is part of a greater 1km by 6km zone which has been identified to host at least two porphyry centres. While it is early days, this reflects the size potential we see at Porvenir.
  • Systematically demonstrating exploration potential. Target 15 is similar in age, mineralization style and may prove to be similar in size to the company’s world-class Alpala deposit where the company has defined a resource of 2.95Bt grading 0.52% CuEq (0.2% cut-off). These results highlight the benefits of the company’s first mover advantage into Ecuador back starting in 2014 and reflect the fact that while Cascabel is the most advanced, there is much more potential to the company’s wider portfolio of highly prospective assets. 
  • A significant portfolio with news to come. SolGold is rapidly establishing itself as an important player in Ecuador with 11 priority projects and 42 geologists in regional exploration. The company’s other important regional projects include La Hueca and Blanca, which, alongside Porvenir and other regional projects, we expect are likely to bring exciting catalysts following drilling this year.
Valuation:
The market does not account for the potential beyond Alpala. SolGold trades at 0.44x NAV, a slight discount to peers at 0.46x. Given the world class nature of the Alpala deposit and the interest from majors, we believe a 0.90x NAV multiple applied to our C$1.47 NAVPS estimate would be appropriate implying a value of C$1.32/share. Upcoming catalysts: 1) Ongoing exploration and 2) Maiden PEA for Alpala (Q1/19).


 


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