Sprott B Salier 3/2021Ticker: MOZ CN 4Q20 cash: C$44m Project: Valentine Lake Market cap: C$497m Price: C$2.32/sh Country: Canada / NFLD
RECOMMENDATION (unc): BUY TARGET (unc): C$3.30/sh RISK RATING: HIGH The key takeaway from today’s results is that the Berry zone continues to return high-grades as it transitions from exploration to delineation. In more detail (i) the hit rate / tenor returned today overall is excellent (ii) today’s results will not be included in the upcoming MRE and points to further delineated ounces / additions and (ii) hits including 21m @ 3.9g/t towards FEP point to the extension potential along strike.
We make no change to our model which includes 250koz @ 1.4g/t in satellites so maintain our BUY rating with 0.8xNAV5%-1850 PT of C$3.30/sh based on a fully-funded fully-diluted 262m shares, including finance costs for C$200m of debt.
As drilling continues, our 250koz satellite contribution does look beatable in the medium-term, and potentially even in the upcoming MRE. Updating for the recent flow subscription including C$7.5m from Pierre Lassonde, our 1xNAV5%-1850 fully-diluted stands at ~C$4.80 once in production. This assumes no further ounce growth, hence shows clear long-term upside given the share price is under half this currently.
Similarly Y1-5 ~170koz pa in a domestic asset notin the far north or glacier terrain should command a premium going forward, either as M&A target or standalone build.
Berry 2021 drill program delivers 22m @ 6.6g/t ahead of Berry Maiden MRE Seven holes at Berry have returned a 100% hit rate of mineralization above the 0.7g/t cut-off with highlights of 22m @ 6.6g/t and within the central portion of the Berry zone and 21m @ 3.9g/t in the northeast portion of the pit. The Berry zone maiden resource estimate is currently underway and will only include 42,000m of drilling completed to the end of 2020.
The Berry zone will see further delineation this year with an additional 30,000m planned on the back of the maiden MRE. Sprite and Victory Deposits will also be drilled, as will greenfield targets along the 20km of Valentine Lake Shear Zone. Figure 1. (A) Plan of Berry > FEP, (B) cross section and (C) long section through Berry Source: Marathon 11 March 2021 Page 2 Why we like Marathon 1. Low cost vanilla gold pit 2.
Fully-diluted NAV in production sits at C$5-6/sh 3. First satellite Berry has potential to exceed our modelled 250koz 4.
Potential for further satellites in Berry – Marathon ‘gap’ and NE of Marathon at Narrows 5. Builder-mentality of management, multiple recent staff bulk build team Catalysts
1H21: Maiden Berry inferred resource
1H21: Feasibility
2H21: Detailed engineering and financing
3Q21: Permitting approval
1Q22/2Q23: Construction starts / first pour Brock Salier (London) M: +44 7400 666 913 bsalier@sprott.com Justin Chan (London) M: +44 7554 784 688 jchan@sprott.com Brandon Gaspar (Toronto) M: +1 204 541 1144 bgaspar@sprott.com