We recently took the time to dig deeper into Marlin Gold Mining Ltd. (TSXV:MLN, $0.405) and are publishing our initial estimates. We came to the conclusion
that Marlin Gold is an undervalued gold producer with increasing near-term cash flow providing the company optionality for shareholders, as it positions
the company to unlock shareholder value via exploration at its existing assets, all three have good potential, or using its cash pending cash flow
as a lure for an accretive acquisition. A summary of our work can be found below, and our full report can be downloaded here.
Marlin Gold is entering a second period of significant free cash flow, which provides management the ability to unlock the value of its own assets or assets
that could be acquired.
Key Reasons We Like Marlin:
Significant Cash Flow Coming Again – Provides Optionality
• Similar to late 2016 - early 2017 La Trinidad is about to enter a period of significant free cash flow, as the company starts mining the South HS Zone
• For the remaining two-year mine-life we expect La Trinidad to generate US$45M in cash
• Our model assumes, the cash expected from La Trinidad is being used to repay the debt to Marlin’s majority shareholder, this provides the lowest NAV
impact on value for this cash
Exploration Upside at all Three Assets
• La Trinidad – Near-Mine & Regionally – Colinas could increase the current mine-life while San Cristobal could be a new mine
• Commonwealth – New geologic model, followed by updated resource later this year, continued success at Six Mile Hill, and the expansion of Pearce Hill
• Gavilanes – large land package in a prolific silver district, current resource open along strike and at depth
Demonstrated Willingness to Unlock Shareholder Value
• In our view, the remaining parts of Marlin may be worth more separately, versus its current form
• Marlin’s spin-out of Sailfish demonstrates its willingness to use corporate actions to unlock shareholder value
• Marlin’s majority shareholder is Wexford Capital (85%) who continue to back the company financially ($64.2 million in equity, $61 million in debt invested
to date) and is likely to provide the financial backing to fund an accretive corporate action
• Exploration drilling at La Trinidad and Commonwealth - Ongoing
• Increased production & cash flow from La Trinidad as production shifts to the higher-grade ore at Taunus – H2/2018
• Potential expansion of Colinas Zone as drilling progresses - Ongoing
• Updated resource estimate at Commonwealth to include new drill data – Late 2018
• Monetization of royalty assets
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Alex Pitcher | Associate
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Marlin Gold Mining Ltd. - TSXV:MLN - 1,2,3,4
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