RE:Analyst Site Visit Here is the view from RBC:
October 20, 2021
Marathon Gold Corp
Valentine Site Visit: Taking the long view
Our View:
Oursite visit to the Valentine Gold project reinforced our positive view, highlighting the continued focus on unlocking longer term exploration upside in parallel with ongoing permitting as the project approaches shovel ready status. Current drilling is focused on resource additions at both the Berry and Victory deposits, and various elements are coming into place including engineering and financing ahead of a construction decision. Overall, we view Marathon as one of the most attractive advanced stage developers, sitting within a Tier I jurisdiction and with potential re-rating ahead as the project continues to be de-risked.
Exploration focused on longer term upside
Exploration continues to advance aggressively with 4 active rigs on site including 2 at Berry and 2 at Victory, and is expected to progress through early-November with a brief pause for the caribou migration season. A total of 120,000m is targeted at Berry (+78,000 m vs maiden resource), similar to the level of drilling at Leprechaun, while the Victory deposit has been given increased focus following promising results to date. Additionally, RC drilling is ongoing on the main Marathon and Leprechaun pits to provide further confidence in the block model, with an eye towards a companywide resource update in mid-2022.
Permitting a continued focus:Targeted release from EA in Q4
On the permitting front, Marathon continues to anticipate potential release from the EA process in Q4, pending completion of review from provincial and federal regulators. The company has gone through several rounds of responses to information requests following on from the EIS submitted in September 2020. While current timeline appears on track, the review process is subject to potential for additional requests, and as such remains a key catalyst ahead. Marathon has taken steps in parallel to bolster social license including signed benefits agreements and outlined commitments for local employment and procurement within Newfoundland.
Advancements being made ahead of construction
Engineering continues to progress ahead of a construction decision, anticipated post-release from the EA process. Key items include the location for the tailings facility, which was carefully selected based on mitigation of impact to fish habitat, which would have required a Schedule 2 amendment, as well as evaluation of downstream risk in the event of failure. Additionally, engineering work continues to advance to connect the project to the grid via construction of a ~50 km powerline. Lastly, budgeting and scheduling work has advanced towards finalization of an EPC contract with Ausenco, which is expected to cover ~50% of the scope of the project.
Valuation remains attractive for the next Canadian project
In our view, Marathon represents the next Canadian growth project in the emerging space, and stands out in terms of scale, quality, and jurisdiction (Pg 3-4). We estimate valuation of 0.67x spot P/NAV, a ~15% premium to advanced stage emerging peers, with potential for greater premium justified as the project advances through to construction given relative asset quality.
Reiterate Outperform, Spec Risk rating, C$4 PT.