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Tuesday, February 28, 2017 Derek Macpherson

RPX Intersects High Grades North of Surluga


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Red Pine Exploration Inc. (TSXV:RPX) released partial results from five holes drilled during the ongoing 6 km campaign at the Wawa gold project (60% interest) in Ontario. Hole SD-16-45, in which visible gold was identified prior to assaying, returned 44.41 g/t Au over 1.0m within a wider interval of 15.2m that returned 14.66 g/t Au. This hole was drilled in a previously untested area north of the existing resource. This, coupled with the balance of the results, suggests that meaningful resource growth is possible at Wawa. However, this potential does not appear to be fully reflected in the company’s modestly discounted valuation of C$45/oz versus peers at C$54/oz. We expect continued exploration success, along with the recently completed ownership consolidation of the Wawa project should help close the valuation gap to peers.


Results support resource growth potential north of resource. Today’s results returned a weighted average grade of 6.65 g/t Au over 5.3m, which is significantly higher than the inferred resource grade of 1.71 g/t Au. Hole SD-16-45 returned a high grade intercept in the Jubilee Shear Zone, returning 44.41 g/t Au over 1.0m, within a wider interval of 15.2m that returned 14.66 g/t Au. This hole was drilled down-dip from SD-16-44 which had returned near-surface mineralization in the Surluga deposit’s hanging wall (Figure 1). In our view, drill results from Wawa continue to suggest meaningful resource growth is possible to the north of the existing 1.1 million oz Au inferred resource.


High-grade results could be expected from Wawa’s south. Visible gold was observed in four holes drilled in the vicinity of the historic Darwin-Grace mine. These were drilled close to where high grade composite grab samples were found as we discussed in a previous post. Although it is early days, these preliminary results suggest that the current resource could potentially be expanded to the south with the possibility of high grade results. In addition, Red Pine announced earlier this month it staked 194 ha adjacent to the property’s eastern boundary, which in our view, underlines the company’s confidence in the project’s expansion potential.

Resource growth potential not fully factored into the valuation. At $45 oz Au, Red Pine continues to trade at a modest discount to peers ($54/oz). In our view, the market does not appear to fully account for the project’s likely resource growth as indicated by recent drilling and resampling results. We expect further results from these programs, coupled with the recently completed consolidation of the Wawa Gold project’s ownership structure, to be important catalysts for the company and help close the valuation gap to peers. With a recent C$6.5 million financing completed, we expect Red Pine to be in a good position to fund working capital and the planned exploration program.


 

Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
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Red Pine Exploration Inc. - TSXV:RPX - 2,3,4,7

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