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Monday, June 27, 2016 Derek Macpherson

Timely Fosterville Drill Results from Newmarket


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Newmarket Gold Inc (TSX:NMI) released underground drill results from the Harrier South system at its Fosterville gold mine. The results should allow the company to upgrade existing resources into reserves and support the company’s current valuation and drive a mild re-rating. However, the results feature a few good intersections and with investors taking an increased interest in gold following last week’s Brexit vote, we expect the stock to react favourably today.

 

Drill results highlighted by 22.13 g/t Au over 3.33m (UDH1559) at Harrier (Figure 1). Other highlight holes from the Harrier gold system at the Fosterville Gold mine included 10.30 g/t Au over 3.27m (UDH1596), 13.46 g/t Au over 2.25m (UDH1606), 10.78 g/t Au over 4.57m, 11.99g/t Au over 3.39m (UDH1575), 14.25g/t Au over 3.59m (UDH1593) and 16.6g/t Au over 3.05m (UDH1619). Overall, based on the estimated true widths provided the results returned an uncut weighted average grade of 7.95 g/t over 1.75m. While this compares favourably to the current Measured and Indicated resource grade at Fosterville 4.39 g/t Au, considering the relatively narrow true width, the results are likely best characterized as in line to slightly positive.
 

 

Results support current valuation, could drive mild re-rating. Newmarket is trading at 4.6x 2017 EBITDA and 1.45x NAV, versus peers at 6.7x and 1.59x, respectively. In our view, these results are likely to see the conversion of M&I resources into reserves, suggesting a mine-life extension likely which supports the current valuation and could drive a mild re-rating.

 

Results timely, as good news should be very good for gold stocks this week. Following the Brexit vote last week, there has been renewed market interested in gold and gold equities as a result of increased uncertainty and reduced confidence in currencies. As a result, we expect these results to provide positive momentum for the Newmarket’s share price.

 

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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