RCKS Talk

25-Mar-2019

FireFox Gold Corp

Another Target on Large Prospective Property

Impact: Mildly Positive

Ground magnetic results from FireFox’s Jeesiö project continue to suggest the presence of a large mineralized structural continuation of the Sirkka Shear Zone. We expect systematic drilling at Mustajärvi could initiate a chain of potential discoveries across FireFox’s large, prospective land package. 

Highlights:

  • Priority target confirmed with magnetic surveying. Recent ground magnetics completed on Firefox’s Jeesiö confirmed a sizeable structure with the hallmark traits of gold deposits found in the Central Lapland Greenstone Belt. The company successfully confirmed a previously identified a 2.8km long structural zone Utsamo target where Base-of-Till and historic geochemical sampling has identified the Utsamo area as a high-priority target (Figure 1). 
  • Capitalizing on the potential of the Sirkka Shear zone. Exploration to date suggests that Utsamo is ideally located along the Sirkka Shear zone and we expect follow-up surveying to generate a better understanding of the mineralized controls of the large anomaly. Additionally, the company’s projects host four other targets where, with the nearby discovery of quarts veining at Aurion Resources (TSXV:AU) property roughly 1.7km to the southeast.  
  • Advancing exploration across Finland camp. Work is ongoing at the company’s more advanced Mustajärvi project where we expect the company will continue to delineate the extents of its mineralized body. Additional ground magnetic surveying and IP surveying will be completed at Jeesiö focusing on Utsamo with the objective of achieving target identification ahead of drilling.
    Valuation:
Valuation does not reflect land package scale or prospectivity. We value FireFox at potentially C$0.63/share (Figure 3). At C$0.27/share, the company has an EV of C$7.8M and a significant land package in the CLGB. Despite recent exploration success, the company is currently significantly discounted relative to peers. Upcoming Catalysts include 1) Phase II results from Mustajärvi 2) Further exploration and commencement of drilling at Jeesiö and Seuru.

 

21-Mar-2019

Vanadium One Energy Corp

RCKS Nugget - Vanadium One Energy Corp (TSXV:VONE)

Recent drilling results from VONE caught our attention.

And we believe the pending resource update could positively surprise the market for this C$5.6M market cap company. Vanadium One Energy Corp (TSXV:VONE) is a Iron-Vanadium exploration/development company advancing its 100% Mont Sorcier (Fe-V) project near Chibougamau, Quebec.
 

21-Mar-2019

Big Project, Small Capex

Big Project, Small Capex

Coro Mining is in the process of re-rating as the market begins to recognize the resource growth potential on a low capital intensity copper heap leach project in Chile. We estimate the fair value of Coro’s shares to be C$0.21/sh, with further upside should regional exploration targets pan out. Coro is backed by an economic copper oxide heap leach project with excellent access to infrastructure in mining friendly Chile. The combination of i) our expected doubling of the resource in the near-term, ii) our heap leach valuation and iii) the regional exploration potential, should drive Coro’s share price higher over the near and medium-term.
Investment Thesis:

  • Budding resource set to grow. Coro’s 2018 resource of 434Mlb Cu was constrained by limits of the Marimaca property at that time. The Company has since expanded its land position and has been actively drilling. Based on drilling results to date, we believe the resource should double in size during the 2019 campaign.
  • Easy to develop, low capital intensity project with great infrastructure. Our base case model suggests Marimaca could produce 49Mlbs of Cu per year at US$1.88/lb with an initial capex of US$50M. We believe the expanded scope relative to the 2018 feasibility (23Mlbs/year) should get Coro noticed by mid-tier producers and possibly larger players. Marimaca is only 45km by road from the city of Antofagasta, with access to infrastructure and services and only 24km from Coro’s Ivan SX-EW plant – these factors should help reduce capital and operating costs for the project.
  • Blue-sky potential could deliver an even larger project. Until recently drilling has been focused on Marimaca (1200x600m footprint), but geochemical evidence suggests the project sits within a larger mineralized system, which extends for 6km. The company has just started testing surrounding targets and recent results from La Sorpresa (2km south) have been encouraging. We would expect that exploration success beyond our current estimates to drive a significant expansion in project scope, making Coro a more attractive M&A target.
Valuation:
We believe Coro is one of the most attractive copper exploration stories. Our view is that the market has not fully priced in the near-term resource expansion nor the regional blue-sky potential. Our fair value estimate of C$0.21 per share is based on 0.80x time our base case NAVPS estimate of C$0.26, which we believe accurately reflects the low execution risk we see at Marimaca. The company currently trades at 0.39x NAV, a 35% NAV discount compared to peers at 0.58x. In our view, continued drilling success should result in the market re-rating the stock. Upcoming Catalysts include : 1) Resource Estimate Q3/19, 2) Ongoing drill results from both near mine and distal targets 3) Updated PEA study in Q4 2019.

 

21-Mar-2019

De Grey Mining

More High-Grade Hits from Withnell

Impact: Mildly Positive

Results from De Grey’s larger Withnell deposit suggest high grade lodes are coming down the pipeline as the company pursues an aggressive exploration target across its entire project. These and other recent drill results support our fair value estimate for De Grey of A$0.30/sh and we believe the stock should re-rate as the company demonstrates the scale potential and exploration upside of the Pilbara Gold project.
Highlights:

  • Better than average grades should expand open pit. Withnell is the largest deposit in the Pilbara Gold Project with 377,300 oz at 1.8 g/t Au. Highlights from shallow drilling include 5m at 7.8 g/t Au (INRC1364B) from 43m in Lode 1. While our estimates assume some open-pit resource expansion, these results suggest more at better grades.
  • Deeper intercepts support our expectations of an underground mine. The highlight deeper intersections from Lode 1 which returned 8m at 20.11 g/t Au (NRC112) from 168m support our view that sufficient grades and widths exist for underground mining. We currently model 3.5M tonnes at 5.0 g/t, in-line with the existing exploration target of 2.6-3.5 Mt at 2.6 – 3.5 g/t Au (330,000 – 720,000 oz). With the underground component representing 43% of our pre-tax NAV, continued deeper drilling success is important for our valuation.
  • The rigs keep turning. Drilling continues to at both Withnell and Toweranna, along with results pending from Malina and we expect to see steady news flow over the next few months. The company is targeting a 2Moz resource for 2019 and we view this as very achievable based on the recent success at Toweranna and Withnell alone. We expect the stock to march higher as De Grey demonstrates the exploration upside of this project.

 
Valuation:
 Recent share price performance not reflective of fundamental value. We estimate De Grey’s hard rock assets are worth at least A$0.30/sh based on 0.70x our NAVPS8% estimate of A$0.44 (unchanged) and believe the recent share price performance reflects the near-term payment A$9.7M payment needed to acquire the western portion of the project. In our view, the company is very likely to be able to fund this obligation, which we expect to drive a significant re-rating. Upcoming catalysts: 1) Ongoing exploration results, 2) Project development updates and 3) Final project payment

 

18-Mar-2019

Chalice Gold Mines Ltd

Recon Drilling Smoke A Good Sign

Impact: Mildly Positive

Chalice has released encouraging results from its Pyramid Hill project where it just completed a 19,500m air-core and reverse-circulation (AC/RC) reconnaissance drill program. Chalice is on the hunt for quality deposits at Pyramid Hill in the prolific Victorian Goldfields of Australia while also advancing East Cadillac, within the Abitibi of Quebec, where exploration work is ticking the boxes for another Canadian Malartic. Chalice’s discounted EV doesn’t reflect that this is a cashed-up junior on the hunt in two major gold camps. 
Highlights:

  • AC/RC recon drilling fleshes out targets. Chalice reported the first batch of results from widely spaced reconnaissance holes drilled within its Muckleford Property. From the East Target, Chalice reported 6m at 6857 ppm As (PA 136) and 4m at 0.25 g/t Au (PA 149). From the West Target, PA 073 returned 4m at 0.39 g/t Au and PA 078 returned 4m at 0.29 g/t Au. We note that the high-grade gold deposits in the southern exposed portion of the Bendigo camp have footprints measured in kilometers and feature extensive geochemical halos. Today’s results will help enable Chalice to vector to a potential gold discovery at depth.
  • Catalyst Metals, Proof of Concept. Chalice’s neighbor, Catalyst Metals (A$180M Market Cap), has had great drilling success exploring under cover at their Four Eagles and Tandarra projects. Geochemical anomalies identified in AC holes within overburden led to headline grabbing diamond drill results including 16m at 63 g/t Au at the Boyd’s Dam Zone (June 25, 2018). Catalyst’s current market cap is based on a 50% and 51% interest in pre-resource exploration at Four Eagles and Tandarra, respectively.
  • More reconnaissance drilling underway. Chalice will be following up with an additional 15,500m of AC/RC drilling at Muckelford given that their multi-purpose AC/RC rig configuration is proving itself as an effective geochemical sampling tool. In addition, Chalice will be launching a 4000m reconnaissance AC/RC drill program at its Mt William property (Figure 3), north of Kirkland Lake Gold’s (TSX,NYSE:KL, ASX:KLA) high-grade Fosterville mine.
    Valuation:
Chalice is an inexpensive option on a major discovery. With A$21M in cash, Chalice is well positioned to advance its exploration programs while avoiding dilution, effectively providing investors a low-cost option on any exploration success, with a major discovery providing significant upside. Upcoming Catalysts 1) Ongoing exploration results from both the Pyramid Hill and East Cadillac projects 

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