Golden Arrow Resources Corp

Q1 Operating Results Ahead of Guidance

Impact: Mildly Positive

SSR Mining (TSX:SSRM; NASDAQ:SSRM) reported strong Q1 production results from its Puna Operations, a (75/25) joint venture operation with Golden Arrow. The results imply a production pace ahead of current guidance and bode well for the ongoing ramp-up of Chinchillas mine. It appears the market is ascribing a severely discounted valuation to Golden Arrow’s interest, and we expect a re-rate as operations ramp-up.

  • Production off to a strong start in 2019. Results from the Chinchillas mine generated 2.4Moz of Silver, 6.8 Mlbs of lead and 1.6 Mlbs of Zn (2.9Moz AqEq) in Q1. This represents a significant increase in production at Puna, versus Q4/18 which saw 1.2Moz of Silver, 2.735 Mlbs of lead and 4.014 Mlbs of Zn (1.7 Moz AqEq). This bodes well for the ongoing ramp-up of the Chinchillas mine, as it appears to be progressing better than SSR guided at the beginning of 2018.
  • On track to beat guidance. As Chinchillas heads into its first year of full-scale production, guidance was for 6-7Moz of Ag (8-10Moz AgEq) for 2019. When compared to Q1’s strong results during the ongoing ramp-up, it appears that Puna is poised to easily beat its guidance. We highlight that Puna is expected to deliver cash costs of US$8-10/oz Ag (net of by-products) in 2019.
  • A better than expected ramp-up could see cash flow to Golden Arrow sooner. Golden Arrow funded its portion of initial capital with US$10M in debt to SSR. Initial cash flow from Puna, is expected to be used to repay this debt, after which it would flow to Golden Arrow. With the ramp-up going better than expected, Golden Arrow’s debt may be repaid sooner than the current mid-2020 expectation.
Market is significantly discounting Golden Arrow’s minority interest in the project. Consensus estimates value 100% Puna Operations at ~C$297M, putting Golden Arrow’s 25% stake at ~C$74M. When considering Golden Arrow’s current cash position (C$4.7M) and the debt (US$10M), it is trading at 0.53x consensus NAV, assuming zero value for its exploration assets. This compares to SSR, the project operator, which trades at 1.1x consensus NAV. While some discount is warranted because of Golden Arrow’s minority interest and higher political risk, the current gap appears to be extreme. Upcoming Catalysts include: 1) Q1 Financial results for Puna Operations (May 2019)



RCKS Charts

Catalysts are Key

In this edition of RCKS Charts, Keith has evaluated Toachi Mining Inc. (TSXV:TIM), Avidian Gold Corp. (TSXV:AVG), Aurania Resources Ltd. (TSXV:ARU), Novo Resources Corp. (TSXV:NVO), Golden Arrow Resources Corp. (TSXV:GRG) and NxGold Ltd. (TSXV:NXN).


Golden Arrow Resources Corp. (TSXV:GRG)

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