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Wednesday, June 07, 2017 Derek Macpherson

AQA Exploration Highlights Back Forty Potential


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Aquila Resources Inc. (TSX:AQA) reported 10 initial drill results from its ongoing drill program at its Back Forty project in Michigan. Initial drill results from the program are promising, with these near-surface results suggesting that the initial open-pit phase of the project could be extended, along with suggesting potential resource expansion. Aquila trades at a premium to peers, which we believe it warranted given its good jurisdiction, advanced permitting, exploration upside and late-stage of development.


Advancing the Back Forty project. Aquila is focused on advancing its permitting stage Back Forty zinc and gold VMS deposit in Michigan. The company has received 3 of 4 key permits needed for the construction of the planned open pit mine. Underground operations are being evaluated as a possible amendment; however, current permitting is solely focused on open-pit operations to simplify the process. The 2014 PEA outlines a 5,350 tpd operation with a 16-year mine life, including total payable production of 532k oz Au, 721M lbs Zn, 74M lbs Cu, 4.6M oz Ag and 21M lbs Pb. A Feasibility Study is in progress and is expected to be completed in H2 2017.

Recent drilling highlights exploration upside. Initial drill results from the company’s ongoing drill program targeted the Pinwheel, Deep Zone and Main Zone massive sulfide, all of which are located outside of the proposed Back Forty open pit, but in close proximity to planned infrastructure. Results were highlighted by Hole GT-10 which included 1.6 g/t Au, 32 g/t Ag, 1.6% Cu over 20.9m and Hole GT-11 which included 0.96 g/t Au, 29 g/t Ag, 0.33% Cu, and 20% Zn over 11.4m. Results were generally near-surface and suggest that the potential exists to extend the open-pit portion of the mine plan. The company expects to use these results in future resource estimates for the potential development of underground operations. Drilling continues, following-up on previous results in addition to testing targets to the south of the deposit. Importantly, these are an early indicator of the potential for resource expansion around the proposed mining operations.

Premium to peers likely warranted based on advanced permitting and development stage. Aquila trades at a premium to peers on an EV/lb basis (C$0.021 vs. peers C$0.014). We believe the premium valuation is warranted given the company’s advanced permitting stage, good jurisdiction, exploration upside and stage of development. We expect additional exploration results and the pending feasibility study along with the final permit needed for construction as important near-term catalysts for the company.


Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
 
Red Cloud Klondike Strike Inc.
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All values in USD unless otherwise noted.

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Aquila Resources Inc. - TSX:AQA - 2

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