RCKS Talk

12-Dec-2018

Standard Lithium Ltd

Iron Cap Success Should Improve Mine Economics

Impact: Mildly Positive

Seabridge has announced that it has once again extended the Iron Cap mineralization down plunge to the northwest, which is already defined a 49Moz AuEq deposit within the wider KSM property in BC. Results align with our thesis that Seabridge is in possession of a major-scale gold-copper project in a premier jurisdiction that we expect to attract major partners.

Highlights: 
  • Seabridge delivers on 2018 exploration objectives. The 2018 exploration program that was focused on the Iron Cap Deposit has successfully extended the mineralization down-plunge from the high-grade core and tested the southern limits of the Iron Cap Deposit, as defined by a 2018 resource update. Highlights include 548m grading 1.30g/t AuEq (0.63g/t Au and 0.44% Cu) in hole IC-18-83, which exceeded the average KSM reserve grade of 0.89g/t AuEq and average Iron Cap resource grade of 0.83g/t AuEq.
  • Expansion of high-grade core should improve project economics. With permits in-hand, that allow the company to mine +2B tonnes of ore, the objective is mine the most profitable tonnes first. We would expect that Iron Cap’s growing higher-grade core may play is likely to be mined sooner and for longer than was outlined in the 2016 PEA, which we think would improve project economics, particular since it is so close to the planned Mitchell-Treaty Tunnel.
  • Another resource update for Iron Cap is now underway. We view the growth of Iron Cap as a game-changing addition to the KSM Project as increased grades in early years with minimal development capital required allows for enhanced project economics. With a high-grade core of 635Mt grading 1.34g/t AuEq at Iron Cap already defined earlier this year, we expect that the resource update currently underway is likely to enhance the already exceptional size and grade of the deposit.
Valuation: 
Improving grade and major scale should see this project trade closer to peers. Based on KSM reserves alone, Seabridge is trading at US$11/oz AuEq compared to peers at US$45/oz AuEq on a total resource basis. Given the scale of KSM, and the fact that it is permitted, we believe the company should trade closer to peers. Upcoming catalysts: 1) Iron Cap resource update (H1/19), 2) Iskut exploration results (Q1/19), and 3) Updated project economics (H2/19)

 

12-Dec-2018

Standard Lithium Ltd

First Lithium Carbonate Another Step Forward

Impact: Positive

On the heels of Standard Lithium’s recent announcement of a maiden resource of 3.1Mt LCE in the brine fields of southern Arkansas, the company has faster than expected successfully commissioned a Crystallisation Pilot Plant for transforming brines into high purity (>99.1%) lithium carbonate. This news aligns with our thesis that the company is quickly surpassing the normally lengthy milestones required to get in to production and remains a low-risk lithium developer in North America.

Highlights: 
    • High purity lithium has been produced. The
      Lithium Carbonate Crystallisation Pilot Plant in BC has been fully commissioned ahead of our expected schedule. The current prototype has already been successful in transforming impure feed solution composed of lithium, sodium, alkali and non-metallic contaminants, in to highly pure lithium carbonate at a purity greater than 99.1%. Upon refining operating parameters and addition of process cycles, the prototype is expected be ready shortly for full scale design.
    • Two halves make a whole. The company is simultaneously developing both halves of its pilot plant with a Lithium Extraction Pilot Plant being designed and built in Burlington, Ontario. We expect the two parts to be combined and constructed construction in Arkansas in late Q1/19, with commissioning starting in late Q2/19.
    • Well into the pilot plant development phase - accelerating pace to production.
      Brines at the company’s flagship project in Arkansas are currently in production for bromine extraction by likely JV partner LANXESS. Once proof of concept is achieved in 2020E, with permits in-hand, significant infrastructure in-place and full-scale production and funding likely coming from its partner, Standard Lithium is on a shortened path to production.
Valuation:
The market is missing the fundamental value of Standard Lithium’s potential. Standard Lithium has access to 150,000 acres of brine fields and with existing permitted infrastructure, a well underway prototype Pilot Pant and permits in hand, we believe the market is currently undervaluing the potential of this update. The company currently trades at US$15/t LCE in contrast to brine exploration and development peers at US$39/t LCE. Upcoming Catalysts include 1) Further results from ongoing test-work (Q1/19), 2) Completion of definitive agreement with LANXESS (H1/19), 3) Pilot plant commissioning (mid-2019) and 4) PEA expected in H1 2019.

12-Dec-2018

Rockcliff Metalls Corp

Ready to Rock

We are publishing our initial estimates on Rockcliff Metals with a valuation of C$0.32 per RCLF share, a 190% premium to the current share price. The company has consolidated a massive ≈200,000 ha portfolio of base metal and gold assets in the Snow Lake Mining Camp in Manitoba. We like Rockcliff’s balanced risk/reward profile with high probability that 2019 drilling is likely to expand resources combined with exciting “Blue Sky” potential at the Snow Lake South (SLS) #1&2 projects.  

  • Snow Lake Mining Camp, Rich Copper-Zinc endowment in a great jurisdiction. Rockcliff’s portfolio of assets are all located in the Snow Lake Camp, a close neighbor to Flin Flon, which is among the world’s most prolific volcanogenic massive sulphide (VMS) districts and home for Hudbay Minerals (TSX:HBM). As the focus for Hudbay shifts from Flin Flon to Snow Lake, we expect smaller satellite VMS deposits in the camp to receive more attention. This bodes well for Rockcliff, currently the junior with the largest land package in the camp and ownership of several small VMS deposits which remain open for growth.
  • Mix of lower risk extension drilling at Rail and Bur + District Scale Blue Sky in Snow Lake South. We expect resource expansion at Rail and Bur with drilling in 2019 given that VMS deposits in the Snow Lake camp typically display good continuity at depth, often extending to 1,000m below surface. As well, we like the “Blue Sky” exploration potential of SLS#1&2, two very large exploration licenses recently staked in the underexplored Snow Lake South Emerging Mining Camp.
  • Added Sweetener, Spin-out of Goldpath Resources + emerging royalty portfolio. We believe a spin-out of Rockcliff’s gold assets would help daylight the value we see at SLG and Laguna. In addition, the company holds a 2% NSR on the Tower project being advanced Norvista Capital Corp. (TSXV:NVV).

Valuation:

Rockcliff trades at a significant discount to our estimates plus plenty of “Blue Sky” potential. Based on Rockcliff’s portfolio of deposits and royalties, we have arrived at a conservative fair value estimate of C$0.32/sh, which does not account for the “Blue Sky” exploration potential. We’re expecting a progressive re-rating as the company pursues expansion drilling at Rail and Bur and advances its other properties in the camp. Upcoming catalysts include 1) 2019 Drilling Results at Bur and Rail 2) Ongoing news flow from Kinross Gold (TSX:K) drilling at Laguna. 
06-Dec-2018

Mawson Resources Ltd

Initial Results from New Asset Promising

Impact: Positive

Mawson released drill results from both its Finnish and US assets. Results from the US look promising and while drilling was unsuccessful at the company’s secondary Finnish targets where further work is needed. Our thesis that the Rompas-Rajapalot project hosts a sizeable high-grade mineralized system remains unchanged and we are awaiting assay result from the US assets to understand that project’s potential.

Highlights:  

  • First look at WUSA looks promising. The company wrapped-up its fall drilling season on the Western USA project (WUSA) in Oregon with three drill holes into the Scorpion and one at the Huckleberry project. Geochemisty points to intense silification and argillic alteration. Iron oxides were associated with brecciation and stockwork fractures and disseminated pyrite was present in the less-altered hosts. Initial results look encouraging, assays for the holes are expected in January.
  • More work needed on secondary Rajapalot targets. The company drilled 11 holes (1,660m) at the Hirvimaa and Korkiakoivikko prospects located
    2.6-4.3km from the high-grade Palakos and Raja areas, from where most of the drilling has been done to-date. Drilling confirmed previous base of till anomalies and VTEM data at the targets but only intersected the desired stratigraphy in 3 holes with only one ore grade intercept of 2m grading 0.11% Co (PAL0157). In our view more work is needed on this prospect.
  • Maiden Resource on high-grade Palokas expected before year-end. The company expects release a maiden high-grade Au-Co resource for the Palakos target for year-end and plans to keep aggressively drilling the area with 15km of drilling planned for 2019 (permits pending). Our recent site visit suggests the potential exists for 1Moz on this area, and recent geophysical results suggest it could be double that. 
Valuation:
Maiden resource appears to be partially priced in, upside excluded. The current enterprise value implies a maiden resource of ~440k oz (using US$40/oz). We expect the maiden high-grade resource to be roughly in line to slightly larger than the implied size; however, the deposit appears to be much larger based on our recent site visit.
We believe Mawson is well positioned to deliver a sizeable high-grade resource from Rajapolot. Upcoming catalysts include 1) Results from WUSA drilling 2) Drill permits for winter Rajapalot program and 3) Maiden Resource estimate on Rompas-Rajapalot (Q4 2019).

 

06-Dec-2018

Bonterra Resources Inc

Fattening Up Gladiator

Impact: Positive

Bonterra’s recent drill results indicate that the mineralization at Gladiator has a much wider footprint than initially thought and is likely to continue to grow to the north beyond the upcoming mineral resource estimate.
Results support our theory of a large high-grade system at Gladiator with expansion potential beyond the pending resource update, which underpins the company’s ~190koz/year production potential by 2020E, with the addition of the nearby Moroy and Barry deposits.

Highlights:  

  • Results suggest Gladiator could be twice as wide. Today’s results from the New North Extension and hole BA-18-88 point to the potential for the mineralized zone to double in width over the current strike length of ~1.3km (Figure 1). While early days, our view is that this increased width could double the resource beyond the pending estimate. We note that increasing width, is likely to increase the ounces per vertical meter, reducing the rate of vertical development which should lower development and operating costs.
  • Ongoing results suggest a more than a doubling along strike as well. Drilling to date has suggested a significantly larger strike length (4.5km, up from 1.3km) than the pending resource is expected to define. Results included in this update, and recent results suggests there is significant upside. Our understanding is that company is focused on the extending the deposit east and we expect the next Gladiator results to focus on a strike extension.
  • Pending resource updates on Barry and Gladiator to underpin development plans. The pending resource update from Gladiator, is now also expected to include Barry, while this may delay the update slightly, it is important first step in the company’s path to producing 185koz/year by 2020. We note that 85koz/year are expected to come from Gladiator and 100koz/year from Barry and Moroy. Importantly, this should be an important catalyst for investors to understand and properly value the path forward.
Valuation:
Near-term resource growth, with a clear path to production should drive a re-rating. Based on currently reported resources for Gladiator, Barry and Bachelor, Bonterra trades at US$63/oz, but once we factor in our estimate of ~C$50M for the Bachelor mill, and what we expect may eventually be a ~2M oz Au deposit at Gladiator, Bonterra would trade at a discount to peers at US$24/oz (peers US$30/oz). Upcoming catalysts include 1) Gladiator & Barry resource update, 2) Barry drill results (Q4/18) and 3) Gladiator drill results (Q1/19).

 

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