analyst ideas of the week – nigerian gold junior attracts ... · 4/24/2019 · monarch gold...

April 24, 2019

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Analyst Ideas of the Week – Nigerian Gold Junior Attracts Significant Financing

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Sid Rajeev, B.Tech, MBA, CFA

Head of Research

Company Name: Ticker Symbol Current Share

Price:

FRC Fair Value

Estimate:

Date of PR:

Thor

Explorations Ltd.

TSXV: THX $0.16 $0.50 April-15-2019 April-16-2019

PR Content

Executed a term sheet with the Africa Finance Corporation for a US$78 million financing for the Segilola gold project in Nigeria. The financing is expected to close next month. The financing includes a US$54 million senior secured credit facility, a US$9 million gold stream prepayment, and a US$15 million equity investment (at $0.20 per share) from AFC. The company also received a commitment from Norinco International (engineering contractor) for financing 10% of their contract value of approximately $65 million. This increases the total financing to up to $84.5 million.

FRC Opinion

Positive – We are very pleased with this development. In our last report in Feb 2019, we mentioned that the THX was in advanced discussions with project financiers. The financing was a result of the robust Definitive Feasibility Study completed in February 2019. Based on a gold price of US$1,300 per oz, the After-Tax Net Present Value at 5%, of the open pit operations, was estimated at US$138 million, and the AT-NPV, at 5%, of the underground operations was estimated at US$35 million, for a total of US$173 million. Management’s plan is to start construction this year, with first gold pour targeted in the second half of 2020.

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Price:

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Date of PR:

Monarch Gold

Corporation

TSX: MQR $0.24 $0.71 April-18-2019

PR Content

Closed a $1.20 million flow-through financing at $0.33 per share.

FRC Opinion

Positive – We are expecting a number of catalysts this year. The company is seeking financing / JV partners on Wasamac, as well as potentially increasing resource estimates of the Croinor gold and McKenzie Break properties. The company is also seeking to expand its custom milling operations. MQR’s properties currently hold measured and indicated resources totaling 3.16 Moz, and inferred resources of 0.44 Moz, implying an Enterprise Value (“EV”) of just $15 per oz versus the comparables average of $50 per oz. A FS on Wasamac showed an AT-NPV at 5% of $103 million, even at a gold price of US$1,000 per oz


Price:

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Sirios Resources

Inc.

TSXV: SOI $0.165 $0.44 April-16-2019

PR Content

Sirios announced results of its 47 hole / 11,322 m drill program on the Cheechoo gold property. The program focused on five areas - Main (2 holes), North contact (10 holes), Mafic Dyke (5 holes), Echo (13 holes) and Eclipse (17 holes). Results announced to date showed potential for extension of the Contact zone by more than 100 m. Key results included - 0.7 g/t Au over 19.5 m, 0.9 g/t Au over 12.5 m and 0.6 g/t Au over 21.7 m. Results of 16 holes are pending.

FRC Opinion

Positive – We are pleased with these results as they not only show potential for expansion but also reasonably good grades. We had used an average grade of 0.6 gpt in our preliminary resource estimate. Based on a 500 m x 500 m area, and a conservative depth of 200 m (the company has drilled up to 300 m depth), we estimate a preliminary speculative resource of 66 Mt. An average grade of 0.6 gpt, implies potential for 1.27 Moz of contained gold. The Cheechoo property, is just 10 – 15 km from Goldcorp’s (TSX: G) Éléonore gold mine. Goldcorp is also Sirios’ largest investor, and holds 17% of the total outstanding shares.

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Price:

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Rio2 Limited TSXV: RIO $0.31 $1.54 April-16-2019 PR Content

Announced intent to complete a PFS on the Fenix gold project by July 2019. A recent 7,000 m drill program confirmed the higher-grade nature of material at surface, which will be the focus of the updated PFS. The company is also evaluating water options.

FRC Opinion

Neutral – We believe the PFS will likely demonstrate the viability of advancing the project to production at a significantly smaller-scale, and CAPEX, focused on the higher-grade ore close to the surface. Note that a 2014 PFS showed an AT – NAV at 5% of US$409 million, with an AT - IRR of 25%, at a US$1,350/oz gold price. The initial CAPEX was estimated at US$399 million.


Price:

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Kerr Mines Inc. TSX: KER $0.14 $0.49 April-15-2019 PR Content

Appointed a new CEO, Giulio T. Bonifacio. The previous CEO and a significant shareholder, Claudio Ciavarella, will retain his role as Executive Vice Chairman. Mr. Bonifacio was the Founder, President and Director of Nevada Copper (TSX: NCU / market capitalization of $271 million) from 2005 to 2018. Kerr also completed a $0.47 million financing at $0.14 per unit. Mr. Bonifacio subscribed for $0.42 million.

FRC Opinion

Positive – We are pleased with the significantly stronger team, as well as the new CEO’s investment in Kerr. The company remains focused on advancing the Copperstone mine project to production.

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Price:

FRC Fair Value

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Diamcor Mining

Inc.

TSXV: DMI $0.10 $1.75 April-18-2019

PR Content

Announced sale of 3,715 carats of rough diamonds for US$0.52 million, implying a pricing of US$141 per carat.

FRC Opinion

Neutral - Although the pricing is lower than the historic average (which we estimate is approximately US$174 per carat), the company indicated that they were expecting lower pricing due to a larger percentage of lower quality rough diamonds in this tender. The latest press release also indicated that the company is making progress on ramping up processing levels and improving operational efficiencies.


Price:

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GMV Minerals

Inc.

TSXV: GMV $0.13 $1.07 April-16-2019

PR Content

Commenced a minimum 2,500 m drill program (eight holes) to test extensions of the known gold mineralization at its Mexican Hat gold deposit in Arizona.

FRC Opinion

Neutral – A positive drill program will be a bonus to the already attractive deposit identified on the property. In late 2018, GMV had completed a Preliminary Economic Assessment. The base-case scenario showed an AT – NPV at 5% of US$78 million, with a high after-tax Internal Rate of Return (“IRR”) of 29%, at a US$1,300/oz gold price. The company’s current market capitalization is just $5 million.

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Price:

FRC Fair Value

Estimate:

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Bonterra

Resources Inc.

TSXV: BTR $1.66 $5.96 April-16-2019

PR Content

Received notice of a civil claim, filed by its former CEO, Navjit Dhaliwal, and its former Vice President of Exploration, Dale Ginn, seeking payment for $1.09 million each.

FRC Opinion

Negative – We have been trying to get in contact with the new management to produce an update report. We are not making any changes to our fair value estimate or rating as we believe the fundamentals of its portfolio remain intact. We will publish a report as soon as we hear from the new team.


Price:

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Chatham Rock

Phosphate

Limited

TSXV: NZP $0.20 $1.12 April-16-2019

PR Content

Entered into a collaboration agreement with the local tribe, named Ngāti Mutunga O Wharekauri AHC (Ngāti Mutunga), to develop a Marine Consent application on the Chatham Rise rock phosphate deposit, located approximately 450 km offshore of the east coast of New Zealand.

FRC Opinion

Positive – Support from the local tribe is a positive sign. The company’s first application for a Marine Consent was rejected in 2015. Chatham is the only identified marine phosphate deposit in New Zealand.

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Anthony De Ruijter, B.A. (econ)

Analyst


Price:

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DataMetrex AI

Limited.

TSXV: DM $0.04 $0.23 Apr-24-2019

PR Content

The company announced that it had secured an initial one-year contract with the Korea Press Foundation (“KPF”), a non-profit focused on the Korean media and public interest space. The company will provide the KPF with their Nexalogy AI solution with a focus on filtering fake news and improving the variety of content and media content available to the KPF.

FRC Opinion

Neutral: The economic details of the agreement, such as the payment for the company’s services, was not disclosed.


Price:

FRC Fair Value

Estimate:

Date of PR:

DataMetrex AI

Limited.

TSXV: DM $0.04 $0.23 Apr-23-2019

PR Content

The company announced that it had secured an additional contract with Lotte Group for approximately $0.30 million

FRC Opinion

Positive: The company’s established relationship with the Fortune 500 company continues through the additional contract, demonstrating the quality of the company’s AI and machine learning solutions.

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Price:

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Estimate:

Date of PR:

DataMetrex AI

Limited.

TSXV: DM $0.04 $0.23 Apr-23-2019

PR Content

The company announced that it had completed the building of a blockchain solution focused on the Agriculture sector. The company has entered into an MOU with Ezfarm Inc., a big data solution business focused on agriculture, for Ezfarm to utilize the company’s new solution.

FRC Opinion

Neutral: The terms of DataMetrex’s MOU with Ezfarm were not disclosed. As a result, we cannot comment on the likely impact on the company’s valuation.


Price:

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Estimate:

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Siyata Mobile

Inc.

TSXV: SIM $0.51 $1.27 Apr-23-2019

PR Content

The company announced that Pelephone, a leading Israeli telecom carrier and provider of PTT communication, has launched Siyata’s UV350 in-vehicle smartphone and UR7 rugged smartphone on their network.

FRC Opinion

Positive: As a major telecom carrier in the region, Pelphone is likely to have an established sales network in Israel. By launching Siyata’s products on their network, Pelephone increases Siyata’s exposure and potential sales in the region.

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Price:

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Alliance Growers

Corp.

CSE: ACG $0.08 $0.35 Apr-23-2019

PR Content

The company announced that it has entered discussions to acquire certain cannabis assets (including licenses to grow, manufacture and sell) in the U.S. state of California. Though the assets were undisclosed, the company indicated that the focus was on small-scale craft growers.

FRC Opinion

Neutral: Though expansion into California exposes Alliance to the largest U.S. cannabis market, it also exposes the company to increased risk due to the federal stance on cannabis in the U.S. Until more information is given regarding the California cannabis assets, we cannot say with certainty that the information is a positive driver.


Price:

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Date of PR:

Alliance Growers

Corp.

CSE: ACG $0.08 $0.35 Apr-23-2019

PR Content

The company announced that it had filed a short form base shelf prospectus allowing private placements of up to $13 million. The prospectus has a 25-month life, allowing Alliance to raise the capital at their discretion through multiple tranches at various market prices.

FRC Opinion

Neutral: As an equity financing facility, it is likely that any private placements filed through this prospectus will be done at a discount to the market price, signalling dilution. However, the company will undoubtedly need to raise cash in order to continue with their operating initiatives.


Price:

FRC Fair Value

Estimate:

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The Green

Organic

Dutchman

Holdings Ltd.

TSX: TGOD $4.33 $7.60 Apr-22-2019

PR Content

The company announced that it had received a Health Canada license to sell cannabis oils.

FRC Opinion

Positive: Cannabis oils are a higher margin cannabis product with margins that are expected to be more defensible than that of dried product.

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Price:

FRC Fair Value

Estimate:

Date of PR:

The Wonderfilm

Media Corp.

TSXV: WNDR $0.21 N/A Apr-16-2019

PR Content

The company announced that it intended to amend the terms of a total of 1.27 million warrants to bring the strike price down from $0.75 per share to $0.50.

FRC Opinion

Neutral: Though the lowering of the warrant strike price implies that the company is lowering the bar for warrant holders to buy in, the adjusted price is still significantly above the market price and exercising the warrants will bring in much needed capital for the company.


Price:

FRC Fair Value

Estimate:

Date of PR:

Micron Waste

Technologies Inc.

CSE: MWM $0.36 N/A Apr-16-2019

PR Content

The company announced that it had opened a waste treatment innovation centre in B.C. to facilitate improved R&D.

FRC Opinion

Neutral: The material impact of this news is uncertain given that it does not give an indicator of how soon the company will approach commercial roll-out.


Price:

FRC Fair Value

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Date of PR:

Clean Seed

Capital Group

Ltd.

TSXV: CSX $0.24 $2.03 Apr-16-2019

PR Content

The company announced that it would no longer be moving forward with the acquisition of Harvest International Inc. due to the transaction no longer being viable given advanced due diligence.

FRC Opinion

Neutral: Though the company will now need a new entry point into the U.S., the financing that was required to facilitate the transaction has been cancelled. As a result, the stock outstanding will not increase, and the company will not assume a large debt position. Furthermore, we had not included Harvest into out forecasts, so our valuation does not change.

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Price:

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Date of PR:

Eve & Co Inc. TSXV: EVE $0.44 $1.13 Apr-22-2019 PR Content

The company announced that it had appointed Alice Murphy to its board. Her biography is provided below: Ms. Murphy has a wealth of financial experience with public companies at a senior level. As the former CFO of Harry Winston Diamond Corporation, she had responsibility for overseeing the financial reporting of its global entities, its compliance with NYSE listing requirements and the financial due diligence of its global M&A activities. Ms. Murphy has gained valuable experience with Health Canada from her role as CFO of a First Nations community, where she helped coordinate the financial and risk analysis of a medical marijuana application. As former Mayor and District Councillor of the Township of Muskoka Lakes and the District of Muskoka, she has worked on behalf of her local community utilizing her finance and negotiation skills. Ms. Murphy is a Fellow of the Chartered Professional Accountants of Ontario.

FRC Opinion

Neutral: The appointment does not strike us as particularly negative or positive.

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Price:

FRC Fair Value

Estimate:

Date of PR:

Eve & Co Inc. TSXV: EVE $0.44 $1.13 Apr-18-2019 PR Content

The company announced that it had received $5.80 million through the exercise of 16.67 million warrants. This suggest exercise prices of approximately $0.35 per share.

FRC Opinion

Neutral: The exercise prices are dilutive against the current market price, but the cash raised further strengthens Eve’s balance sheet and may reduce the need for further financings this year.


Price:

FRC Fair Value

Estimate:

Date of PR:

PLUS Products

Inc.

CSE: PLUS $4.75 $7.99 Apr-18-2019

PR Content

The company introduced a new infused mint product line, through the introduction of classic flavoured mints. The inaugural mint product is THC-dominant.

FRC Opinion

Positive: As we have pointed out before, the diversification of PLUS’ product portfolio will help them maintain their top position in the California edibles space.


Price:

FRC Fair Value

Estimate:

Date of PR:

SugarBud Craft

Growers Corp.

TSXV: SUGR $0.21 $0.28 Apr-23-2019

PR Content

The company announced that it had received a confirmation of readiness letter from Health Canada for their Stavely facility. This is the final stage of the application process and will be followed with a full demonstration to Health Canada that the facility is fully functional and compliant.

FRC Opinion

Positive: This announcement signals that a cultivation license may follow in the near-term, as expected. With a cultivation license, SUGR may begin B2B sales.

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Price:

FRC Fair Value

Estimate:

Date of PR:

TransCanna

Holdings Inc.

CSE: TCAN $7.43 $7.80 Apr-18-2019

PR Content

The company completed the sub-lease of a 10,000 square-foot warehouse facility in Adelanto, California. The terms of the agreement stipulate a four-year duration at US$2 per square-foot. The company terminated the previous LOI for a 15,000 square-foot facility at US$2.25 per square-foot as the facility has not been completed as expected.

FRC Opinion

Neutral: We do not expect the facility to directly produce revenue and it is not included in our valuation models.

Cannabis Provincial Pricing Update

The below table summarizes provincial cannabis pricing across Canada as of April 22, 2019:

Source: FRC, Online Provincial Cannabis Stores

Pricing remains the same nationwide, though Alberta’s provincial webstore has significantly increased the number of products available on its shelves. Last weeks pricing information is shown below:


Province (As of 22/04/2019) Average Price per Gram Average Price THC per Gram Average Price per Gram CBD # of Products Min. Price Max. Price

B.C.* 11.33$ 11.43$ 10.80$ 157 7.23$ 19.80$ Ontario 12.41$ 12.32$ 13.40$ 70 9.06$ 22.66$ Quebec* 9.57$ 9.50$ 9.92$ 59 5.81$ 13.75$ Alberta* 13.69$ 13.59$ 14.45$ 121 8.17$ 17.60$ N.B. 11.19$ 11.26$ 10.80$ 60 6.67$ 16.28$ P.E.I.* 10.96$ 10.90$ 10.92$ 83 8.13$ 14.35$ Newfoundland* 10.68$ 10.89$ 8.67$ 54 7.58$ 14.29$ Yukon* 15.11$ 15.02$ 16.84$ 19 7.34$ 22.28$ N.S. 11.67$ 11.60$ 11.97$ 69 7.64$ 14.99$ Nunavut* 16.45$ 16.49$ 16.23$ 16 15.08$ 18.69$ Northwest Territories* 15.26$ 15.26$ 5 14.44$ 16.93$ CANADA (Excluding SK, MB) 12.58$ 12.57$ 12.40$

Province (As of 15/04/2019) Average Price per Gram Average Price THC per Gram Average Price per Gram CBD # of Products Min. Price Max. Price

B.C.* 11.28$ 11.38$ 10.71$ 158 7.23$ 19.80$ Ontario 12.64$ 12.56$ 13.56$ 70 8.10$ 17.25$ Quebec* 9.57$ 9.50$ 9.99$ 58 6.29$ 11.75$ Alberta* 13.69$ 13.57$ 14.44$ 106 9.43$ 16.65$ N.B. 11.18$ 11.21$ 10.80$ 62 6.67$ 16.28$ P.E.I.* 10.93$ 10.89$ 10.89$ 82 8.13$ 14.35$ Newfoundland* 10.68$ 10.89$ 8.67$ 53 7.54$ 14.29$ Yukon* 14.79$ 14.74$ 15.85$ 20 10.52$ 21.73$ N.S. 11.89$ 11.79$ 12.49$ 65 8.49$ 14.99$ Nunavut* 16.45$ 16.49$ 16.23$ 16 15.08$ 18.69$ Northwest Territories* 15.26$ 15.26$ 5 14.44$ 16.06$ CANADA (Excluding SK, MB) 12.58$ 12.57$ 12.36$

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The below chart shows average price per gram nationwide since we began price coverage:


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The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Companies mentioned in this report may be covered by FRC under an issuer paid model or be candidates for coverage. FRC or companies with related management, may hold shares in some companies mentioned in this report. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. To subscribe for real-time access to research, visit http://www.researchfrc.com for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company, industry, and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

analyst ideas of the week – nigerian gold junior attracts ... · 4/24/2019 · monarch gold...

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