RCKS Talk

04-Jul-2018

Anaconda Mining Inc.

Anaconda Bumps Up Maritime Bid

Impact: Mildly Positive

Anaconda Mining has announced that it will increase the takeover bid for Maritime Resources from an exchange ratio of 0.39 Anaconda shares to 0.50 Anaconda shares per Maritime share, a 28% increase.
  • The offer represents $0.21 per Maritime share, which equates to a premium of ~110% based on the prior day close’s share price. This sweetened offer is likely to entice additional shareholders to tender their shares
  • The increased offer is conditional on Maritime’s recently approved private placement being withdrawn. This could eliminate potential investors in that financing who were looking to capture the value gap between the offering price and Anaconda’s original bid
  • In our opinion, the increased bid has approximately the same dilutive impact as the proposed private placement; however, in this scenario the added premium would only benefit Maritime’s current shareholders
We view this new development as positive for both Anaconda and Maritime shareholders with our revised estimate of the probability of the deal being completed to 60-70% (was 40-50%). If we were to factor the revised offer into our estimates, our NAVPS estimate would decrease from the current C$1.11 to C$1.05. We are leaving our estimates unchanged at this time but are likely to update when once the increased offer is formalized. Regardless of the completion of the takeover, the company remains attractively valued. Assuming the transaction is completed, Anaconda is trading at 0.34x NAV or if it is not completed Anaconda is trading at 0.36x NAV (peers 0.69x). We believe that a resolution of the hostile bid (either positively or negatively) is likely to lift current overhang on the share price.

03-Jul-2018

De Grey Mining Ltd.

Continued Hard Rock Success; Toweranna Results Impress

Impact: Positive

De Grey Mining has released drill results from the Toweranna Gold Deposit in the Pilbara, confirming further infill mineralization within existing resource limits at the Western Zone and intersecting new shallow high-grade gold lodes at the Southern, Northern and Eastern Zones.

  • Mineralization remains open along strike and at depth, drill intersections included 4.82g/t Au over 22m and 17.29g/t over 7m; diamond drilling assays for 9 holes are pending, though visible gold was noted in quartz veining at a 173m depth
  • Toweranna only represents a small area of the current overall resource (1.21Moz at 1.6 g/t) and is expected to be a key area to expand the existing resource
  • These results continue to highlight the prospectivity of De Grey’s Pilbara project and ongoing drill results from the companies, active program are expected to demonstrate the potential of its traditional hard rock assets
Our preliminary valuation of De Grey’s hard rock assets of A$0.15-0.23/share does not account for the likely resource growth demonstrated by these results. We continue to believe that De Grey’s current valuation provides investors a low-cost option on the conglomerates which is underpinned by traditional hard rock assets with resource growth potential. Next catalyst includes a PFS for the company’s Pilbara Gold Project (Q4 2018), preceded by ongoing exploration results.

29-Jun-2018

Anaconda Mining Inc.

Maritime Private Placement Approved

Impact: Mildly Negative for Anaconda

Maritime Resources has received 52% shareholder consent to approve the company’s C$1.5M proposed private placement.
  • We view this as mildly negative for Anaconda’s bid to acquire Maritime, as the management received shareholder support, and the offering increases the size of the company, implying a higher price for Anaconda shareholders – the result is that Anaconda has stated it may withdraw or revise its bid
  • This is also negative for Maritime shareholders, as there is a reduced likelihood that the Anaconda completes the transaction (as stated or at all), suggesting further downside may exist in Maritime’s share price as we believe the company is unlikely to be able build Hammerdown on its own
  • The planned financing represents 23% dilution (including warrants), for existing Maritime shareholders, significantly increasing the price for Anaconda, if the deal were completed at the previously announced exchange ratio, our NAVPS estimate for Anaconda would decrease to C$1.06 (currently C$1.11) – we have not altered our estimates at this time
Anaconda’s management has responded and indicated that it may withdraw or revise its bid, reducing the probability of the transaction being completed. Consequently, we now believe which we now estimate the probability of the deal being completed to be 40-50% (was 60-70%). Regardless of the completion of the takeover, the company remains attractively valued. Assuming the transaction is completed, Anaconda is trading at 0.32x NAV or if it is not completed Anaconda is trading at 0.36x NAV (peers 0.64x). We believe that a resolution of the hostile bid (either positively or negatively) is likely to lift current overhang on the share price.

28-Jun-2018

Novo Resources Corp.

Work-to-Date Suggests Upper Conglomerate is Continuous over ~2.5km of Strike

Impact: Positive

Novo Resources continued drilling and fieldwork has identified the Upper Conglomerate over 2.5km, which supports our view that a large gold deposit is possible at Purdy’s Reward and Comet Well. Key highlights from this release include:

  • Geologic markers have been identified (Mafic tuff bed and chlorite alteration) which should help guide future exploration
  • Results support our view of that a large gold deposit could be found
  • Aggressive bulk sampling continues with a goal to generate sufficient data for trial mining
We expect ongoing exploration of the upper conglomerate horizon and further bulk sampling results to be important catalysts for the stock. We continue to believe that Novo is worth between C$4.70-17.90/sh, suggesting upside from the current share price.

28-Jun-2018

Adventus Zinc Corp.

Adventus Adds Another Strategic Investor

Impact: Positive

Adventus Zinc has announced a financing which brings a fourth strategic investor into the company. The company is raising $9.2 million at a price of $0.90/sh. Additionally, an affiliate of Wheaton will pay Adventus $800,000 in cash for the right of first refusal on any new precious metals royalties or streams from the Curipamba and Alliance projects and right of first offer on any future properties in Ecuador acquired by Adventus

  • Wheaton Precious Metals Corp. was the lead order on the deal and is expected to hold approximately 9.9% of the common shares of Adventus upon closing
  • We view the companies continued support from multiple strategic investors as both an endorsement of the Curipamba project and management
  • The net proceeds of the offering will be used to fund exploration and development activities at Curipamba and within the Ecuador Exploration Alliance, which includes the Pijilí and Santiago Projects
Adventus is trading at a slight discount to peers, which we expect to close given the exploration potential and quality of the company’s exploration assets but probably does not fully account for the planned monetization of its earlier stage projects in Ireland and Newfoundland. Upcoming catalysts includes results from ongoing exploration activities along with the planned monetization of non-core earlier stage exploration assets. 

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