RCKS Talk

Tuesday, March 13, 2018 Derek Macpherson

Marlin Gold: More to this Fish than Meets the Eye


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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.


Conclusion:

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.

Estimates:


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

Upcoming Catalysts:
• 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
 
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
Toronto ON, M5C 1G6
 
Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in CAD unless otherwise noted.

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Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and the Yukon. Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This publication should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not undertake to advise the reader of such changes. This publication does NOT take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud KS will not treat recipients of this publication as customers or clients by virtue of having viewed this report.

Company Specific Disclosure Details
Marlin Gold Mining Ltd. - TSXV:MLN - 1,2,3,4

1) A member of Red Cloud KS team has visited/viewed material operations of the issuer.
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6) Red Cloud KS or a member of the Red Cloud KS team own more than 1% of any class of common equity of the subject issuer.
7) A member of Red Cloud KS team or a member’s household serves as a Director or Officer or Advisory Board Member of the subject issuer.

 

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