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Wednesday, August 16, 2017 Derek Macpherson

Sierra Maintains Positive Financials in Q2

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Sierra Metals Inc. (TSX:SMT, BVL:SMT) reported Q2 consolidated financials results, which have shown improvements YoY, however as compared to the previous quarter (Q1 2017) have been affected by reduced Q2 production. Revenue increased YoY by 30% however, due to weaker production results QoQ revenues decreased by 11%. In addition, costs increased; cash costs by 17% and AISC by 29% during the quarter as compared to Q1 2017; however, ongoing optimization should see these costs decrease as improvements are realized. Although decreased on a QoQ basis (31%), adjusted EBITDA remains positive for the quarter at US$17.6 million, especially compared to Q2 2016 of US$5.3 million. Importantly, exploration remains a priority for the company’s three operations which has the opportunity to add to the production profile in the near term, results are expected to be reflected in updated technical reports in Q4 2017. We anticipate a strong 2017 from Sierra as operations continue to improve and exploration advances, all of which should further enhance the company’s value. read more


Wednesday, August 16, 2017 Derek Macpherson

Site Visit: SGI is Systematically Building a Business

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Last week we visited the prolific Plutonic mine, which was recently acquired by Superior Gold Inc. (TSXV:SGI). While the asset itself impressed us, both from an operating and upside potential, we were most impressed by the company’s systematic approach to build a gold mining business. This has manifested itself by first converting Plutonic into a profitable mining operation (as evidenced by Q2 financial and operating results), then starting the process to add near mine resources and reserves (update expected in H1 2018) and now starting to look outside the existing operations then expanding. As well, we believe the addition of the Hermes project, is likely to have a positive impact on output, recoveries and consequently costs when it comes online later this year. Despite a short reserve life, we believe Superior Gold may be undervalued as it trades at 3.1x EV/CF and 4.2 EV/FCF (annualized Q2 results), versus peers that trade at 6.2x 2017 EV/CF.  read more


Tuesday, August 15, 2017 Derek Macpherson

NVO Completes JV with Artemis

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Novo Resources Corp. (TSXV:NVO) has signed a definitive agreement with Artemis Resources Ltd. (ASX:ARV), to form a 50:50 JV on 38 tenements/tenement applications which include Purdy’s Reward. Novo is required to spend AUD$2 million on exploration within two years, as well as issuing 4 million common shares to Artemis, once completed and approved, the companies will form a 50:50 JV managed as one by Karratha Gold. An additional 19 Artemis tenements/tenement applications are expected to be covered under another definitive agreement in the future. Together the companies are undertaking exploration work which includes systematic trench bulk sampling and large diameter RC drilling targeting Purdy’s Reward. Completing the JV is an important catalyst for the company, as it continues to consolidate land in Karratha. Based on our preliminary value for Beatons Creek (C$150-200 million) plus the C$400-560 million we would ascribe to Karratha based on our +10-million-ounce estimate at Comet Well, we believe modest upside remains to the current share price, which is likely to be realized as Novo demonstrates the potential of its Karratha project. read more


Tuesday, August 15, 2017 Derek Macpherson

Radisson Begins IP Survey at Douay

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Radisson Mining Resources Inc. (TSXV:RDS) has begun a 42km Induced Polarization (IP) geophysical survey at its Douay property. The company has compiled historical exploration work, which has identified four gold trends and other exploration targets. The IP survey will aide to identify new drilling targets, specifically at the Vezza mine gold trend. In addition, at its O’Brien gold project the company has completed 11,000m of drilling (24 holes) between April 2017 and July 2017, which tested the F Zone, 36E and Kewagama zones as well as targets parallel and along strike of the O’Brien deposit. At C$52/oz, Radisson continues to trade at a discount to peers at C$59/oz. In addition to current exploration at Douay, at O’Brien, the nearby infrastructure, higher grades and the potential for resource expansion that is demonstrated with ongoing drill results, we believe the company could trade at a premium to peers. In our view, the current drill program, together with the re-logging and selective re-assaying of historic drill core and the digitization of historic data (resource estimate Q3 2017), including exploration at Douay should provide positive catalysts for the stock and close the valuation gap to peers. read more


Tuesday, August 15, 2017 Derek Macpherson

Tinka Expands Mineralization at Ayawilca

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Tinka Resources Ltd (TSXV:TK) reported results from an additional five step-out holes completed at its Ayawilca zinc project in Peru (Figure 1). High grade results from both holes (A17-079 and A17-080) drilled in the West Ayawilca zinc zone, extended the zone by ~150m to the northeast. Drill results intersected 5.2% Zn, 0.2% Pb and 65 g/t In over 36.3m including 12.5% Zn and 103 g/t In over 5.5m (A17-079). In the South Ayawilca zone, mineralization was intersected 250m east of a previously drilled hole (A17-075), which remains open over 700m. In addition, one hole was drilled in the Central Ayawilca zone, intersecting additional high grade zinc, and highlighting the other opportunities that exist within Ayawilca. Exploration continues at Ayawilca, with a resource upgrade expected in Q4 2017. We believe as Tinka continues to demonstrate exploration upside at Ayawilca it should support and may expand the current premium it trades at relative to peers (C$0.03/lbs vs. C$0.01/lbs ZnEq). read more


Tuesday, August 15, 2017 Derek Macpherson

NEE’s Construction Activities Continue at Moss

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Northern Vertex Mining Corp (TSXV:NEE) provided an update regarding construction activities currently underway at its Moss Mine in Arizona, which continues to be on track for commercial production in Q4 2017. Construction continues at Moss with concrete work, liner installation, the decommissioning of the pilot plant heap and ponds and the delivery of crusher plant components still underway. As well structural, mechanical and piping (SMP) will begin in two weeks and electrical and instrumentation (E&IC) will begin in mid-September. In addition, optimization remains a focus for the company to obtain the Right of Way (ROW) permits for power delivery and road improvements. The company is also working on a report to review possible mine-life extension for Moss. Northern Vertex trades at C$70/oz a premium to peers (C$38/oz). We view the premium valuation as reasonable given that the Moss mine is financed, permitted and under construction. In addition, the company’s valuation does not appear to account for the potential of meaningful mine-life extension and improved economics from the ongoing optimization and exploration programs. read more


Tuesday, August 15, 2017 Derek Macpherson

ASND Q2 Highlighted by Improved Operations

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Ascendant Resources Inc. (TSX:ASND) reported Q2 2017 financial results, highlighted by the July adjusted EBITDA of $0.7 million, the first positive result since acquiring the El Mochito Mine in December 2016. Operations improved month over month to 1,853 tpd, for an average of 1,733 tpd for Q2 2017 (1,619 in Q1 2017), which remains under the guidance of 1,850 tpd by ~6%. The company remains focused on optimization with the additions of new equipment and availability to ultimately increase head grades and value per tonne mined. The company expects to realize these improvements over the remainder of the year. We believe a progressive re-rating is likely over the year as the company executes on its ongoing optimization program and reports exploration results from the recently initiated program. read more


Tuesday, August 15, 2017 Derek Macpherson

Site Visit: RPX is Unlocking Surluga’s Secrets

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Last week we had the opportunity to visit Red Pine Exploration Inc.’s (TSXV:RPX) Wawa Gold Project. Red Pine is the operator with a 60% stake in the project, with the balance held privately by Citabar Limited Partnership (“Citabar”). The company has two rigs turning as part of its ongoing 20,000m drilling program, with one rig currently testing the Surluga North Zone and another at the Minto Mine South Zone. Results from the latter have been especially encouraging, as the company consistently continues to intersect gold mineralization in step-outs to the south-south-east.  read more


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