I-80 Gold Corp T.IAU

Analyst Update

[Ridgeback]

Today’s Hilltop drilling, averaging 11.8g/t AuEq (19-24-30-27% Au-Ag-Pb-Zn) confirms world class CRD grades and in our view confirms that base metal production at Ruby Hill is a major part of I-80’s plans.

Today’s technical teach-in added more colour, highlighting plans for a twin-decline UG operation that accesses Ruby Deeps and 426-zone gold, as well as Hilltop CRD and Blackjack skarn-style polymetallic/base metal mineralization.

Noting the US$60m cost estimate to retrofit the Ruby Hill Mill for base metal flotation (7 Nov 2022 press release), we see potential for a ~US$125m base metal restart at 750-1500tpd. At the average of drilled grades to date (~16.5g/t AuEq + 20% SCPe dilution), we see potential to produce ~160kozpa AuEq at ~US$970/oz at steady state and generate ~US$90m of cash at spot prices, paying back initial capital within two years.

While we love the 300-500kozpa gold base case, the base metals opportunity appears to be lower capital, faster to ramp up, and faster cashflow payback with potential to generate >$100m/year of FCF at spot albeit too early to confirm capex/tonnes/LOM yet.

Today we maintain our base case estimates, but as we come off research restriction, lift our LT price assumptions from US$1,700/oz to US$1,850/oz for Au and US$20/oz to US$24/oz for Ag in line with our sector update. We therefore lift our price target from C$4.75/sh to C$5.50/sh based on 0.60xNAV5%-1850 and maintain our BUY recommendation.

There are multiple positive catalysts coming, including resource updates at Granite Creek (adding SCPe 0.5-1.0Moz South Pacific Zone) and Ruby Hill (SCPe upgrading gold grades to >8g/t and adding Hilltop and Blackjack polymetallic), and production ramp up at Granite Creek.

Figure 1. (A) plan and (B) cross-section of today’s Hilltop drilling Source: I-80 Gold More world class Hilltop CRD hits, teach-in highlights low capital base metals opportunity Today’s drilling results: I-80 reported 24 drill holes from 2022 Hilltop drilling targeting polymetallic-rich CRD mineralization. In total 27 intercepts were reported averaging 6.9m @ 11.8g/t AuEq (19-24-30-27% Au-Ag-Pb-Zn at spot pricing). Upper Hilltop averaged 7.4m @ 13.8g/t AuEq (23-28-36-13% Au-Ag-Pb-Zn) while lower Hilltop averaged 2.8m @ 10.9g/t AuEq (14-23-21-43% Au-Ag-Pb-Zn.

The 2023 drill program will test several targets believed to be prospective for CRD, skarn or porphyry mineralization. Step-out and follow-up drilling (core with RC) are ongoing at Upper, Lower and East Hilltop Zones.

Convert: I-80 closed a US$65m principal secured convertible debentures offering. The debentures pay 8.00% fixed interest per annum and mature in February 2027. Principal may be converted at US$3.38/sh. 23 February 2023 Page 2

Our view: Today’s drilling is world class, we see >$100m/year FCF potential albeit it’s early Today’s drilling added significantly more meterage to prior drilling at Hilltop and confirms that grades are world class for a CRD deposit – 6.9m @ US$690/t in-situ value should be highly profitable even accounting for dilution and payability.

Tonnes are the main question – both upper and lower Hilltop remain open and now cover >200m of strike so we could have 1-2Mt drilled and potential to grow from here. Below we show indicative economics (not in our base case model yet): The takeaways in our view are quick cash flow payback, >50% return on capital, and >$100m/year FCF potential (noting that gold majors currently trade below 5% FCF yield after a difficult 2022).

The below assumes the average grade of Hilltop drilling (i.e. blending Upper and Lower Hilltop), but Upper Hilltop drilling has been ~20% higher grade and 3x the average width to date and is easier to access and permit thus we see upside to the below. Wrapping some ‘too-early’ indicative economics: Assume SCPe US$125m of capex (of which US$60m for mill) for a 500ktpa operation at average grades to date – 16.5g/t AuEq + 20% mining dilution x 80% AuZn-Pb and 70% Ag recovery = ~41koz Au + 3.2Moz Ag + 46kt Pb +20kt Zn = 130kozpa AuEq. Costs: SCPe US$160/t mined + US$20.5/t processing + US$10/t G&A + US$23/t sustaining capital = SCPe US$970/oz AuEq AISC. US$90m/yr FCF, US$442m NPV / 54% post-tax IRR on 8.5-year / 4.25Mt mine life.

Teach-in takeaways: RH decline could commence this year, potential strategy evolution Today’s teach-in call had a significant amount of new colour, mostly focused on Ruby Hill / Hilltop. Strategy: Depending on drilling/permitting, base metals could shift in front of the autoclave in the development profile.

This would involve i) restart of the Ruby Hill Mill with retrofit for flotation (est US$60m capex per last November press release), ii) twin decline UG mine accessing the 426 Zone (Au), Blackjack (polymetallic skarn), Upper and Lower Hilltop and Ruby Deeps. Sequencing/Permitting: The portal and UG development could commence potentially as early as 2H23.

The current Ruby Hill EA enables mining of 426, Blackjack, and Upper Hilltop, while retrofit of the Ruby Hill CIL could be accomplished reasonably quickly. While not explicitly stated, we see 2025 as a potential start date.

Geology: The Ruby Hill system, in both scale (7.7Moz Au and growing, which excludes the base metals) and mineralization styles (Distal epithermal style Au, Carlin-style Au, skarn, CRD mineralization) shows indications of a large porphyry intrusive system. Hilltop corresponds well with geophysical anomalies, but there are several similar but significantly larger anomalies on the property that are exploration targets, including a potential porphyry target below the Archimedes Pit.

Gold update: Gold remains a major focus with Granite Creek ramping up mining. The focus is currently on the lower levels and pushing decline development to the better ground / higher grade South Pacific and Ogee Zones which should contribute to a significant increase in production from 2H23.

Why we like I-80 • Among highest grade open pit and underground development assets in US
• One of only three companies with refractory sulphide processing facilities in Nevada
• Ramping up underground methodically with US$174m of cash to support • Opportunity to consolidate Nevada and western US gold projects

Catalysts
• 1H23: Updated Granite Creek MRE, Lone Tree restart study
• 1H23: Updated Ruby Hill MRE including maiden resource for Blackjack
• 2H23: Cash flow positive inflection at Granite Creek, Ruby Hill FS

[Aurum79]

   Looking at our charts and others, the average correction time is six moths or so after a major spike in share price.  March/April should be go time for our sector again. IAU is loaded and earning, not to mention expanding very nicely. Accumulation window isn't going to be open indefinitely. 

[Ridgeback]

Good Post. My opionion is,,,,  I wll buy on dips.