RNC Minerals

Sediment Does Host High-Grades

Impact: Positive

Initial results from the ongoing 40,000m drill program at Beta Hunt have returned exceptional grades. The results suggest that our upside case is modestly more likely, with our current fair value estimate at C$0.97 (was C$0.94). We continue to expect ongoing exploration and development work to be the key catalysts for demonstrating the potential that we see at Beta Hunt.

    • Specimen gold intersected near the sediment/shear contact on a second shear. RNC may have identified a second specimen zone on the Western Flanks shear, after hole WFN-029 intersected 1,017 g/t Au over 2m including 7,621 g/t Au over 0.27m (Figure 3). This result supports the company’s geologic thesis on these zones which in our view increases the odds that another Father’s Day Vein type are is found. Additionally, the company intersected 119.37 g/t Au over 6.4m below the Father’s Day vein (A-zone shear), suggesting there may be a higher-grade area around this specimen gold zone (Figure 4). 
    • Other results support our view, that a higher-grade bulk mining resource is developing. The balance of the intercepts continues to return better than > 3g/t Au (historic mining grade 2-3 g/t Au) supporting our view, that the company should be able to develop a significant bulk mineable resource at better than historic grades. While the specimen gold drill results are impressive, in our view the definition of a bulk mineable resource at Beta Hunt is key. 
    • Steady flow of drill results expected. RNC has drilled only 10km of the 40km
      program and only released results from 5,766m. Consequently, we expect steady newsflow over the next 6 months as the company works as the company works towards creating an updated resource and restarting the mine.  
    Based on initial drilling success we are increasing our fair value estimate to C$0.97/sh (was C$0.94/sh). Our fair value estimate is based on our probability-based valuation method for Beta Hunt (C$0.93/sh, was C$0.89/sh), plus the company’s other assets (C$0.04/sh, was C$0.05/sh). Based on the company’s initial success, we have increased the probability of our upside case C$1.28/sh (was C$1.31) to 22.5% (was 15%). As well, we have adjusted our estimates for the recent financing. Ongoing exploration and development work at Beta Hunt are key to demonstrating the potential for additional “specimen zones” and a bulk mineable resource. Upcoming catalysts include: 1) Drilling and development results from Beta Hunt, 2) Balance sheet update (Q1/19) and 3) Resource update (mid-2019).

NxGold Ltd

Moving Forward at Mt Roe

Impact: Mildly Positive

NxGold is advancing its Pilbara projects towards a maiden drill program. We continue to believe that the current enterprise value (EV) of the company does not reflect ongoing exploration success or the potential that this company has to make a gold discovery in the Pilbara. With funding in-place to advance this project through initial drilling, we believe the market is providing investors an with opportunity as it has yet to price in this company’s fair value.  

    • Closing in on hardrock targets at Sholl tenements. The company is following up on a number of anomalous soil samples from its Hawk, Eagle, and Swan areas where it is closing in on vein structures thought to be associated with primary gold mineralization. The company has newly granted tenements adjacent to its current holding at Mt Roe (Figure 1) where, alongside its slightly more advanced Prinsep property, it will apply systematic surface exploration to assess the geological potential.  
    • Applying systematic approach to Prinsep tenements. The company sampled an additional 300m to the west of a previously reported 500m strike segment and returned assay results of up to 4.8 g/t Au. NxGold has identified a potential strike length of up to 1,800m at Prinsep which it will investigate using systematic sampling techniques such as soil grid sampling followed by potential trenching or drilling.
    • Progressing towards drilling. In early 2019, NxGold plans to complete another round of surface work at its Mt. Roe projects, ahead of drilling. The objective is to do sufficient work on the recently granted tenements, to properly define the first drill targets. The company has enough money to fund Mt. Roe through a maiden drill program. 
    NxGold still trades at near shell value and is overdue for a re-rating. Early stage exploration companies typically have EV’s between C$5-10M, while publicly listed shells normally have EV’s between C$1-2M. Considering NxGold has C$3.5M in cash and securities and is continuing to move what we view as a prospective project forward, the current valuation is unwarranted. This does not account, for what we view as a free option on Kuulu, as we expect the restoration of surface access rights to drive a significant re-rating.  Upcoming catalysts include 1) Ongoing Surface sample results from Mt. Roe, 2) Scout drilling at Mt. Roe (H1 2019) and 3) Surface access update at Kuulu.

Bonterra Resources Inc

Moving Ahead in the Urban Barry Camp

Impact: Neutral

Bonterra is continuing to advance towards a company-wide mineral resource estimate encompassing its Gladiator, Barry and Moroy deposits. The company will move all three projects ahead simultaneously in the aim of creating a development plan which incorporates the company’s nearby Urban Barry Mill. We believe Bonterra could uncover large high-grade system at Gladiator which alongside Moroy and Barry, underpins the company’s ~190koz/year production potential by 2020E.


  • Growing Gladiator. Bonterra continues to increase expansion potential at its Gladiator deposits following a recent JV with Beaufield Resources which allowed the company to consolidate historical databases and begin to delineate the Titan extension (Figure 1). Highlights from recent drilling include BA-18-116 which returned 12.4 g/t Au over 5.3 m drilled northeast along strike at the Titan extension. The mineralized zones at Coliseum and Titan are open in all directions and reflect similar characteristics to the Gladiator main deposit suggesting a potential 3.8x strike extension of Gladiator to a total strike length of 5 km.
  • Updates on Barry and Moroy. While the company pursues expansion at Gladiator, it is assembling geological models at both its Barry and Moroy deposits which are expected to be included in the pending mineral resource estimate. With a small underground ramp installation at Barry for future bulk sampling and drilling as well as existing workings from the historic underground Bachelor Mine at Moroy the company has access to complete underground development work to define both deposits at depth.
  • News coming in 2019. This year’s 2019 drill program will focus on
    validating the potential strike extension at Gladiator and completing infill drilling at the main deposit in order to contribute to the coming resource estimate. The company is currently refining drill targets for 2019 with the aim of improving potential project economics and growing its indicated mineral resources.
We anticipate a resource update should highlight the scale of the mineralized system to the market. Based on currently reported resources for Gladiator, Barry and Bachelor, Bonterra trades at US$46/oz, a premium to peers but once we factor in our estimate of ~C$50M for the Bachelor mill, and what we estimate could be a ~2M oz Au deposit at Gladiator, Bonterra would trade at a substantial discount to peers at US$16/oz. Upcoming catalysts include, 1) Resource update and 2) Ongoing exploration results



FireFox Gold Corp

Initial Results Demonstrate the Potential of Mustajärvi

Impact: Positive

Phase I of drilling at FireFox’s Mustajärvi project successfully intersected high grade gold at depth and validated historic exploration results near surface. In our recent report on Finland, we outlined FireFox as having a potential value of C$0.63/share contingent on continued exploration success at Mustajärvi. As the company moves in to Phase II of drilling, we view this progress as aligning well with our estimates. 

  • Depth extension beyond historic drilling. The company drilled 18MJ010 at 125.5m of depth and returned assays of 45.1 g/t Au over 2m highlighting the success of its first attempt at testing the deeper mineralization at Mustajärvi. With historical drilling constrained above 40m of depth, 18MJ010 confirmed a deep and highly altered mineralized zone measuring over a potential interval of 5m. 
  • Validating historic results. The company is following-up on drill holes completed by Outokompu and has a number of near-surface drill targets identified through recent IP surveying and magnetics. Results from the shallow portion of the drill program tested below an artisanal pit at Mustajärvi and returned similar grades and mineralization-styles seen in the historic drill holes completed by Outokompu. This news aligns well with the company’s geologic interpretation of the area and is beginning to bring proof of the potential we see at Mustajärvi.
  • Assays pending and Phase II underway. With great success coming from Phase I and despite challenging winter weather conditions, the FireFox will forge ahead in to a second phase of drilling at Mustajärvi. The company has plenty of catalysts coming in the near-term with assay results pending on 4 additional drill holes from Phase I and further drilling to begin with Phase II. Additionally, the company is rapidly defining a number of drill targets at its Jeesiö and Seuru projects.
FireFox is advancing Mustajärvi while accumulating a promising land package in the Central Lapland Greenstone Belt and we expect the market is likely to reconsider the discounted valuation on this newly public company’s potential. As mentioned, we value FireFox at potentially C$0.63/share (Figure 1). At C$0.28/share, the company has an EV of C$6.2M and a significant land package in the CLGB and continues to warrant a positive outlook for exploration success. Upcoming Catalysts include 1) Phase II results from Mustajärvi 2) Further exploration and commencement of drilling at Jeesiö and Seuru.



Mawson Resources Ltd

Ready, Set, Drill

Impact: Positive

With renewed exploration permits for the next 3 years, four drill rigs, a ~C$ 4.5M budget and a 70-person workforce mobilized we expect that Mawson will begin to showcase the potential we see in their ability to uncover a significant gold deposit at Rajapalot. In our recent report on Finland, we highlighted our belief that Mawson could be worth C$0.79/share and we expect coming newsflow to prove this.

  • Drilling permits enable action and reduce risk. The Kairamaat 2-3 1,462 ha exploration permit overlain by the Rajapalot project area should allow the company to focus its 15km drilling program on growing the Rajapalot Maiden Resource. With 18% of its claims overlapping protected Natura 2000 land, the permit defines clear agreement terms that should allow Mawson to undertake exploration methods including diamond drilling, base of till drilling and geophysics while minimizing any environmental concerns associated to the exploration of the area. 
  • Large electromagnetic targets to be confirmed with drilling. The company is continuing to collect geophysical data across the entire 4km Rajapalot trend where it has mapped a number of conductive anomalies (Figure 2). The current unconstrained inferred maiden resource encompassing the Palokas and Raja prospects contains 482koz at 2.4g/t AuEq (1.7g/t Au and 0.041% Co) and has significant potential to grow with drilling. Geophysics now to be followed by drilling should support our theory that Rajapalot hosts a significant gold mineralization.
  • 2019 to focus on resource expansion. Mawson’s current resource could double with results from its winter drilling program which is set to commence immediately following ground preparation. The company will focus its efforts on the large conductive plates down dip at Raja which has shown potential to extend further down than previously drilled. Mawson is now well positioned to pursue resource development with a viable system for translating its numerous geophysical anomalies (Figure 2) in to drill targets.
Current pricing reflects maiden resource but does not account for exploration potential to be demonstrated in early 2019, we estimate Mawson could be worth C$0.79/share. Based solely on its maiden resource Mawson is trading at US$37/oz AuEq relative to peers at US$45/oz AuEq. We believe that this recent news moves the company closer to the upside that we expect to be confirmed with the winter 2019 drill program. Upcoming catalysts include 1) Results from WUSA drilling (Q1/19), 2) 15,000m drill program results from Rajapalot (H1/19).


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