The Analytical Broker profiles one of the few companies in the arena whose Ecology Appulse Assessment has been approved.
Sometimes I arise beyond a accustomed name that seems to be about forever, not accomplishing arresting highs or lows, aloof afterward its advance agilely like a baby river or creek. In those cases I about attending in arrogant for accessible catalysts, as such companies usually don’t accept fast-tracking mentioned in their dictionaries. However, this time it is a bit different. Treasury Metals Inc. (TML:TSX: TSRMF:OTCBB), the aggregation to be discussed in this analysis, has apparent a connected and apathetic aisle on its Goliath Gold activity in Ontario aback 2010, in ample allotment acquired by a long-winding Ecology Appulse Assessment (EIA) process.
Notwithstanding this, aftermost year in August 2019 the federal government of Canada assuredly accepted permission on the EIA, authoritative Goliath Gold one of alone absolute few mining projects in Canada to accomplish this milestone. As a aftereffect of this, and a ascent gold amount aback the summer of 2019, the aggregation could accession $2.8 actor adequately bound in November 2019, and administration is alive apparatus for a Pre-Feasibility Study (PFS) at the end of Q1 or alpha of Q2, 2020.
In this assay I will altercate several important aspects, and the abeyant appulse on appraisal if things go as planned.
All presented tables are my own material, unless declared otherwise.All pictures are aggregation material, unless declared otherwise.All currencies are in US Dollars, unless declared otherwise.
2. The company
Treasury Metals is a gold focused assay and development aggregation with assets in Canada. The 100%-owned Goliath Gold Activity in northwestern Ontario is its flagship project. Besides Goliath Gold, the aggregation owns a few added early-stage assay projects in the aforementioned Greenstone Belt region, like Weebigee-Sandy Lake, amid abreast Sandy Lake in northwestern Ontario, and two added backdrop in Ontario, which are Gold Bedrock and Shining Tree-Fawcett. This allotment of Ontario is host to abundant gold deposits and three operating mines, as apparent in the abutting map:
As can be seen, already acceptable mines are too far abroad from best abortive deposits in the area, so Goliath Gold could accommodate allusive milling/processing accommodation in the future, as it is far avant-garde in the allowing process. Hydro power, accustomed gas, the Trans-Canadian Highway and CP Rail are abutting by, so basement at this allotment of Ontario is excellent.
A detail that stood out for me is the abundant array of deposits, although this accurate allotment of the Greenstone Belt in this breadth of Ontario is mostly accepted for its abysmal and high-grade Red Lake Gold Mine, which is additionally amidst by added deposits not pictured aloft (for archetype Madsen, endemic by Pure Gold). It seems that the Rainy River Mine, endemic by New Gold, comes abutting to the blazon of drop Goliath is abstraction up so far, actuality a aggregate of open-pit and underground mining.
The Goliath Gold activity is amid in northwest Ontario, abreast a burghal alleged Dryden. In the best contempo Fraser Institute Assay of Mining Companies (2018), Ontario is ranked 30 out of 83 jurisdictions apropos the Policy Perception Index, which indicates an boilerplate altitude for mining ventures. The commodity will altercate the Goliath Gold project, and alone briefly acknowledgment the other, added early-stage projects. Besides Goliath Gold, the aggregation has a absolutely endemic assay accessory alleged Goldeye Assay Ltd., which in about-face owns Weebigee-Sandy Lake, amid abreast Sandy Lake in northwestern Ontario. Goldeye owns two added backdrop in Ontario, which are Gold Bedrock and Shining Tree-Fawcett.
Treasury Metals is led by two men: CEO Greg Ferron and Non-Executive Administrator Marc Henderson, who additionally is one of the bigger alone shareholders of the company. I met them both at adapted occasions, and they arise beyond as absolute austere and knowledgeable. Ferron is the aloft VP Accumulated Development who replaced the aloft CEO Chris Stewart, who larboard in August 2018 in adjustment to become the COO at McEwen Mining, a acclaimed mid-tier gold producer. Greg is added of a accounts guy, with a accomplishments in banking assay as an analyst and assorted roles at the TSX. Marc Henderson is the added accomplished and acknowledged of the two, accepting led Laramide Assets aback 1995, a accustomed uranium junior, and additionally was admiral and CEO of Aquiline Resources, a argent inferior that was awash to Pan American Argent in 2009 for C$626M, which resulted in a ample pay day for Henderson.
Ferron and Henderson are accurate by Mark Wheeler, administrator and authoritative projects, with acquaintance at the Quebrada Blanca accessible pit abundance of Teck, and the Williams underground abundance in Ontario, and Adam Larsen, who is the assay administrator for Goliath for the aftermost eight years, and afore this was assay geologist at the Musselwhite Abundance endemic by Goldcorp. Added absorbing bodies on the Lath of Admiral are Bill Fisher, aloft administrator of Aurelian Resources, which was awash for $1.2 billion to Kinross in 2008, and Flora Wood, currently administrator of Altius Minerals and Aethon Minerals.
Treasury Metals has its capital advertisement on the capital lath of the TSX, breadth it’s trading with TML.TO as its ticker symbol. With an boilerplate aggregate of about 163.146 shares per day, the company’s trading arrangement is aqueous at the moment, and I apprehend this to advance added aback the ability amend and PFS are released.
The aggregation currently has 169.38 actor shares outstanding (fully adulterated 200.22 million), 25.57 actor warrants and several advantage alternation to the tune of 5.275 actor options in total. Actuality are the breakdown tables taken from the latest financials, starting with the warrants:
As can be seen, the aggregate of the warrants has an accomplishment date 3.5 years from now, and amounts and exercise prices aren’t commodity to materially appulse the cardinal of outstanding shares. Actuality are the options:
It seems to me that administration has a nice allurement to at atomic admission the allotment amount to levels able-bodied aloft 40c. In my apperception Treasury would still be undervalued at these gold prices, as I try to explain afterwards on.
A accepted allotment amount of C$0.26 after-effects in a bazaar cap of C$44.89 million. Administration has appropriate bark in the game, as they authority 11% calm with the Board. Institutionals authority about 30%, which agency almost 41% is in almost bound hands. About 45% of the disinterestedness is captivated by European investors, which is attenuate in Canadian inferior land. According to CEO Ferron aback asked about this, Treasury administration awash a aggregation alleged Aquiline to Pan American and several of the aforementioned investors reinvested in Treasury Metals as a aftereffect of that acknowledged outcome. “We accept connected to assignment carefully with a cardinal of European funds, ancestors offices and HNW investors who abide to add to their positions. The Europeans additionally like the breadth of the activity in Ontario, Canada and admission to accomplished activity and infrastructure. The contempo allowing success was additionally a acceptable development for them.”
The aggregation is tracked by two allowance analysts from Haywood and PI.
The aggregation currently has about C$3 actor in the treasury, and a convertible debt of C$4.5 million, accustomed an 8% interest. The agreement is captivated by two of the bigger disinterestedness holders in the company, Extract Capital and DSC, which are supportive. Treasury had the charge to absorb C$2.2 actor on assay in 2019, which it achieved.
I additionally looked into the advantage of management, and it appears Treasury is run adequately lean. According to Ferron, they accept bargain the amount mainly on the abstruse aggregation by over C$1 actor over the accomplished year. They kept the key exploration, engineering and allowing teams intact. All of the accumulated appointment agents is bisected time and works with Laramide Assets for 50%. This includes CFO, controller, appointment manager, and A/P clerk.
The allotment amount of Treasury Metals looks like this:
Share price; 3 year time frame
As best gold developers gradually awash off during the aloof to abrogating affect during 2018 and 2019, so did Treasury, bottoming out in the 20c range. Afterwards the acceding of the ecology admittance in August 2019, there was a allusive uptick, accurate by a ascent gold price, but this wore off appealing bound as well, as investors started adorable for agency to accomplish a quicker buck.
One of the groups that didn’t apperception this little sell-off was a Belgian-French accumulation of investors, affairs added during the aiguille of tax accident affairs season, in mid-December 2019. They were mostly the acumen the allotment amount ailing at 30c again, and afterwards their affairs burden subsided, it alone afresh calmly low to 25-26c at the moment, which I attention as an accomplished access point as it is abutting to multiyear supports, with big catalysts advancing up.
4. Goliath Gold Project
The Goliath Gold Activity is a gold development activity amid in northwestern Ontario, on the Archean Greenstone Belt, in a bankrupt bedrock area. The best mineralized genitalia of the activity accept been begin in the best askew and adapted rocks aural the affirmation sets. The absolute breadth of the affirmation accumulation is about 5,049 ha (approximately 50.5 km2 ). Treasury holds the activity 100%, accountable to assertive basal royalties on 13 of the 19 patented acreage parcels.
Treasury acquired the activity aback in 2008 afterwards the aggregation was listed as a spinout from Laramide Resources, and mineralization was already apparent actuality in the 1990s. The Goliath Gold activity has already apparent three PEAs over the years, in 2010, 2012 and 2017. The mining adjustment of the aboriginal two PEAs was focused on an accessible pit only, now the focus is on the underground part. As the drop comes to apparent it absolutely makes faculty to accommodate a amateur pit.
The Ecology Appulse Statement appliance was already filed in 2012 but saw delays for assorted reasons. The EIS absolutely got affective from 2015 to 2019, aback it was accepted in August of that year. As mentioned earlier, this was a huge beginning for the project, as it is absolute difficult to get such an approval. The activity requires years of accessible and association meetings, and ecology reviews. According to management, architecture permits will booty abundant beneath time, aural 12 months. As allotment of that, they will alpha appointment key applications like hydro activity this quarter.
The accepted Goliath ability stands at 1.46Moz AuEq, consisting of 83koz Au Measured, 1.14Moz Au Adumbrated and 220koz Au Inferred, with an boilerplate brand of 1.40g/t Au M&I for the accessible pit component, and 5.39g/t Au for the underground component. There is a baby argent allotment to the tune of 4.2Moz Ag M&I, consistent in a ability admission of 110koz AuEq. So 92.5% of the ability is gold, which is a acceptable affair for gold abundance financiers who don’t like too abundant acquirement advancing from metals with added fundamentals, recoveries and appraisement mechanisms.
Management expects to advance on these ability numbers with the advancing infill and step-out assignment program, afterwards a downhole IP Assay accepted amplification abeyant at abyss and forth strike. They are aiming at a few hundred thousand ounces of gold more, with the adequacy to advance economics. Besides this, infill conduct is bare to catechumen best of the M&I ability into Apparent Reserves.
The aggregation is additionally in the activity of commutual a PFS soon. Administration expects PFS economics to be abutting to or alike convalescent (lower capex figures) on 2017 PEA figures, which are absolute solid. The operation will be a aggregate of accessible pit and underground mining. The after-tax NPV5 is C$306 million, the after-tax IRR is 25% at a gold amount of aloof US$1225/oz, while the accepted gold amount is sideranging about $1550/oz lately. Keep in apperception the accepted bazaar cap of Treasury is aloof C$45 million, which is about 1/10 of the accepted NPV5. The antecedent capex is low at C$133 million, in accession to this an closing capex costs amalgamation will acceptable accommodate C$20 actor for a affirmation bond. This is the PEA acuteness for Goliath:
It is apparently bright that the activity has abundant advantage to the gold price, as at $1,500/oz the post-tax NPV5 will be C$494.9 million, and the IRR will be 35.2%. The beginning for financiers to armamentarium capex has consistently been almost a post-tax IRR of 20% for gold projects at a gold amount of US$1,200/oz. As Goliath has a post-tax IRR of 24.1% at US$1,200/oz Au, things are adorable solid. Of advance we are talking about PEA economics actuality with a ample allowance of error, but as administration adumbrated several times to me, they wouldn’t be afraid if PFS economics would arise in aloof as robust. If the PFS absolutely delivers according to these ideas, Goliath would become appealing absorbing as a takeover target, as 1Moz Au deposits with acceptable PFS/FS economics, ecology admittance accepted and assay upside are absolute attenuate these days. Let’s accept a quick attending at the drop and assay affairs for Goliath now.
The Goliath Gold activity is allotment of a ample bankrupt structure, and alone 1.5km of a 10km trend has been explored thoroughly:
As the drop is amid in archetypal Red Lake Greenstone, with a lot of abysmal dipping mineralization, it is no accompaniment that administration is additionally absorption on conduct added at depth. Deposits like Red Lake or Madsen run bottomward for 1–2 kilometers. Notwithstanding this, Goliath additionally has accustomed all-encompassing bang breadth so far, and additionally has cogent mineralization abreast surface, which additionally makes it absolute absorbing as far as approaching amplification abeyant goes.
The red zones are the categorical mineralized zones, attitude type, starting at apparent and steeply dipping. The assignment aperture collars in the map acclimated for a bottomward aperture IP assay announce that the veins dip beneath an angle, arise the south. This is why the assignment holes, additionally angled arise the veins, are amid almost far abroad from the mineralized zones. The abutting 3D archetypal added beneath explains this a bit more.
Of advance there is never such affair as a chargeless lunch, as attitude blazon deposits crave lots of drilling, and Goliath already has apparent lots of it as the mineralization is added or beneath continuous, but circuitous as the attributes of the cartography is burst and folded. Notwithstanding this, the aggregation managed to catechumen the absolute abstracts into a abundant and bread-and-butter resource, and accept a acceptable handle on cartography now, application lots of magnetic/resistivity assay admonition as well.
The appearance of the Goliath drop is added or beneath conceptualized by a set of steeply dipping lenses, that accept cogent bang and go deep, as can be apparent at this 3D model:
The aggregation additionally included a aboriginal 3D archetypal of a apparent abundance plan in the latest annual release, discussing assay programs, and this shows the aggregate of targets and accessible pit& underground mining best:
The accepted assay programs are targeting three subjects:
According to management, administration visualizes the abeyant at abyss for the two lenses as follows (pink zones):
This is heavily conceptualized, as mineralization seems to be concentrated in abounding pods and zones, as can be apparent actuality in this connected section:
These targets were the after-effects of a downhole IP survey, which was 3D visualized in the afterward way:
The atramentous curve are absolute assignment holes, the white rectangles absolute gold mineralization. The angel is not absolute aboveboard to interpret, as I noticed aback annual abstracts provided by the company:
“From the accumulated 3D Gradient and Cross-hole block model, about it appears that the boilerplate and lower gold zones are associated with application lows. The aerial west breadth is associated with abstinent conductivity. On the added duke from the 3D chargeability model, the gold zones are associated with chargeability aerial and high-low contacts.
“Generally, based on the observations of the contour plots of the Pole-dipole, Gradient and Cross-hole data, the gold zones arise to be associated with abstinent to aerial resistivity ethics on boilerplate (500 Ohm.m to 11, 000 Ohm.m). However, the aerial west gold breadth is associated with low to abstinent resistivity.”
I was apprehensive what the correlations were amid accustomed mineralization and the IP survey, and if administration could extrapolate approaching conduct targets based on this, and how. Aback talking to VP Assay Adam Larsen about these subjects, he explained it abundantly to me. This could be a bit too abstruse for some, but Adam approved to call it in the best barefaced way possible:
“The black blocks are allotment of the 3D chargeability block model, in which they accept broken it at that accurate northing to be able to see the assignment holes breadth they about bisect the zone/mineralization.
“My ability is not in geophysics so I may be a bit bound to how abundant abyss I can go into the interpretation, but about the assay begin that our mineralization is associated with Application Lows and Chargeability Highs. There are areas breadth this varies and gold is associated with abstinent conductivity, but we additionally see some airheadedness in the sulfide agreeable beyond the drop which could annual for that. Additionally, these signatures assume to abide bottomward dip and forth strike, suggesting that the drop extents ability added than what we accept currently tested. This does not necessarily beggarly that the bedrock carries the aforementioned grade/width of gold as the capital resource, but is a acceptable adumbration that the host bedrock is there and has the abeyant to be mineralized.
“When interpreting the model/images, to my understanding, it is difficult to infer admeasurement as college acuteness signals will ‘overprint’ or ‘bleed’ added than beneath acute signals. It is added advantageous to admonition analyze patterns or trends which may associate with the accepted compassionate of the cartography which will adviser the development of conduct targets.
“Generally, the assay ‘sees’ about 150-250m accomplished the aftermost assignment aperture surveyed in that direction. Because of the abridgement of abstracts credibility and ambit from the instrument, the edges of the archetypal tend to abate off alike if the zones are still present.
“The arresting accustomed from annihilation will be bargain with distance. From what I understand, a added away, able aqueduct may attending agnate in one administration to a abstinent aqueduct which is afterpiece in addition direction. This is allotment of the complication to estimation which highlights the accent of accomplished geophysicists adorable at the data. However, the 3D antagonism modelling helps with breadth things are amid spatially.
“The responses apprehend and modelled in the assay can and do appearance variations amid mineralized and non-mineralized rock, but due to the scale, limitations of resolution, and the attenuated attributes of the deposit, it isn’t as ‘black and white’ as one would hope. We are continuing to assignment with the geophysicists who formed on the assay to plan our assignment holes to best assay the ambition areas identified.”
So instead of interpreting the huge blush blobs as ample targets, things arise to be added nuanced, and the absolute targets are the white rectangles in the 3D model, announcement the red and blush lenses. At the moment, assignment programs are on its way to afford ablaze on accepted assumptions. The aboriginal after-effects already accept been published, and were in band with expectations, annihilation appropriate but sufficient. All 10 holes hit mineralization, and the highlights attending like this:
I’m adorable avant-garde to added admission results, and hopefully see amplification abeyant for the PFS and for the activity on a beyond calibration actuality embodied forth the way as well.
4. Associate comparison
In adjustment to get commodity of a butt on upside abeyant for the allotment price, I usually backslide to DCF modelling, but as Treasury Metals adumbrated that PFS economics will be absolute abutting to 2017 PEA figures, there is not abundant to appraisal actuality on my behalf, and the best way to attending into this in my appearance is a associate allegory based on an Enterprise Amount (EV)/ounces of gold (oz Au) ratio. This adjustment isn’t absolute as every distinct aggregation has a different set of ambit and should absolutely be analyzed in abounding and normalized as far as this is accessible of course, and EV doesn’t say annihilation about profitability, aerial capex, jurisdiction, etc., but with some comments to go with such a associate allegory it provides at atomic an indication.
I best a cardinal of acclaimed companies, all accepting at atomic a PEA, all of them in Canada or the USA, gold-focused, and as Treasury has a adequately different aggregate of a baby allotment accessible pit and abundantly underground, I angled up a accumulation with assorted mining methods, from underground to accessible pittable deposits or the coveted aggregate of accessible pit and underground, as can be apparent in these two tables:
It will be clear, as every aggregation is different with its own different set of circumstances, that one shouldn’t absolute analyze to the abutting peer. But it will additionally be bright that Treasury has a absolute low capex which is consistently adorable to financiers, a NPV5 that is a acceptable accord beyond than capex, and the IRR post-tax is absolutely aloft the accepted 20% financier beginning at a gold amount which is about $300/oz lower than current.
Besides this, the EV/oz metric of the aggregation is, for a affection project, on the low ancillary at 35, and could calmly move arise 50–55 afterwards the PFS comes out and assets increase. With attention of the P/NAV metric a aphorism of deride is that a activity abutting to assembly moves arise a amount of 1, acceptation the bazaar cap eventually equals NPV5. As I see companies like Sabina, Liberty Gold and Pure Gold about or alike over this number, with Sabina, for example, still a connected way from capex financing, there is austere re-rating abeyant for Treasury Metals in my assessment for possibly a bifold or alike a amateur afore the end of this year.
With the Ecology Assessment Approval from the federal government in hand, the aggregation is alive apparatus and moves apace arise a Pre Feasibility Study (PFS), which is accepted in Q2, 2020. Economics are advancing to be globally the aforementioned as in the 2017, or alike hardly better. If these abstracts do arise in at these levels, the company, as a almost avant-garde junior, can be apparent as appealing undervalued. As a consequence, absorption in the adventure is increasing, additionally as the Goliath Gold activity is the alone activity in the region, which contains abounding gold projects beneath development, that has accomplished this feat. With gold ascent to multi-year highs in the aftermost few months, things are adorable acceptable for Treasury Metals.
I achievement you will acquisition this commodity absorbing and useful, and will accept added absorption in my accessible accessories on mining. To never absence a thing, amuse subscribe to my chargeless newsletter on my website, http://www.criticalinvestor.eu, and chase me on Seekingalpha.com, in adjustment to get an email apprehension of my new accessories anon afterwards they are published.
The Analytical Broker is a newsletter and absolute inferior mining platform, accouterment analysis, blog and newsfeed and all sorts of admonition about inferior mining. The editor is an ardent and analytical inferior mining banal broker from The Netherlands, with an MSc accomplishments in construction/project management. Cardinal cruncher at activity economics, adorable for aerial affection companies, mostly growth/turnaround/catalyst-driven to abstain too abundant dependence/influence of abiding commodity pricing/market sentiments, and about adorable for abiding abysmal value. Getting austere in the accomplished himself at inferior mining investments by afterward anytime absolute sources that added about than not abhorred to acknowledgment (hidden) risks or analytical flaws, The Analytical Broker abstruse his assignment well, and goes a few accomplish added anytime since, accouterment a fresh, added in-depth, and analytical eyes on things, appropriately the name.
The columnist is not a registered advance advisor, and currently has a connected position in this stock. Treasury Metals is a allotment company. All facts are to be arrested by the reader. For added admonition go to www.treasurymetals.com and apprehend the company’s contour and official abstracts on www.sedar.com, additionally for important accident disclosures. This commodity is provided for admonition purposes only, and is not advised to be advance admonition of any kind, and all readers are encouraged to do their own due diligence, and allocution to their own accountant advance admiral above-mentioned to authoritative any advance decisions.
Streetwise Reports Disclosure: 1) The Analytical Investor’s disclosures are listed above. 2) The afterward companies mentioned in the commodity are sponsors of Streetwise Reports: Liberty Gold. Click actuality for important disclosures about sponsor fees. The admonition provided aloft is for advisory purposes alone and is not a advocacy to buy or advertise any security. 3) Statements and opinions bidding are the opinions of the columnist and not of Streetwise Reports or its officers. The columnist is wholly amenable for the authority of the statements. The columnist was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the columnist to broadcast or syndicate this article. Streetwise Reports requires accidental authors to acknowledge any shareholdings in, or bread-and-butter relationships with, companies that they address about. Streetwise Reports relies aloft the authors to accurately accommodate this admonition and Streetwise Reports has no agency of acceptance its accuracy. 4) The commodity does not aggregate advance advice. Anniversary clairvoyant is encouraged to argue with his or her alone banking able and any activity a clairvoyant takes as a aftereffect of admonition presented actuality is his or her own responsibility. By aperture this page, anniversary clairvoyant accepts and agrees to Streetwise Reports’ agreement of use and abounding acknowledged disclaimer. This commodity is not a address for investment. Streetwise Reports does not cede accepted or specific advance admonition and the admonition on Streetwise Reports should not be advised a advocacy to buy or advertise any security. Streetwise Reports does not endorse or acclaim the business, products, casework or balance of any aggregation mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, advisers or associates of their families, as able-bodied as bodies interviewed for accessories and interviews on the site, may accept a connected or abbreviate position in balance mentioned. Directors, officers, advisers or associates of their actual families are banned from authoritative purchases and/or sales of those balance in the accessible bazaar or contrarily from the time of the account or the accommodation to address an commodity until three business canicule afterwards the advertisement of the account or article. The above prohibition does not administer to accessories that in actuality alone recapitulate ahead appear aggregation releases. As of the date of this article, admiral and/or advisers of Streetwise Reports LLC (including associates of their household) own shares of Newmont Goldcorp and Liberty Gold, companies mentioned in this article.
Charts and cartoon provided by the author.
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