RCKS Talk

10-Oct-2018

Bonterra Resources

Gladiator Resource Update Coming in the Next Month

Impact: Potentially Positive

Bonterra Resources announced that it plans to release an updated Gladiator resource in November. In our view, this should be a material catalyst for Bonterra, as the company’s resource base is expected to significantly increase with this update. We believe Bonterra trades at a discount to peers, suggesting that the addition of new ounces with this update should drive the share price materially higher.
Highlights: 
  • We believe a Gladiator resource update could surprise the market. Our site visit late last year, along with this years continued drilling success leads us to believe that the Gladiator resource could host up to 2Moz Au. We would note that managements new focus on development could result in a higher cut-off grade (for mining), potentially resulting in the resource being different than our estimate.
  • Gladiator’s ounces have a home. Following the merger with Metanor, Gladiator has a short path to production, with ore planned to be processed at the recently acquired Bachelor Mill starting in 2020 (see Figure 1 for development timeline). The company plans to expand the mill from 800 tpd to 2400 tpd.
  • Resource at Gladiator puts the company on the path to +190koz per year. Starting in H2 2019, the company plans to restart production at Moroy (500 tpd at 6/gt Au) and Barry (900 tpd at 7g/t), which should result in +100koz per year of production. When Gladiator starts production in mid-2020 (1000 tpd at 7.5 g/t) the production profile is expected to increase to +190k oz per year.
Valuation:
Resource growth is expected to drive a re-rating. Based on currently reported resources for Gladiator, Barry and Bachelor, Bonterra trades at US$58/oz, a premium to peers but once we factor in our estimate of ~C$50M for the Bachelor mill, Bonterra trades at a slight discount at US$32/oz with peers at US$33/oz. As well, if we factor in our estimate of a 2 million oz gold deposit at Gladiator, Bonterra would trade at a substantial discount to peers at US$20/oz. In our view, every ounce added to the current 273koz resource at Gladiator should move the share price higher. Upcoming catalysts include, 1) Gladiator resource update and 2) Ongoing exploration results. 

01-Oct-2018

Bonterra Resources Inc

Gladiator Grows Ahead of Resource Update

Impact: Mildly Positive

Bonterra Resources has released drill results from their ongoing resource development program at the Gladiator Gold Deposit that demonstrate the potential for further resource growth. The company plans on publishing an updated resource in Q4/18 that will include these results (no further drilling data will be included).

  • Step out drilling continues to extend the limits of the South, Main and Footwall zones at Gladiator. Drilling was highlighted by hole BA-18-63 intersecting 37.5g/t Au over 3.3 m in the South zone, proving continuity of the high-grade trend within the zone. 
  • Drilling continues to materially extend and expand the known footprint at the South, Main and Footwall zones. The Gladiator deposit has expanded to a strike length of 1,300m and to a depth of 1,100m (Figure 1 – was 250m and 250m, respectively). 
  • We continue to expect a 2Moz Au resource in Q/18. These results further support our investment thesis calling for the resource to grow to 2Moz Au. If we are correct about the resource growth and the value of the mill, we believe the share price should more than a double from here (see below).
Based solely on gold resources that have been reported at Gladiator, Barry and Bachelor, Bonterra trades at C$66/oz, which is a significant premium to wider peers. However, once we factor in our estimate of ~C$50M for the recently acquired Bachelor mill, Bonterra trades at a slight discount at C$34/oz versus the peer group at C$36/oz. As well, if we factor in our estimate of a 2Moz gold deposit at Gladiator, Bonterra would trade at a substantial discount to peers at C$16/oz. The updated resource is expected before year-end 2018. 

30-Sep-2018

Bonterra Resources Inc.

“1 + 1 =3”: Bonterra Completes Metanor Merger

Impact: Positive

The gold mining industry is notorious for dilutive mergers and destroying shareholder value. However, (too) rarely, a transaction occurs which actually makes complete and obvious sense and creates synergistic value.

We believe that the merger of Bonterra and Metanor is one of those smart transactions and that “New” Bonterra will be a very attractive investment vehicle with plenty of news flow to attract attention from the market. We also expect the deal digestion to be relatively short and painless given the low complexity of the assets and obvious synergies between the two companies as detailed in this report. Another plus is that we estimate that the new company trades at a substantial discount to its peers as well.

 

17-Jul-2018

Bonterra Resources Inc.

Gladiator Continues to Bulk Up

Impact: Mildly Positive

Bonterra Resources has released new infill and extension drilling results from the ongoing resource development program at the Gladiator Gold Deposit, including an intersection of 15.3g/t Au over 2.7m at ~500m depth, extending the Footwall Zone down-plunge to the east (Figure 1).
  • The Footwall Zone was extended westwards with an intersection of 9.1g/t Au over 2.0m, while the North Zone was extended down plunge to 300m depth with an intersection of 12.2g/t Au over 1.5m and expanded up plunge in the east side of the deposit with 12.6g/t over 1.3m
  • The resource development program continues to demonstrate continuity down dip and along strike and supports our view that the Gladiator Deposit has the potential to reach upwards of 2Moz at high-grades with the next resource update
  • Continuity of mineralization is now confirmed over a total drilled strike length of 1,200m, as well as to a drilled depth of over 1,000m; the resource development program continues with five drills in preparation for the updated mineral resource estimate in Q4 2018
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$19/oz vs. peers at C$41/oz).

11-Jul-2018

Bonterra Resources Inc.

Gladiator Continues to Grow

Impact: Mildly Positive

Bonterra Resources has released new infill and extension drilling results from the ongoing resource development program at the Gladiator Gold Deposit, including an intersection of 30.5 g/t Au over 2m, which expanded the high-grade area of the South Zone (Figure 1).

  • The North Zone was extended 150m east at ~500m depth, while the Footwall Zone was extended down plunge with an intersection of 10.3g/t Au over 2.1m and expanded eastward with 18.7g/t over 2.0m
  • The resource development program continues to demonstrate continuity down dip and along strike and supports our view that 2Moz could be delivered with the next resource update
  • Continuity of mineralization is now confirmed over a total drilled strike length of 1,200m, as well as to a drilled depth of over 1,000m; the resource development program continues in preparation for the updated mineral resource estimate in Q4 2018 
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$19/oz vs. peers at C$40/oz).

19-Jun-2018

Bonterra Resources Inc.

BTR to Acquire MTO; Only One Interloper Possible

Impact: Positive

Bonterra Resources has announced that the company has entered into a binding letter of intent to acquire Metanor Resources for ~C$0.73/share in an all share transaction (1.6039 Bonterra shares for each Metanor share), representing a 30% premium to Friday’s close and an aggregate transaction value of C$78 million on a fully diluted in-the-money basis. Prior to completion of the acquisition, Bonterra is to spin out its Larder Lake assets in Ontario with C$7M in cash to create a new gold explorer for its shareholders. The proposed acquisition should create a new advanced Canadian gold explorer and developer focused on the Urban-Barry Gold Camp.
  • For Bonterra, we view the transaction positively, as high-grade ore from Gladiator could be shipped to the Bachelor mill (expansion possible), shortening the deposits path to production and reducing capex
  • For Metanor, this provides additional ore to feed the Bachelor mill and provides additional cash to advance exploration at Bachelor and Barry
  • Metanor is now “in-play” and in our view the only likely interloper is Osisko Mining (TSX:OSK); however, considering the friendly nature and previous opportunities that Osisko has had, we believe there is only a 20-30% chance of a superior offer being made
  • At market close on June 15th, Bonterra traded at C$0.455, which puts the proforma company’s market value at ~C$178M with a cash balance of C$32M (EV of ~C$146M) to advance the Gladiator project to production, an updated resource estimate is still on track for H2 2018
Upon completion of the proposed transaction, the combined entity would be the second largest company in the Urban-Barry Camp by market cap, and the only producer in the region. Considering the 2Moz Au potential that we see at Gladiator, combined with access to Metanor’s permitted mill infrastructure, and the exploration upside we see at both Bachelor and Barry, we believe the company is attractively valued relative to peers. As well, the increased potential scale of the combined company’s projects is likely to make it more attractive to potential acquirers.

13-Jun-2018

Bonterra Resources Inc.

Bonterra Intersects 44.9 g/t over 3m

Impact: Mildy Positive

Bonterra Resources announced further infill drill results at Gladiator, which includes the intersection of 44.9g/t Au over 3.0m extending a high-grade ore shoot at the Footwall Zone of their Gladiator Gold project.

  • North Zone extended ~150m down-plunge east and down-plunge in the western part of the deposit at the Rivage area, total drilled strike length of Gladiator now at 1,200m
  • Drilling to date shows high-grade continuity down-dip and along strike in all five primary zones
  • Bonterra continues to aggressively drill Gladiator to extend and develop the deposit in preparation for an updated mineral resource estimate in H2 2018
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$21/oz vs. peers at C$39/oz).

04-Jun-2018

Bonterra Resources Inc.

Gladiator Expands as Winter Drilling Comes to a Close

Impact: Mildly Positive

Bonterra Resources announced positive results from 10 recent drill holes as the company completes the winter campaign of its 70,000m 2018 drill program at the Gladiator Gold Deposit.

  • Intersection of gold mineralization extended 4 zones in multiple directions, including the North Zone which was extended 50m westward, highlighted by 34.3g/t Au over 2.8m
  • Infill drilling confirmed continuity of mineralization on at least four horizons over a strike length of 1,200m and to a depth of over 1,000m
  • Exploration drilling continues to be successful in expanding the mineralized footprint while infill drilling continues to confirm the continuity for the upcoming resource update (expected H2 2018) and is likely to continue on through spring-summer drilling
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$21/oz vs. peers at C$42/oz).

23-May-2018

Bonterra Resources Inc.

JV on Duke Claims Extends Strike Potential of Gladiator Plus Has Longer Term Benefits

Impact: Positive

Bonterra has announced that it has entered into a letter of intent to acquire 70% of Beaufield’s Duke property, which represents a strategic land acquisition and enhances the exploration upside at the company’s flagship Gladiator deposit.

  • Strategic Urban Barry Land Consolidation
  • Acquisition provides new exploration targets for Bonterra’s Gladiator Project
  • Market value of Bonterra does not take into account the potential for resource expansion
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$26/oz vs. peers at C$39/oz).

17-Apr-2018

Bonterra Resources Inc.

Initial Metallurgical Work Very Good at Gladiator

Impact: Positive

Bonterra has announced positive preliminary metallurgical testwork from the Gladiator Gold Deposit, which represents a significant hurdle for the company’s resource development program.

  • Results highlight the potential for very good recoveries – checking a development box
  • High gravity recoveries suggest the potential for lower capex and opex costs
  • Market value of Bonterra does not take into account the potential for resource expansion
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$25/oz vs. peers at C$39/oz).

09-Apr-2018

Bonterra Resources Inc.

6th Gold Zone Discovered at Gladiator

Impact: Positive

Results from additional drilling at Gladiator continue to support our view the deposit is likely to materially grow.

  • Drilling expands Gladiator, intersecting a new gold zone south of Barbeau
  • Continuity of deposit demonstrated through recent infill results
  • Assays are pending, follow-up drilling underway to test south of new zone 
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers (C$26/oz vs. peers at C$36/oz).

03-Apr-2018

Bonterra Resources Inc.

Gladiator Goes West

Impact: Mildly Positive

Download Report

Latest 4 drill holes continue to expand and confirm continuity at Gladiator, supporting our view that significant resource growth potential exists.

  • Near-surface strike length extended by 100m to the west at Gladiator.
  • Drilling continues to confirm continuity.
  • Resource development advances with 7 drills in operation.
 
Given our expectation for meaningful resource growth at its flagship Gladiator deposit, assuming a 2M oz Au resource at Gladiator, Bonterra trades at a discount to peers; C$29/oz vs. (C$37/oz).

01-Jan-2018

Bonterra Resources Inc. (TSXV:BTR)

RCKS Talk Blog Archive

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To access the historical archives of our original blog format, please click on the link(s) below to be re-directed. Please note that we no longer update those archive blog pages.

Click here to access the RCKS Talk Blog Archive for Bonterra Resources Inc. (TSXV:BTR)


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