RCKS Talk

21-Jan-2019

Finding our Way in Finland

We believe Finland has the potential to yield multiple major gold discoveries. We recently had the opportunity to visit several projects in Finland which was highlighted by the fact that despite having a long and significant mining tradition, there has been a late move (1990’s) to commercial gold exploration creating opportunity in this top-notch jurisdiction. Our favourite Finland focused gold exploration companies include: Mawson Resources Ltd (TSX:MAW), FireFox Gold Corp (TSXV:FFOX), and Aurion Resources Ltd (TSXV:AU). We visited a number of other quality projects discussed in-detail within this report.

Summary:
    • Finland is a tier-1 country for mining and underexplored for gold. The combination of exceptional infrastructure, mining culture and favourable financial regime is the reason this country ranks among the best in the world for mining. That being said, with historic exploration effectively driven by the government and with a focus on base metals and iron ore, its gold potential has never been systematically tested providing current explorers an exceptional opportunity.
    • Mawson Resources Ltd (TSX:MAW): Maiden resource is just the start. Mawson has been advancing its Finnish projects for multiple years, and we believe the company has just unlocked the geologic controls for gold at Rajapalot. With an unconstrained inferred maiden resource of 482koz grading 2.4g/t AuEq (1.7g/t Au and 0.041% Co), the project is off to a good start and we expect the resource to grow materially with the next drill program. We believe the company is potentially worth C$0.78/share.
    • FireFox Gold Corp (TSXV:FFOX): Ready to discover. Uniquely, FireFox’s management team is predominantly Finnish, and have been actively exploring in Finland for more than 10 years. This company has acquired a number a of prospective projects in the Central Lapland Greenstone Belt (CLGB) and are poised to make a discovery with drilling underway. We believe the company is potentially worth C$0.64/share.
    • Aurion Resources Ltd (TSXV:AU): Thinking big in the CLGB. Aurion was one of the first to pursue and systematically explore for gold in the CLGB. The company has some very prospective ground and has been quickly advancing its Aamarusko project from gold-in-boulders to gold-in-core to the beginnings of a deposit. Our site visit suggests that the results to-date may only be the tip of the iceberg. We believe the company is potentially worth C$2.29/share.
    • To get exposure, majors need to come through the few active juniors. The land rush is effectively over, and other than Aginco Eagle (TSX,NYSE:AEM), the other major and mid-tier producers would likely have to acquire one of the active juniors to get exposure to this opportunity. This is supported by investments by Kinross (TSX:K) in Aurion and by Goldcorp (TSX:G) in Mawson.
18-Jan-2019

Red Pine Exploration

Beefing up Resources at Wawa

Impact: Mildly Positive

With promising deposits at both Minto South and Surluga, Red Pine’s drilling continues to de-risk Surluga while also pointing to growth beyond current resources. Today’s results support our view that the Wawa corridor hosts a large gold system which may encompass multiple gold deposits.


Highlights:
  • Surlaga deposit model holding up under scrutiny. Red Pine infill Hole SD-238 encountered thicker mineralization than predicted by the current resource model and returned 12.6m (true width) at 4.33 g/t Au. Similarly, holes SD-237 and SD-239 encountered mineralization as predicted by the Surluga model at grades and widths in line with expectations: 2.41m @ 6.26 g/t Au and 3.76m @ 1.69 g/t Au, respectively. Assay results for 42 infill holes are pending at Surluga and we expect them to validatie the current model in addition to identifying zones with growth potential.
  • Upside within the Jubilee Shear Zone. Hole SD 18-238 intercepted mineralization in the footwall of the Jubilee Shear Zone returning 1.74m @ 5.31 g/t Au within the Surluga Road Shear Zone plus 5.9m @ 0.67 g/t Au from a newly discovered structure at 293m downhole. Although not economic, this latter intercept highlights potential for discovery of new structures at depth, where further drilling may well vector to better grades.
  • Let’s not forget Minto South. Following the Minto South maiden resource (100 koz at 6.8 g/t), hole SD-18-219 has identified a new high grade zone in the Minto South hanging wall which returned 1.2m @ 17.66 g/t Au. We note that the current Minto South resource accounts for only 20% of the mineralized structure at Minto South and we expect further drilling to shed light on additional upside at this emerging deposit.
Valuation:
Red Pine continues to trade at a discount to peers (US$9/oz versus peers at US$32/oz). We note that the company is well funded and is undertaking a 23km drill program in 2019. We believe ongoing exploration success and a resolution to projects ownership should drive a re-rating. Upcoming catalysts include 1) Pending assay results (Q1/19) and 2) Updated Surluga Resource estimate (Q2/19).

17-Jan-2019

Coro Mining Corp

Growing Marimaca into a Potential Mining District

Impact: Positive

Coro Mining Corp announced a second batch of drilling results from La Atómica which continue to demonstrate the potential to expand oxide copper resources at its Marimaca project in Chile. With cash in the bank and 30,000 meters of drilling planned in 2019, we think Coro is well positioned to create value as it steps out to test targets on trend and contiguous to its Marimaca oxide-copper deposit (M&I: 47Mt @ 0.65% CuT).

Highlights: 

  • Expansion of Marimaca resource towards La Atómica likely. Results to date from La Atómica suggest mineralization extends a further 300 meters northwest of Coro’s Marimaca deposit. Highlights include LAR 63 which returned 98 meters of copper oxide mineralization at 0.63% CuT and LAR 44 with 44 m @ 0.79% CuT. Overall, we expect La Atómica will contribute to expansion of resources at Marimaca – a maiden La Atómica resource estimate is anticipated by end of Q1 2019. 
  • Attention now shifting to Atahualpa. With the Phase II drilling at La Atomica now complete, Coro will be shifting focus to Atahualpa, where 18,000 meters are planned for H1 2019. We note that small scale artisanal workings extend for at least 500 meters to the north of Marimaca within the Atahualpa property. The first batch of Atahualpa drill results are expected as early as two weeks and should shed light on the potential of this area to host additional oxide copper resources. 
  • Cash in the bank and drilling underway. With its 45,000 meter Phase II drilling program fully funded we believe Coro is well positioned to create value through 2019 as it tests both near-mine and distal targets on its recently consolidated property package. Steady drilling news flow and resource updates at La Atómica and Atahualpa if positive, should eventually begin to raise market profile of this Company. We will publish more detailed thoughts on geological potential following our site visit next week.
Valuation:
Coro Mining trades at a premium to peer explorers – drilling progress and resource expansion key to re-rating. We view Coro mining as a growing exploration story in a favourable jurisdiction whose potential has yet to be fully priced in by the market. Upcoming Catalysts include 1) Resource estimate incorporating La Atómica Q1/19 2) Drill results from SW part of Atómica Q1/19 and Phase II.

 

17-Jan-2019

Mawson Resources Ltd

Ready to Grow in 2019

Impact: Mildly Positive

Mawson’s newly released electromagnetic survey results from South Palokas add a potential doubling of the second component of the company’s current resource at Rajapalot. With 15km of drilling to commence shortly, we can expect significant resource growth as the company follows-up on two large conductive plates at both South Palokas and Raja. We continue to believe that Mawson is nearing a significant Au-Co discovery beyond the current maiden resource which will be confirmed with coming drilling.

Highlights: 
  • Surveying points to a doubling beyond the South Palokas resource footprint. The conductive body extends 250m beyond the deepest drillhole PAL0016 which returned 8.4m at 5.7g/t AuEq (Figure 2) and remains open down dip to the northwest. The company is continuing to collect geophysical data across the entire 4km Rajapalot trend where it is mapping a number of additional conductive anomalies (Figure 1) supporting our theory that Rajapalot hosts a significant gold mineralization.
  • Results impact growth potential of current resource. 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) which with recent news has significant potential to grow with the down dip extension at South Palokas. The company has already highlighted a potential doubling at Raja with previous TEM results (released prior to the completion of it’s maiden resource) demonstrating the successful use of geophysical surveying for identifying Au-Co drill targets.
  • Expect resource expansion with 2019 drilling. The company will test the South Palokas and Raja conductive bodies with its coming drill program in late January. Mawson is now fully transitioned in to resource development with a refined process for translating geophysical surveying in to successful drill targets. As a result, we expect 2019 drilling to deliver a potential doubling of the existing resource.
Valuation:
Current pricing reflects maiden resource but does not account for exploration potential to be demonstrated in early 2019. Based solely on its maiden resource Mawson is trading at US$37/oz AuEq relative to peers at US$46/oz AuEq. We believe that this recent news demonstrates exploration upside that we expect to be confirmed with the winter 2019 drill program. Upcoming catalysts include 1) Results from WUSA drilling (Q1/19), 2) Drill permits for winter Rajapalot program (Q1/19) and 3) 15,000m drill program at Rajapalot (Q1/19).

 

17-Jan-2019

Anaconda Mining Inc

Q4/18 Production Beats Estimates

Impact: Mildly Positive

Anaconda Mining reported record gold production for 2018, exceeding both our estimates and the company’s 2018 guidance. Financials have yet to be released but we expect these results to generate cash that would support the development efforts at the Goldboro project. We continue to believe that Anaconda’s share price still fails to account for the growth that Goldboro is expected to deliver starting in 2021.

Highlights:  

  • Strong production growth in Q4/18 up 32% Qtr/Qtr (Figure 1). Anaconda produced 6,125 oz Au in Q4/18, which compares favourably to the 4,632 oz in Q3/18 indicating a successful transition to the higher-grade Stog’er Pit. Fourth quarter production beat our estimate of 5,690 oz Au by 8%, which was driven by higher grades processed at the Pine Cove Mill (1.93g/t versus 1.80g/t) as the company processes more ore from Stog’er Tight and less from the Pine Cove pit stockpiles.
  • Positive impact on our Q4/18 financials estimates. As result of the higher grades in Q4/18 and the additional revenue from gold sales, we have modestly adjusted our financial estimates for the quarter (Figure 1). That being said, we await Q4 financials to highlight cash costs in Q4 and fiscal 2018. Higher grades from Stog’er Tight should help fuel production and financial performance over the next 12 months.
  • 2019 production expected to be similar to 2018. The company announced 2019 guidance of 19-20koz Au at US$800-835/oz. This is slightly lower than our expected 22.1koz Au at US$707/oz. As a result, we have adjusted our 2019 estimates to reflect more lower grade ore being processed that wasn’t previously accounted for (Pine Cove Pit pushback). We now model 19.8koz Au at US$800/oz for 2019E.
Valuation:
Anaconda continues to trade a steep discount; development progress and operating execution key to re-rating. As a result of operating results and revised 2019 outlook our NAVPS estimate has increased to C$1.37 (was C$1.31). However, Anaconda still trades at a steep discount to peers (0.19x vs. 0.60x). In our view near-term positive operating updates, along with the continued progression of Goldboro towards production are the keys to re-rating. Upcoming catalysts: 1) Q4 Financial Results, 2) 10kt bulk sample results at Goldboro Q2/19 and 3) Goldboro resource update (H2/19).

 

16-Jan-2019

Rockcliff Metals Corp

Blue Sky Just Got Bluer

Impact: Positive

Rockcliff today announced a dramatic increase to its holdings in the Snow Lake South Emerging Mining Camp (“SLSEMC”), increasing its position by 51% to 290,000 hectares. The SLSEMC represents the underexplored extension of the Snow Lake VMS Mining Camp beneath cover and has the potential to host multiple VMS discoveries. We like Rockcliff’s balanced risk/reward profile with high probability that 2019 drilling is likely to expand resources alongside exciting “Blue Sky” potential on the now super-sized Snow Lake South (SLS) projects (SLS #1,2,3&4).

Highlights: 
  • Growing land position in a world-class base metal camp. Rockcliff just acquired an additional 174,379 ha by staking its SLS #3 & 4 properties, more than doubling the company's current land holdings in the SLSEMC (Figure 1). The strategic importance of this portfolio can't be over-stated, given the Snow Lake Camp is among the world's most prolific VMS districts and home to Hudbay Minerals (TSX:HBM) who need to secure feed for their facilities.

  • Blue sky potential of the Snow Lake South Emerging Camp. We note that the SLSEMC represents the underexplored southern extension of the Snow Lake camp. Over 60Mt of copper-zinc sulphide ore have been produced from the exposed northern half of the camp. It stands to reason that yet undiscovered VMS clusters may occur to the south beneath the limestone cover. Minimal exploration in the SLSEMC has already led to a handful of discoveries including Hudbay's Reed Lake Mine, the Talbot and Tower deposits, as well as Hudbay's Kof and Sylvia deposits, which occur on trend with Rockcliff's SLS#1 property.
  • Targets on the radar with more to come. On its SLS#2 property Rockcliff has already identified eight potential targets based on interpretation of previous geophysical data and incorporating litho-structural information from nearby VMS deposits. Rockcliff intends to drill the best of these targets by late 2019 / early 2020, after further detailed follow-up work on the ground. But we expect new targets to be defined on SLS#1, #3 and #4, with further compilation work and collection of new geophysical data.  
Valuation: 
Rockcliff trades at a 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$0.33/sh, which does not account for the “Blue Sky” exploration potential. Upcoming catalysts include 1) 2019 Drilling Results at Bur 2) Ongoing news flow from Kinross Gold (TSX:K) drilling at Laguna. 3) Follow-up drilling on SLS Properties late in 2019

 

16-Jan-2019

FireFox Gold Corp

New Targets Defined at Seuru

Impact: Mildly Positive

FireFox has announced the discovery of two new mineralized targets just north of its more advanced Mustajärvi and Jeesiö projects. In a rapidly emerging mining jurisdiction, FireFox is strategically positioning itself with a highly prospective land portfolio in the Central Lapland Greenstone Belt (CLGB) of Finland. We expect positive drill results and further surface sampling to generate the momentum needed for a re-rating of this newly public company. 
Highlights: 
  • Advancing a third project in Finland. FireFox has identified a 1km and 1.4 km-long mineralized target at Selkä-E and Selkä-W respectively (Figure 1). Firefox’s efforts follow-up on previous work which identified a 20km gold in-till anomaly, extending from Agnico Eagle’s Kittilä Mine. Prior reconnaissance drilling completed at Selkä-E included 1m at 3.06 g/t Au and trenching has returned 6m of 14.2 g/t Au. Surface work completed by FireFox confirms historic results and the company plans to follow-up with additional surface exploration. 
  • Adding land around more advanced projects. Firefox also is growing its land package by applying for reservations proximal to its more advanced Mustajärvi and Jeesiö project. Additionally, the company has applied for exploration permits on six Seuru mineral reservations which when granted, would allow more advanced exploration work (trenching and drilling).
  • Pending results are expected from all projects. Firefox is planning magnetic surveying and further IP surveying to help close in on potential drill targets at Seuru.
  • More importantly, we expect drill results from the company’s most advanced project, Mustajärvi to be an important catalyst in the near-term (Q1/19) while it is also following-up on five new gold targets at its Jeesiö project.
Valuation: 
As FireFox advances its projects, a re-rating is expected. At C$0.30, the company has an EV of C$6.8M with $2M in cash and a significant land package in the CLGB. Seeing as similar stage peers in Finland have multiples to FireFox’s market cap, we believe drilling success in the short-term is likely to have a significant positive impact on the share price. Upcoming Catalysts include 1) Drill results from Mustajärvi Q1/19 2) Further exploration and commencement of drilling at Jeesiö and Seuru.

 

 

14-Jan-2019

Anaconda Mining Inc

Goldboro Expected to Grow in 2019

Impact: Positive

Anaconda provided an exploration update on Goldboro and the results continue to support our view that the company is poised to grow this resource in 2019 and advanced it towards production. We continue to believe that Anaconda’s share price still fails to account for the growth that Goldboro is expected to deliver starting in 2021. 

Highlights:  

  • Drill results confirm continuity, point to resource expansion. Results from the company’s 10km 2018 drill program which focused on the West Goldbrook Gold System (Figure 1) helped to establish continuity throughout the deposit and demonstrate further resource growth potential at depth. The infill drilling which highlighted 78.07 g/t over 1.1m (BR-18-63) should help to move the company’s current inferred mineral resources in to the indicated category. Furthermore, expansion drilling successfully extended the mineralization to new depths (up to 450m).
  • Goldboro progressing down the development path. The company has initiated a new 5000m drill program at Goldboro; however, in our view the most important catalysts are results from the ongoing 10,000 tonne bulk sample (Q2/19), followed by a resource update (H2/19) and feasibility study shortly after. The company is also working to complete the major permits by the end of 2019. In our view, as the company de-risks Goldboro, the market should progressively add it to the company’s share price.
  • Q4 operating results and 2019 outlook expected shortly. We currently model 5.7k oz Au at US$797/oz for Q4/18 and now forecast 22.1k oz at US$835/oz in 2019. We have updated our 2019 estimates as we expect the higher grade Stog’er Tight pit to contribute less ore than previously thought in 2019. Importantly, continued operating execution is key, as the funds generated from operations at Point Rousse, should support ongoing development work for Goldboro.
Valuation:
Anaconda continues to trade a steep discount; development progress and operating execution key to re-rating. As a result of our revised 2019 outlook our NAVPS estimate has decreased to C$1.31 (was C$1.36). However, Anaconda still trades at a steep discount to peers (0.16x vs. 0.61x). In our view near-term positive operating updates, along with the continued progression of Goldboro towards production are the keys to re-rating. Upcoming catalysts: 1) Q4 results & 2019 Outlook, 2) 10kt bulk sample at Goldboro Q2/19 and 3) Goldboro resource update (H2/19).

 

10-Jan-2019

Standard Lithium Ltd

Standard Lithium Produces Battery Grade LCE

Impact: Mildly Positive

Standard Lithium is quickly assembling all the pieces to move into production at its South Central Arkansas Project following the successful production of battery quality lithium . As it moves its sights to commissioning a full-scale Pilot Plant, we believe the market is currently undervaluing the potential of this company which has lower risk than peers.
Highlights: 
  • Robust system for producing battery grade lithium. This final stage of test-work demonstrates the robustness of the crystallization system prototype which produced battery quality purity (>99.56%) lithium carbonate. The current feed solution used at the prototype pilot plant was known to be less pure than the feed solution expected to come out of the company’s patented lithium extraction system which is also in the pilot phase. Following further optimization of the crystallization process parameters, the plant will be refined to receive feed from the pilot extraction plant and ready for full scale construction.
  • One piece left before full-scale commissioning. A Lithium extraction mini pilot plant being designed and built by Zeton Inc, will provide feed concentrate to the crystallization plant as brines are extracted from the underlying brine fields. Both parts are to be combined and constructed in Arkansas in late Q1/19 which the company is expecting to begin commissioning starting in late Q2/19.
  • Positioned for a quick move from construction to production. Having recently announced a maiden resource of 3.1Mt LCE at its flagship project in Arkansas, the company will have ready access to fully permitted and operational facilities through its likely JV with LANXESS. The proposed agreement with LANXESS would not only benefit the company by providing permits, significant infrastructure and funding but also partners it with a large chemical company, that is selling other products to battery producers.
Valuation:
We believe Standard Lithium to be one of the best lithium companies in its space with a sizeable resource and the potential for a large partner to support progress. Standard Lithium has access to 180,000 acres of brine fields where majors have been in operation for brine extraction for decades. The company currently trades at US$20/t LCE in contrast to brine exploration and development peers at US$39/t LCE. Upcoming Catalysts include 1) Resource update at SE Arkansas (Q1/19), 2) Completion of definitive agreement with LANXESS (H1/19), 3) Pilot plant commissioning (mid-2019) and 4) PEA expected in H1 2019.

 

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).

07-Jan-2019

Novo Resources Corp

Sumitomo Likely to Provide Funding for Next Steps

Impact: Positive

The now extended and expanded MOU between Novo and Sumitomo Corporation (TYO:8053) proposes an agreement which could bring the needed cash, confidence and expertise for furthering the company’s Australian projects. We believe the market continues to undervalue the com pany’s Karratha, Egina and wider Pilbara projects, with much of the current value underpinned by an improving Beatons Creek project.

Highlights: 
  • Agreement should add confidence and provide some future funding. In the near-term the continued interest from Sumitomo should provide investors confidence with respect to the merits of Novo’s Australian projects. As well, adding Sumitomo’s expertise and capital, should help this small company move its projects from the development to production stage. Consequently, we view the expansion of this agreement positively, particularly as the company is likely to be conducting large scale bulk sampling later this year at its Karratha project and we expect the next resource update from Beatons Creek to drive an updated economic study followed by a likely production decision.
  • Provides technical expertise and cash. Following the establishment of project development plans and a potential transaction structure, the current MOU stipulates that Sumitomo could commit up to ~C$61.4M (¥ 5.0B) through an option to purchase interest. Sumitomo would then be offered a right of first refusal (ROFR) providing it with security for maintaining its interest in the company. A successful agreement would bring significant technical support and a major piece of the equity funding needed to a bring one of Novo’s projects into production.  
  • A vote of confidence ahead of a busy 2019. Novo is advancing multiple projects in 2019, with bulk sample results expected from Egina, Beatons Creek and Karratha. Additionally, a resource update demonstrating higher grades is expected in Q1/19 from Beatons Creek. As well, the company continues to advance Karratha to a larger sale bulk sampling with a Native title agreement and mineralization report expected in H1/19.
Valuation:
Steady newsflow from Novo in 2019 should provide lift. Our preliminary DCF valuation for Beatons Creek alone underpins an estimated value of C$1.10-1.40/sh and a combined value of C$2.40-4.80/sh for Karratha and Beatons Creek. A valuation gap is evident as Novo currently trades at C$2.75/sh and we believe steady newsflow from all projects should drive the stock towards the top-end of our valuation range. Upcoming catalysts include, 1) Bulk sampling at Karratha (H2/19), 2) Systematic bulk sampling work at Egina (Q1/19) and 3) Beatons Creek resource update (Q1/19).

 

03-Jan-2019

FireFox Gold Corp

High Grades Near Surface at Mustajärvi

Impact: Mildly Positive

Sampling at FireFox’s Mustajärvi project has successfully increased both the size and grade potential of the company’s drill targets for 2019. FireFox benefits from being in one of the best mining jurisdictions in the world and is strategically positioned as a significant land holder in the Central Lapland Greenstone Belt (CLGB). We expect positive drill results to generate the momentum needed for a re-rating of this newly public company. 

Highlights:  
  • High-grade mineralization near surface. Sample results point to expanding the near surface zones of the mineralization at Mustajärvi. Grab samples highlighted gold grades of >1g/t in 16 of the 66 samples across the property. The company also completed 42 chip channel samples successfully identifying two potential structures. The primary structure of was found to extend for 45m along strike at an average grade of 21.6 g/t Au (ranging from 0.66 to 140.5 g/t Au). The second northwest striking structure was identified for its potential to significantly increase the size of the target.
  • Advancing historical prospects in ready to drill targets. The company is following-up on drillholes completed by Outokompu from 1991 to 1992 (Figure 2) and is rapidly expanding its range of possible near-surface drill targets at Mustajärvi. Results from its 2017 and 2018 field seasons have succeeded in increasing the company’s understanding of the controls of the high-grade mineralization and diamond core drilling is currently underway.
  • Drill results and coming catalysts to shed light on potential. As its most advanced target, we expect drill results from Mustajärvi to be an important catalyst in the near-term (Q1/19). The company also recently provided an update on its Jeesiö project (Figure 1) where it is following up on five new gold targets.
Valuation:  
As FireFox moves closer to a potential discovery it should close the material valuation gap to peers. At $0.29, the company has an EV of C$6M with $2M in cash and a significant land package in the CLGB. Despite this, the company is currently significantly discounted relative to peers. Upcoming Catalysts include 1) Drill results from Mustajärvi Q1/19 2) Further exploration and commencement of drilling at Jeesiö.


 

03-Jan-2019

Red Pine Exploration Inc

Moving Forward at Wawa

Impact: Mildly Positive

Following its maiden resource of 100 koz at 6.8 g/t at its Minto South project, Red Pine is now filling in the gaps at its larger Surluga project alongside high grade discoveries at Minto South demonstrating its potential for future growth across its projects. The results support our view that the Wawa corridor hosts a large gold system which may encompass multiple gold deposits.

Highlights:
  • Continued success of Surluga infill drilling bodes well. RPX announced 2.9m at 32 g/t Au and 1.9m at 6.5 g/t Au from ongoing infill drill program at Surluga targeting gaps within the existing Surluga resource envelope (Figure 1). The results validate Red Pine's structural model and suggest drilling is increasingly becoming more predictive. This should bode well for future drilling results and may cause incremental expansion of the Surluga deposit.
  • Surluga's future increasingly underground.
    As new drill data is incorporated, it looks increasingly like the Surluga deposit may be amenable to bulk underground mining given vein thicknesses of 3m to 30m and grades above 3 g/t Au. We note that the Surluga deposit occurs in the vicinity to historic underground workings, which could lessen capital costs for future mining operations.
  • Plenty of Upside left. Drilling within the Minto Stockwork at Minto South has led to discovery of two high grade quartz veins returning 1.0m at 16.5 g/t Au and 1.1m at 14.1 g/t Au. We note that Red Pine announced a maiden resource at Minto South in Q4 2018 (Figure 2) which only covered 20% of the Minto South structure. These results highlight the potential for expansion of the Minto South resource and potential for discovery of new zones at Minto South and on the numerous other structures within the Wawa Gold Corridor which have seen limited drilling.
Valuation:
Red Pine continues to trade at a discount to peers (US$8/oz versus peers at US$33/oz) due to ongoing uncertainty regarding ownership structure. We note that the company is well funded with over C$5M in cash and continues to drill. Upcoming catalysts include (i) Results from ongoing drilling program in addition to results expected for 23 holes drilled at Surluga (ii) Updated Surluga Resource estimate in Q2 2019 

 

02-Jan-2019

SolGold Plc

Beyond Alpala

Impact: Positive

Sampling results from SolGold’s Porvenir porphyry targets in Southern Ecuador provide exciting new prospects for SolGold as it continues to demonstrate its copper-gold expertise in Ecuador. These results support our thesis that SolGold may be in possession of not one but multiple world class copper discoveries in an emerging mining jurisdiction (Figure 1).
Highlights: 

  • High-grade discovery. Results from initial rock-saw channel sampling across the exposed outcrops at Porvenir include an open intersection of 62m grading 1.16% CuEq at Target 15 (Figure 2). The outcrop appears to be well-preserved and thus could be the top of a vertically extensive system. The intersection discovered within an 800m wide by 1200m long mineralized corridor is part of a greater 1km by 6km zone which has been identified to host at least two porphyry centres. While it is early days, this reflects the size potential we see at Porvenir.
  • Systematically demonstrating exploration potential. Target 15 is similar in age, mineralization style and may prove to be similar in size to the company’s world-class Alpala deposit where the company has defined a resource of 2.95Bt grading 0.52% CuEq (0.2% cut-off). These results highlight the benefits of the company’s first mover advantage into Ecuador back starting in 2014 and reflect the fact that while Cascabel is the most advanced, there is much more potential to the company’s wider portfolio of highly prospective assets. 
  • A significant portfolio with news to come. SolGold is rapidly establishing itself as an important player in Ecuador with 11 priority projects and 42 geologists in regional exploration. The company’s other important regional projects include La Hueca and Blanca, which, alongside Porvenir and other regional projects, we expect are likely to bring exciting catalysts following drilling this year.
Valuation:
The market does not account for the potential beyond Alpala. SolGold trades at 0.44x NAV, a slight discount to peers at 0.46x. Given the world class nature of the Alpala deposit and the interest from majors, we believe a 0.90x NAV multiple applied to our C$1.47 NAVPS estimate would be appropriate implying a value of C$1.32/share. Upcoming catalysts: 1) Ongoing exploration and 2) Maiden PEA for Alpala (Q1/19).


 


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