RCKS Talk

10-Jan-2019

GT Gold Corp

Saddle North Continues to Impress

Impact: Positive


GT Gold released assay results from hole 109 at their 100% owned Saddle North deposit located in BC, Canada, intersecting an extremely wide 1,150m grading 1.12g/t AuEq from surface. We consequently updated our in-house grade shell model of this deposit. Our preliminary economic estimates suggest that this
project is very likely to be an economic mine at some point in the future.

We continue to believe that GT Gold has made an exceptional porphyry gold-copper discovery. Importantly, our view is that very little (if any) value is being ascribed by investors for that discovery in GT’s current share price. Further, we expect continued exploration success at Saddle North.
Highlights:

  • Grade shell model points to sizeable high-grade resource. Using Leapfrog Geo, we have created our own grade shell model of the Saddle North deposit and have defined high-grade (for a porphyry-style deposit) and very high-grade resource estimates of 365Mt grading 1.21g/t AuEq (0.8g/t AuEq cut-off) and 77Mt grading 1.81g/t AuEq (1.5g/t AuEq cut-off), respectively (Figure 1).
  • High-grade core emerging at depth (Figure 1, 3, 4 & 5). Hole 109 confirmed that grades get better at depth, returning 342m @ 2.1 g/t AuEq (starting at 740m). Though still early days, our 3D model reveals the emergence of a high-grade zone 500m below surface with grades above 1.5 g/t AuEq, which extends for 450m along strike, 600m down plunge. We stress that the zone remains open at depth and laterally and grades may improve further still with deeper drilling as the core of the system is approached.
  • Saddle North likely to become a mine. After comparing our estimates for Saddle North to other block cave projects and the nearby Red Chris Mine, our preliminary view is that this project should be economic to mine (Figure 2). Using the high-grade resource, and based on a 30,000tpd operating rate (~400k oz AuEq/year) we roughly estimate the after-tax NPV5% for Saddle North to be C$2.4B, and its IRR would be 19%. See Figure 6-8, for our assumptions and sensitivities.
Valuation: 
Is the market getting it wrong on Saddle North? Our rough numbers point to a project NPV at over C$2B. Even with conservative estimates for further dilution and time to get the construction phase, GT Gold appears to be significantly undervalued at a market capitalization of just C$66.9M. We note that in our view, current drilling at Saddle South alone justifies the current market cap (~750-1Moz AuEq at C$50-75/oz implying C$37.5-75M), suggesting negligible value ascribed to Saddle North. Upcoming catalysts include 1) Saddle South exploration update (Q1/19).

 

Derek Macpherson | VP Mining Analysis 
Edmond Thorose | VP Corporate Development
Alex Pitcher | Associate, Mining Analysis
Beatrice Cigagna | Associate, Mining Analysis 

 
Red Cloud Klondike Strike Inc.
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GT Gold Corp - TSXV:GTT - 2,4


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