RCKS talk

Thursday, September 29, 2016 Derek Macpherson

KLG & NMI to Merge, Creating a Mid-Tier Producer

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This morning Kirkland Lake Gold (TSX:KLG) and Newmarket Gold (TSX:NMI) announced they have entered into an agreement to merge the two companies. As consideration for the transaction, each Kirkland Lake shareholder would receive 2.1053 Newmarket shares, implying a 9.3% premium for Newmarket in the transaction. We view the merger positively, for both KLG and NMI shareholders as the companies increased scale is likely to warrant a premium valuation. It is also likely to be beneficial for other junior producers as the merger continues to highlight the scarcity of quality assets in good jurisdictions.  read more


Wednesday, September 28, 2016 Derek Macpherson

GQC’s Romero PFS Yields No Surprises, De-Risks Project

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Goldquest Mining Corp. (TSXV:GQC) released the results of a Prefeasibility study (PFS) on its Romero Project in the Dominican Republic. The notable changes from the June 2015 PEA are to metal pricing (gold up 6%, copper down 14%), a modest increase in pre-production capital (up 11%) resulting in after-tax NPV and post-tax IRR decreasing 14% and 17%, respectively. Based on the increased rigor required for a PFS (vs. a PEA) we consider this study to be roughly in line with the previous one. However, with this increased rigor the PFS has essentially confirmed the project's economics while at the same time de-risking it. In our view, Goldquest’s current valuation does not reflect the ongoing de-risking of Romero or the exploration potential of the wider property. read more


Friday, September 23, 2016 Derek Macpherson

Argyle Drill Results Offset Weak FQ1

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In separate releases this past week Anaconda Mining Inc. (TSX:ANX) released drill results from the Argyle target and FQ1 2017 (FYE May 31) operating results. While the drill results, were very good, and should extend the mine’s life, Q1 results were weaker YoY and QoQ. In our view, the drill results, which we estimate may have added 40-45k oz Au, more than offset the weak FQ1. However, share price performance, essentially flat prior to the first release, suggests the market is providing little credit for these added ounces. We highlight that while the discovery is at this point small, considering that the Anaconda’s global resource is only 221,650 oz (M&I+I), this discovery is still meaningful. Therefore, this is likely to extend the company’s operating life and should have had a larger positive impact than a single quarter of operations. read more


Friday, September 23, 2016 Derek Macpherson

NUG's Avocado Begins to Ripen

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NuLegacy Gold Corp (TSXV:NUG) reported the third hole from the Avocado target at its Red Hill project in the Cortez-trend in Nevada. Hole AV-03 returned favorable results of 1.04 grams of g/t over 25.9 metres, while the intercept is deep (312.6m to 347.5 m), it confirms that NuLegacy has identified a second Carlin-type gold deposit on its property. The Avocado target is ~2km from the North zone of the Iceberg deposit (Figure 1). While we view these results favourably, more work is needed to determine this targets economic potential. However, based on peers (trading at C$67/oz), the market currently implies a resource of 2.6 million ounces. This is on the smaller side of the targeted resource providing no credit for the potential of Avocado, or the other targets on the 98 km2 property.  read more


Thursday, September 22, 2016 Derek Macpherson

Drilling Continues to Extend Fosterville's Life

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Newmarket Gold (TSX:NMI) announced another set of high-grade drill results that continue to suggest that the company is poised to expand resources and reserves with the year-end update. The company released four surface holes (4,326m) and 96 underground holes (22,799m) from the Lower Phoenix zone at its Fosterville Gold Mine in Australia. Drilling at Fosterville continues to deliver high-grade results and these results combined with those recently released from the Harrier and Osprey zones, continue to suggest that Fosterville’s mine-life is likely to be extended. However, this does not appear to be reflected in the company’s current valuation, suggesting that when the year-end resource/reserve update is released a re-rating is likely.  read more


Tuesday, September 20, 2016 Derek Macpherson

ICG's C2 Zone at Triangle Appears to be Growing

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Integra Gold Corp. (TSXV:ICG) announced additional results from its ongoing drill program at the Triangle zone. The results were a combination of infill and step-out drilling and appear to have expanded the C2 zone, along with demonstrating continuity. In our view, these results are important as the C1 and C2 zones at Triangle are the focus of the planned bulk sample and should benefit the pending Triangle zone resource update ahead of the planned PEA update later this year. In our view, these results continue to support the current valuation.  read more


Thursday, September 15, 2016 Derek Macpherson

NMI's Drill Results Suggest Fosterville Likely to Grow

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Newmarket Gold (TSX:NMI) released drill results from 17 holes (6,376m) from its Fosterville Gold Mine in Victoria, Australia, which continue to suggest that resources are likely to grow. Results were highlighted by 64.8 g/t Au over 4.5m (UDH1734) and 46.22 g/t Au over 6.8m (UDH1764). The drill program was focused on expanding the resources/reserves at Fosterville to extend the mine-life. In our view, these results along with previous ones suggest a mine-life extension is likely; however, based on the current valuation, this does not appear to be incorporated in the company’s share price. In our view as Newmarket demonstrates the potential for a longer mine-life at Fosterville it should close the valuation gap to peers.  read more


Wednesday, September 14, 2016 Derek Macpherson

MQR to Resume Drilling

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Monarques Gold (TSXV:MQR) announced that it plans to drill 10km at its Croinor project in Quebec this fall. Based on our recent visit (report here), this drilling has the ability to expand the existing resource at Croinor and could add satellite deposits from the Gold Bug, Trench 2 and Bug Lake targets. In our view, Croinor has the potential to start small and grow and this upcoming drill campaign has the ability to demonstrate that.  read more


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