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Thursday, September 22, 2016 Derek Macpherson

Drilling Continues to Extend Fosterville's Life


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Newmarket Gold (TSX:NMI) announced another set of high-grade drill results that continue to suggest that the company is poised to expand resources and reserves with the year-end update. The company released four surface holes (4,326m) and 96 underground holes (22,799m) from the Lower Phoenix zone at its Fosterville Gold Mine in Australia. Drilling at Fosterville continues to deliver high-grade results and these results combined with those recently released from the Harrier and Osprey zones, continue to suggest that Fosterville’s mine-life is likely to be extended. However, this does not appear to be reflected in the company’s current valuation, suggesting that when the year-end resource/reserve update is released a re-rating is likely.


A new discovery and result continuity illustrates Fosterville’s promising future. Underground near mine drilling at The Lower Phoenix Footwall identified a new west dipping lode with high-grade gold mineralization headlined by 194 g/t Au over 14.3m (ETW 3.07m) in hole UDH1643. As targeted drilling continues, we expect to gain a greater understanding of the resource and its impact on mine-life.

Definition drilling continues to suggest resource growth likely. As Newmarket continues to focus on converting resources into reserves, there remains a heavy focus of definition drilling (Figure 1). These results were highlighted by 83 g/t Au over 3.0m (ETW 2.8m) in hole UDH1584, 155 g/t Au over 2.2m (ETW 1.93m) in hole UDH1590 and 101 g/t Au over 1.45m (ETW 1.1m) in hole UDH1815 in the Eagle fault system. Eagle fault system. As well, results from the Phoenix fault were highlighted by 6.43 g/t Au over 9.15m (ETW 8.38m) in hole UDH1782 and 7.8 g/t Au over 5.3m (ETW 4.63m) in hole UDH1640. While these were highlight holes, the overall results continue to suggest that reserve growth is very likely.


Results have started to close the valuation gap to peers
. Newmarket is trading at 4.4x 2017 EBITDA and 1.43x NAV, versus peers at 6.4x and 1.56x, respectively. In our view, these results are likely to see resources and reserves grow at Fosterville, suggesting a mine-life extension which should help close the valuation gap to peers.

Company Description: Newmarket Gold Inc. (TSX:NMI) is a Canadian-listed gold mining and exploration company with three 100% owned operating mines across Australia. The Company is focused on maintaining a strong foundation of quality gold production, over 200,000 ounces annually, generating free cash flow and maintaining a large resource base as it executes a clearly defined gold asset consolidation strategy.
 

Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate

Red Cloud Klondike Strike Inc.
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Toronto ON., M5K 1H1
RCKSTalk@RedCloudKS.com


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