Mako Mining Corp

Adding Ounces at Las Conchitas

Impact: Mildly Positive

Mako released additional positive drill results from the Las Conchitas target which support our view that the company is positioned to substantially grow its mineable resources at San Albino. We continue to believe that Mako could be worth 3-4x where it is currently trading once there is clarity on project funding and updated economic study is released.

  • Drilling at Las Conchitas returns high grades similar to San Albino. Additional drill results from Mako’s Las Conchitas target returned highlight intercepts of 36.55 g/t Au and 47.8 g/t Ag over 1.7 m (LC19-72). Previously reported results including 376.49 g/t Au over 1m ( LC19-70) as well as our visit to site, have lead us to believe that Las Conchitas, located only 2.5km trucking distance from the permitted San Albino area could be the first near-mine target used to grow production.
  • Regional targets key to resource growth. Exploration supports our view that resource growth could be bolstered by the systematic exploration of regional targets such as Las Conchitas and beyond. At Las Conchitas alone, we believe the company could at a minimum double its open-pit mineable resource. Additionally, the 4km trend which extends from the San Albino deposit to the El Golfo area hosts multiple near-mine targets which remain largely under-explored. We expect a resource estimate for this area by H1/20.
  • San Albino keeps moving towards production. We expect that a full funding plan followed by an updated resource estimate and economic study in early 2020, should position the company to outperform. The company currently trades at less 1x annual estimated EBITDA. Additionally, we believe that once production has started, the mine’s small (500 tpd, +40k oz Au/year) but high-grade operation (+8 g/t Au) could provide the cash to fund further growth and push the mine over the 100k oz Au/year threshold.
Cash flow potential should drive project re-rating ahead of production. Our preliminary view is that Mako should trade 3-4x higher than where it is now, as we expect the company to generate US$20-30M in annual EBTIDA once in production and adjusting for the remaining project capital (US$5-10M, after the rights offering), and increasing the share count to reflect the rights offering, the company should trade 3-4x higher than where it is now. Upcoming catalysts include: 1) Additional drill results (Q2/19) 2) Pricing & completion of the proposed Rights Offering (Q2/19) 3) Updated economic study and resource (H1/20).



Mako Mining Corp & Sailfish Royalty Corp

One Project Poised to Re-Rate Two Companies

Our view is that the San Albino project is poised to re-rate both the operator, Mako Mining (TSXV:MKO) and the royalty holder, Sailfish Royalty (TSXV:FISH), when it comes online next year. We recently had the opportunity to visit Mako Mining’s San Albino project in Nicaragua where construction is underway. Additionally, the company has ramped up exploration on what we believe is a prospective land package and our visit combined with recent results suggests to us that this resource is likely to grow materially. Our preliminary view of valuation implies that both Mako and Sailfish are undervalued, and we expect that as San Albino approaches production, both stocks should re-rate.

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