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Friday, March 24, 2017 Derek Macpherson

NEE Adds C$5M from Warrant Incentive Program

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Northern Vertex Mining Corp. (TSXV:NEE) announced it has completed the warrant exercise incentive program announced on February 17, 2017. The purpose of the program was to provide funding for the ongoing development plans and construction of the Moss gold-silver mine in Arizona. Gross proceeds of C$5,000,054 were raised through the exercise of 10,713,608 outstanding unlisted warrants. For holders who exercised their warrants under the program, the company issued 5,356,804 common share purchase warrants, whereby each incentive warrant entitles the holder to purchase an additional common share of the company at a price of C$1.00 per common share until March 24, 2021. At C$103/oz, Northern Vertex currently trades at a premium to peers (C$55/oz). In our view, this premium valuation is reasonable 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


Thursday, March 23, 2017 Derek Macpherson

Ascendant Continues Optimization at El Mochito

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Ascendant Resources Inc. (TSXV:ASND) provided an update on its ongoing optimization program at its El Mochito Mine in Honduras. Throughout the majority of March, the company mined and milled on average 1,745 tpd (vs. 1,600 tpd in January), noting a sustainable processing capacity target of 2,200 tpd. The company expects that ongoing productivity improvements should steadily ramp-up throughput, achieving planned throughput by year end. In addition, the company is implementing a maintenance program to improve equipment availability and support higher production rates. On March 9th, the company completed its first lead concentrate shipment from El Mochito, selling ~1,500 tonnes. Negotiations are underway to complete a new Collective Bargaining Agreement, we expect further results from the agreement coupled with the ongoing optimization program to result in an operational turnaround, positioning Ascendant to benefit from the improving zinc price environment. read more


Thursday, March 23, 2017 Derek Macpherson

EXN's Optimization Program Nearing Completion

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Excellon Resources Inc. (TSX:EXN) reported financial results for Q4 2016 and 12-months ended 2016 including an update on its ongoing optimization program at its Platosa Mine in Durango, Mexico. Costs for Q4 were much higher than the expected run-rate; however, this incorporates costs of the ongoing optimization program. The company anticipates operations to achieve higher rates of production and lower costs during H2 2017, when the optimization program is complete. While Excellon currently trades at a premium to peers; we believe this reflects the market's anticipation for improved production and costs later this year.  read more


Wednesday, March 15, 2017 Derek Macpherson

AuRico Receives Positive EA Decision for Kemess

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AuRico Metals Inc. (TSX:AMI) announced today it has obtained a positive environmental assessment (EA) decision for its Kemess Underground project in British Columbia. We view this very positively as we believe it is an important catalyst for AuRico to unlock Kemess’ value. AuRico’s current EV of ~C$157.8 million implies an EV/EBITDA for royalties only (based on 2017 guidance) of ~22.0-23.7x, which is slightly higher than royalty peers that trade at 19.2x (2017e EV/EBITDA). This suggests the market currently allocates a value of ~C$20-30 million to Kemess. However, similar development stage peers trade at 0.56x NAV or C$48/oz, which suggests that Kemess on its own could be ascribed a value of ~C$115 million. In our view, with the completion of the Environmental Assessment, AuRico should now be positioned to unlock this value, providing investors the potential for meaningful near-term upside as the market prices in the viability of Kemess. read more


Wednesday, March 15, 2017 Derek Macpherson

Otis Consolidates Ownership of the Oakley Project

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Otis Gold Corp. (TSXV:OOO) announced it has reached an agreement to bring its interest in the Oakley gold project in Idaho to 100%. Otis expects to acquire the remaining 20% stake in the Blue Hill Creek and Matrix Creek properties, which together with the Cold Creek property, comprise the Oakley project. In addition, the agreement entails a reduction of a NSR royalty on Blue Hill Creek and Matrix Creek from 2.5% to 2.0%. The total consideration of the transaction consists of 380k Otis shares, implying a total value of C$112.1k based on Otis’ close price on March 14, 2017 (C$0.295/sh). Blue Hill Creek has a 163k oz Au (11Mt at 0.51 g/t Au) inferred resource that is hosted in a shallow epithermal system which remains open in several directions. Previous drill results have intersected gold mineralization over +100m wide intervals. Limited exploration has taken place on the adjacent Matrix Creek property which hosts a mineralization distinctive from that of Blue Hill Creek. In our view, the consolidation of Oakley, a secondary project, is mildly positive and may help accelerate exploration on this project. At C$37/oz, Otis currently trades at a discount to peers (C$50/oz). We believe the market does not appear to fully account for the potential resource growth at the company’s flagship Kilgore project which is located in Idaho, a stable jurisdiction, and in the vicinity of infrastructure. Coupled with the recent strategic ~C$5.05 million investment by Agnico Eagle Mines Ltd (TSX:AEM, NYSE:AEM), we expect the pending resource update (Q2 2017) and PEA (Q3 2017) for Kilgore to be important catalysts for the company, allowing it to close the valuation gap to peers. read more


Tuesday, March 14, 2017 Derek Macpherson

IDM Starts 2017 Resource Expansion Drilling

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IDM Mining Ltd. (TSXV:IDM) announced it has commenced a spring 2017 Phase I drill program at its Red Mountain project in British Columbia. The underground drill campaign is expected to consist of ~35 holes, totaling 8,000m. The program is focused on expanding mineralization to the north as well as up-dip and down-dip of the AV and JW zones. The resources of these zones combined with that of the Marc zone currently have a strike length of 600m. Previous intercepts indicate the gold mineralization extends for an additional 800m to the north. Initial step-out drilling at the mostly undrilled SF zone, which is north of JW, is expected to cover a strike length of ~300m to the north of the existing resources. The company has also planned step-out drilling up-dip and down-dip from the AV and JW zones where previous drilling suggests that mineralization continues for hundreds of meters. The zones remain open down-dip along strike. IDM continues to trade at a discount to peers on a P/NAV basis (0.47x vs. peers at 0.51x) and on a per ounce basis (C$39/oz vs. peers at C$53/oz). We expect the pending drill results and 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


Tuesday, March 14, 2017 Derek Macpherson

Ascot Starts Surface Drill Program

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Ascot Resources Ltd. (TSXV:AOT) announced it has commenced surface drilling as part of the 2017 exploration campaign planned at its Premier property in British Columbia. As we discussed in a previous post, the C$20 million program is expected to consist of both surface drilling and underground development. Initially, 120 km of surface drilling is targeted at establishing an initial high-grade resource of 2-3 million oz Au. Later this year, Ascot expects to drill an additional 20 km to explore grassroots targets at the north of the property, spending a total of C$13 million on surface drilling in 2017. At C$47/oz, Ascot currently trades at a discount to peers (C$58/oz). However, based on the high-grade resource goal and ignoring the existing low-grade resource, the company trades at between C$70-105/oz, a premium to peers. This valuation reflects the project’s likely high-grades, existing infrastructure and key shareholders. Based on Ascot’s cash position at the end of 2016 (C$29.1 million), the company appears to be well-financed for its planned exploration and remaining option payment of C$6.85 million (due June 2017). We believe Ascot is likely to continue the success demonstrated during the 2016 exploration program and that results from the 2017 drill program should support the company’s valuation. read more


Tuesday, March 07, 2017 Derek Macpherson

SMT Likely to Add High Value Tonnage at Bolivar

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Sierra Metals Inc. (TSX:SMT, BVL:SMT) announced initial drill results from the La Sidra and Bolivar West zones at its Bolivar mine in Mexico. In our view, the good results from the brownfield exploration program suggest the company is likely to deliver on its objective to add high value tonnes and extend mine life at Bolivar. Drilling continues to imply the existence of high grade Au-Ag mineralization at La Sidra. The zone currently extends over 500m along strike and to a depth of 300m while remaining open 2.5km NE-SW along strike and down dip. Results from Bolivar West similarly returned a weighted average grade above the resource grade. Sierra plans to follow-up on strong anomaly zones detected during a recent IP survey at Bolivar West and Bolivar Northwest. In our view, continued exploration success along with ongoing operational improvements at Sierra’s Yauricocha and Bolivar mines is key to enhancing the company’s value and positioning to bring about the necessary capital structure changes needed. read more


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