Otis Gold Corporation OGLDF

PI - TOP PICK .60 Target

[Super_Cycle]

Hot off the press:

OTIS GOLD CORP. (V-OOO) Rating: BUY, Target: $0.60 RESOURCE UPDATE AND EXPANSIVE STEP-OUT DRILL PROGRAM IN Q3 

Our top pick for this quarter is Otis Gold Corp. which is underpinned by a new resource update at Kilgore (early Q3), an aggressive drill campaign planned at Kilgore based on recent exploration results, and encouraging results expected from Oakley upon completion of a recent exploration program.

Advancing Understanding of Targets: Despite the slight delay in the resource update, Otis has not been idle. They have focused on advancing its flagship Kilgore project and the exploration stage Oakley project, both located in Idaho. At Kilgore the focus has been on optimizing the geological model to strategically outline areas for resource expansion (Prospect Ridge, North Target, & Crab Claw) which has led to a 33% increase in the land package. At Oakley, field crews have recently completed a surface exploration (mapping & sampling) program which will outline targets for a potential drill program this summer.

New Resource: The resource update at Kilgore will be focused on increasing the 2012 global resource estimate (Indicated and Inferred of ~820koz grading 0.54 g/t Au) and will include recent drill results (2012 to 2017), many of which encountered mineralization in the previously untested Aspen Formation, reflecting potential for higher grade mineralization (we model 0.82 g/t Au) and an increased resource estimate (we model ~1.0 M oz). Results include 94.5 m grading 4.21g/t Au, 86.8 m grading 1.05 g/t Au and 85.4 m grading 2.5g/t Au.

Permitting Update: Otis’ Plan of Operation outlining a 140 drill hole plan is entering into the final stages of the permitting process with an expected completion date in late July. The public comment period has completed and discussion with management indicates nothing material that will delay the permitting process.

Aggressive Step-out Drilling: Until recently, drilling at Kilgore was constrained by permitting; however the new permitting will allow follow up on open ended mineralized zones to the NE, SE and N of the current resource. Selected results to the SE include 110.6 m of 0.90 g/t Au (17-OKC-362) and to the north 30.4 m of 2.53 g/t Au (10-OKC-210). Follow-up drilling at Kilgore is expected to commence in late Q318.

Resource Expansion Imminent: Exploration during Q318 will aim to further expand the mineralization footprint and test new structural and geological interpretations that have outlined numerous targets around the existing deposit and along an 8 km2 volcanic terrace ripe for new discoveries.

We are maintaining our BUY rating and target price of C$0.60 based on our 8% DCF for Kilgore. We see an appreciation of Kilgore as a low capital heap leach project growing with exploration success. This appeal is supported by Kilgore’s location in Idaho and recent M&A activity in the sector.