Newmarket Gold Inc. (TSX:NMI) announced positive results from its 13,834 m (45 holes) diamond drilling program at the Cosmo Gold Mine in Northern Territory,
Australia. These results suggest resources and reserves are likely to grow and that Newmarket is poised to extend Cosmo’s mine-life. The highlighted
results include drill intercepts at the Sliver Lode and newly discovered Redbelly and Taipan Lodes which are located adjacent to the existing underground
mine development. Newmarket continues to trade at a discount to peers, partially because of the perception that its mines have shorter lives. These
results along with ongoing reserve and resource expansion should help close that valuation gap.
Results include high grade intercepts from new discoveries (Figure 1). Drilling returned high-grade intercepts such as 6.76 g/t Au over
7.55m (CE64062) and 3.61 g/t Au over 14.4 m(CE64073) at the Sliver Lode suggest the current resource extends down-plunge. One of the two new discovers,
Redbelly Lode, returned results such as 4.29 g/t Au over 11.8m(CE64064) and 5.16 g/t Au over 8.75m(CE64070). The other discovery the Taipan Lode, returned
high grade gold results such as 6.23 g/t Au over 21.45m (CE64083) and 10.31 g/t Au over 6.0m (CE64079). Not only have these new discoveries returned
high grade intercepts but they are both in close proximity from the existing underground infrastructure. Newmarket looks to continue to outline an
additional mill and plans to add a fourth drill rig in Q3 2016.
Continued exploration success should help close the valuation gap to peers. Newmarket is currently trading at 3.9x 2017 EBITDA and 1.2x NAV, versus peers at 6.3x and 1.4x, respectively. In our view, this partially reflects the shorter mine lives of Newmarket’s mines. However, with continued exploration success from all three mines, which suggest resources are likely to grow and mine lives extend, Newmarket is likely to 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.
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