RCKS Talk

31-Oct-2018

Amarillo Gold Corp.

Drilling to Improve the Resource and Feasibility

Impact: Positive

Amarillo Gold has announced drill results from the ongoing infill drill program at its Mara Rosa open-pit project in Brazil. The company’s goal is to upgrade the current inferred resource ahead of a feasibility study (H1/19). We expect the current M&I of 1.27Moz Au grading 1.30g/t Au to grow. These results support our thesis that Amarillo’s Mara Rosa project is a highly undervalued development asset in the hands of a proven development team, where drilling and the upcoming feasibility study should gain market support. Highlights:   

  • Higher grades bode well for resource upgrade. Amarillo highlighted drill intercepts of 1.81 g/t Au over 13m and 3.54 g/t over 11m in the central and northern zones (Figure 1), which were successful in targeting the gaps within the existing inferred resource (330koz Au @ 0.92g/t Au). The weighted average grade of the eight holes in this update is 1.26g/t Au.
  • Reserves also set to grow. These eight drill holes are apart of the company’s ongoing 10 km drill program (7 km core & 3 km RC) where 5,179m have been completed to date (includes previously released results). We believe that the resource growth will translate to growth in reserves (currently 1.09Moz Au grading 1.42g/t Au).
  • Reserve growth expected to boost upcoming feasibility study; exploration provides a wild card for growth. Growth in the company’s reserves should improve the economics of company’s feasibility study through improved mine life. It is important to highlight Amarillo are now drilling both: 1) resource expansion holes, as well as, 2) new exploratory holes looking for neighboring deposits along trend. The addition of a second deposit would add new dimension to the project.
Valuation:
We believe Amarillo is a well-positioned gold developer in South America with an undervalued asset with near-term 100koz/year potential. The company currently trades at a significant discount to peers ($13/oz vs. peers at $37/oz) and believe that upcoming catalysts will help re-rate the stock. Upcoming catalysts include: 1) Resource update (Q1 2019) and 2) Feasibility Study (H1 2019) and 3) Installation license.
12-Sep-2018

Amarillo Gold Corp.

Amarillo Improves Mara Rosa Economics with New PFS

Impact: Positive

Amarillo Gold has announced the results of an updated pre-feasibility study (PFS) for its Mara Rosa Project in the Goias state of Brazil, which follows a prior PFS completed by the previous management team in March 2017.

  • The updated PFS has improved the economics of the project with an increase in after-tax NPV to US$194 from US$178 and in increase in after-tax IRR from 35% to 42% at a gold price of US$1,200/oz (Figure 1)
  • The major changes to project components include the addition of 89koz Au of lower grade P&P reserves into the mine plan, a 17% reduction in CAPEX based on declines in the Brazilian Real and the inclusion of the 1.75% NSR sold to Royal Gold (NASDAQ:RGLD)
  • With the help of Whittle Consulting, the company has been able to decrease the resource cut-off grade to 0.2g/t Au from 0.35g/t Au based on the results of a mine optimization study, which has allowed for an increase in resources and we expect to see further improvements in the Mara Rosa resource base following the company’s ongoing 10,000m drill program
The updated PFS incorporates changes to both market conditions, highlighted by the favourable change in exchange rates, highlighted by the results from the mine optimization study performed by Whittle Consulting. We believe Amarillo is a well-positioned gold developer in South America to successfully permit its Mara Rosa project while continuing near-mine and regional exploration for an upcoming resource update and feasibility study. The company currently trades at a significant discount to peers ($10/oz vs. peers at $22/oz). Considering our expectation for modest resource growth ahead of the feasibility study early next year, along with ongoing drill results, we believe Amarillo could close that valuation gap to peers.

 

10-Sep-2018

Amarillo Gold Corp.

Amarillo Drill Results Confirm Continuity

Impact: Mildly Positive

Amarillo Gold has announced drilling results from its first 11 holes of the planned 10,000 m drill program on its flagship Mara Rosa Project in the Goias state of Brazil, which commenced on May 23, 2018.

  • Highlights include 1.57g/t Au over 18m in hole 18P047 and 1.57g/t Au over 10m in hole 18P056
  • Drilling is currently focused on the NE end-of-the pit, which has been identified as the lower strip, shallow end of the ore body
  • The current 10,000m drilling program is designed to convert the projects inferred resources of 310koz Au to add to the existing 1.26Moz Au of measured and indicated resources, which the company intends to include in an updated mineral resource estimate in Q1 2019 to be followed by a feasibility study
We believe Amarillo is a well-positioned gold developer in South America to successfully permit its Mara Rosa project while continuing near-mine and regional exploration for an upcoming resource update. The company currently trades at a significant discount to peers ($9/oz vs. peers at $23/oz). Considering our expectation for modest resource growth ahead of the feasibility study early next year, along with ongoing drill results, we believe Amarillo could close that valuation gap to peers.

 

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