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Tuesday, February 28, 2017 Derek Macpherson

RPX Intersects High Grades North of Surluga

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Red Pine Exploration Inc. (TSXV:RPX) released partial results from five holes drilled during the ongoing 6 km campaign at the Wawa gold project (60% interest) in Ontario. Hole SD-16-45, in which visible gold was identified prior to assaying, returned 44.41 g/t Au over 1.0m within a wider interval of 15.2m that returned 14.66 g/t Au. This hole was drilled in a previously untested area north of the existing resource. This, coupled with the balance of the results, suggests that meaningful resource growth is possible at Wawa. However, this potential does not appear to be fully reflected in the company’s modestly discounted valuation of C$45/oz versus peers at C$54/oz. We expect continued exploration success, along with the recently completed ownership consolidation of the Wawa project should help close the valuation gap to peers. read more


Monday, February 27, 2017 Derek Macpherson

SMT Makes High Grade Discovery at Cusi

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Sierra Metals Inc. (TSX:SMT, BVL:SMT) announced the discovery of a new high grade silver zone within the Santa Rosa de Lima structure at its Cusi mine in Mexico. Given the significantly higher average grade of today’s results over Cusi’s resource grade, we believe this discovery could materially improve this mine’s economics in the same way the discovery of the Esperanza zone was for Sierra’s Yauricocha mine in Peru. We expect this discovery to add value to the Cusi asset and potentially positively impact the mine’s cash flow in the near term. However, in light of that Cusi only contributed 6% of Sierra’s consolidated Q4 2016 AgEq production, the impact of this discovery on Sierra’s overall cash flow is likely to be limited. However, this discovery may allow Sierra to monetize this asset. We continue to expect that Sierra’s performance in 2017 is going to be underpinned by operational improvements at Yauricocha, which in our view is key to enhancing the company’s value and positioning to bring about the necessary capital structure changes. read more


Sunday, February 26, 2017 Derek Macpherson

RCKS Pre-PDAC Mining Showcase Presenter Preview

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On Friday March 3th, 2017, Red Cloud Klondike Strike Inc. will be hosting its 5th Annual Pre-PDAC Mining Showcase. The event features presentations from 21 companies, including a themed lunch presentation by leading corporations in the gold mining sector. Visit the event page for more details on the day’s schedule. In this post, we provide a brief preview on the 21 presenting companies and 13 banner sponsors that will also be in attendance.  read more


Friday, February 24, 2017 Derek Macpherson

AEM Invests in Otis; Affirms Potential of Kilgore

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Otis Gold Corp. (TSXV:OOO) announced a private placement with Agnico Eagle Mines Ltd. (TSX:AEM, NYSE:AEM) for C$5.047 million to fund working capital and exploration at Otis’ Kilgore gold project in Idaho. The financing consists of 14.42 million common shares priced at a C$0.35/sh which represents a 12.9% premium to the prior day’s close. As a result of the transaction, Agnico Eagle would own ~9.95% of Otis on a non-diluted basis. In conjunction with the financing, Agnico Eagle and Otis are to enter into an investor rights agreement where Agnico Eagle has the right to participate in subsequent financings to maintain its 9.95% interest in Otis. The transaction is expected to close on February 28. In our view, this strategic investment by Agnico Eagle provides confidence for investors and supports our view on the Kilgore project’s technical merits and upside potential. We believe the market does not appear to fully account for Kilgore’s likely resource growth over the current 820k oz Au (47.5M tonnes @ 0.53 g/t Au) resource (indicated + inferred) as indicated by recent drill results and we discussed in a previous post. Coupled with the project being located in a stable jurisdiction in the vicinity of infrastructure, we expect the pending resource update (Q2 2017) and PEA (Q3 2017) to be important catalysts for the company, allowing Otis, which currently trades at C$38/oz, to close the valuation gap to peers (C$47/oz). read more


Thursday, February 23, 2017 Derek Macpherson

NEE Optimization Plan Should Improve Moss' Economics

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Northern Vertex Mining Corp. (TSXV:NEE) provided an update on its optimization plan which should improve both the mine’s economics, both for the five-year mine-life (Phase II) and the longer-term (Phase III). A key piece of the plan is to move the mine from diesel power, as envisioned in the feasibility study, to grid power. We expect a nominal increase in initial capital; however, the planned savings of US$16 million over the first five years should materially improve the project´s currently robust after-tax IRR of 48%. As well, the company plans infrastructure improvements (upgrade to Silver Creek Road) and is examining the sale of its waste rock as aggregate which may be a source of additional revenue. Although the power line construction and road upgrades require additional permits, the Moss mine remains on schedule to commence commercial production in Q4 2017. With the project remaining on schedule, we view these optimization initiatives positively, allowing NEE to further reduce costs and improve project economics. At C$99/oz, Northern Vertex currently trades at a premium to peers (C$54/oz). In our view, this premium valuation is warranted given that the Moss mine is financed and under construction. In addition, the company’s valuation does not appear to account for the potential of meaningful mine-life extension potential from the ongoing Phase III engineering work or the ongoing exploration program. read more


Wednesday, February 22, 2017 Derek Macpherson

Osisko Gold Royalties to Invest C$15.2 Million in IDM

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IDM Mining Ltd. (TSXV:IDM) announced a private placement with Osisko Gold Royalties Ltd. (TSX:OR, NYSE:OR) for C$15.248 million which should provide IDM the necessary funds to move its Red Mountain project to a production decision along with allowing for a significant 2017 exploration program. The financing was a combination of flow-through shares that are priced at a 61.3% premium to the prior day’s close (41 million shares at C$0.25 for gross proceeds of C$10.250 million) and common shares that are priced at a 9.7% premium to the prior day’s close (29.4 million shares at C$0.17 for gross proceeds of C$4.998 million). As a result of the transaction Osisko Gold Royalties would own ~19.9% of IDM on a non-diluted basis. In conjunction with the financing, Osisko will be granted certain preemptive rights in respect to the acquisition of royalties or streams from the Red Mountain project. The transaction is expected to close on March 1st. This should provide IDM the balance sheet flexibility to advance the Red Mountain project to a production decision and fund a significant exploration program in 2017. IDM trades at a discount to peers on a P/NAV basis (0.39x vs. peers at 0.56x) and on a per ounce basis (C$41/oz vs. peers at C$57/oz). We expect the pending feasibility study for Red Mountain, coupled with the project’s ongoing de-risking (engineering and permitting), should help close the valuation gap to peers. read more


Monday, February 20, 2017 Derek Macpherson

Dominican Republic Creates Uncertainty for UGD

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Unigold Inc. (TSXV:UGD) provided an update that suggests there is uncertainty around its ability to renew its Neita exploration concession when the current one expires on March 7, 2017. While this is likely to negatively impact the stock, we highlight that no official decision has been made, as the letter received from the Dominican government was from the General Mines Director, not the Minister of Mines and Energy who makes the final decision with respect to granting the concession. A decision to not re-grant the exploration concession would differ from historical precedent, as other companies operating in the Dominican typically have been re-granted their concessions in similar circumstances. In our view, the most likely outcome is that Unigold is re-granted the exploration concession; however, until there is new information from the government this outcome has elevated risk. As well, this news, at least temporarily, elevates the political risk for the Dominican Republic as a mining jurisdiction and we expect other explorers and developers’ share prices to be negatively impacted by the news, including: GoldQuest (TSXV:GQC), Precipitate Gold (TSXV:PRG) and Everton Resources (TSXV:EVR).  read more


Monday, February 20, 2017 Derek Macpherson

NEE Looks to Add Cash with Warrant Incentive

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Northern Vertex Mining Corp. (TSXV:NEE) announced it has initiated an incentive program to encourage the early exercise of up to ~29 million warrants in order to fund the ongoing construction of the Moss gold-silver mine in Arizona. Exercisable warrants from four out of the five eligible tranches have an exercise price of C$0.50 per warrant while warrants from one tranche have an exercise price of C$0.45 per warrant. For each full warrant exercised, holders will receive a new transferable half warrant. Each new full warrant is exercisable at a price of $1.00 for four years from the issue date (~March 22, 2021). As well, the company plans on listing the newly issued warrants. If all the warrants were exercised the total proceeds from the incentive program would amount to ~C$13.9 million. While it is not possible to determine the number of warrants that are going to be exercised, the proceeds should provide Northern Vertex’s balance sheet flexibility as it constructs the Moss mine. As we discussed in a previous post, the company completed a US$20.0 million credit facility and a US$8.5 million equipment lease facility in Q4 2016. With the project’s feasibility study suggesting initial capex of US$33 million and combined with the US$5.6 million of convertible debt raised in H2 2016, these recent financings should provide Northern Vertex with funds to construct the project. At C$111/oz, Northern Vertex currently trades at a premium to peers (C$58/oz). In our view, this premium valuation is warranted given that the Moss mine is financed and under construction. In addition, the company’s valuation does not appear to account for the potential of meaningful mine-life extension from the Phase III engineering work or the ongoing exploration program. read more


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