One More Report. SprottTicker: MOZ CN Cash: ~C$105m Project: Valentine Lake Market cap: C$807m Price: C$3.18/sh Country: Canada / NFLD REC. (unc):
BUY TARGET (unc): C$4.00/sh RISK RATING: HIGH
Recall that the 2Q21 Berry MRE (+640koz @ 1.75g/t) included only 42,000m of drilling in 2020 compared to the 100,000m in the upcoming 2Q22 update, buttoday’s resultsfall outside the cut-off date for inclusion in the next update. So whilst no step change here today, it does point to further resource delineation / additions thereafter, with 80 holes still pending assay.
Big picture, drilling to date leads us to think that Berry could see +50% lift in MRE towards 1Moz resource / 500-800koz reserves, well over our 325koz modelled inventory. If achieved, this could underpin a lift from DFS 4Mtpa / 173koz pa into perhaps 6Mtpa / 200-300koz pa range. Put simply, any expansion of ounces, post build of the existing 4Mtpa twin-pits being permitted now, could underpin buyer confidence, hence improve M&A optionality.
On exploration today, our enthusiasm picked up with news that 44 holes are pending assay from Sprite / Victory–which Victory in particular has us excited for given the continued hits along the corridor to the NE extension (now 700m in strike) and visible gold reported in untested areas. As such, we maintain our BUY rating, and 0.9xNAV C$4.00/sh PT based on a fully-diluted NAV net of central G&A, and finance costs on the C$236m debt facility.
As we head into 2022, we remind investors that Marathon is the only >150koz pa (or more in future?) advanced developer in our universe who doesn’t have to worry about UG mining ramp ups, complex metallurgy, coups, jungle or ice and more, making this a high conviction name for us.
Figure 1. Berry (A) plan map and (B) cross-section 14050E (View NE) showing today’s results Source: Marathon Gold Berry infill returns 39m @ 1.6g/t from 280m downhole; 124 holes in the assay pipeline Marathon reported assays from 15 holes drilled at Berry (within the western conceptual MRE pit shell) highlighted by 39m @ 1.6g/t, 17m @ 2.2g/t, 8m @ 2.1g/t, 8m @ 7.8g/t (inc. 1m @ 29.7g/t).
Additional highlights include 1m @ 83.1g/t, 1m @ 22.1g/t, and 10m @ 2.3g/t in the same hole. The Berry MRE update in 2Q22 will be based on data received prior to November 2021 cut off date. Assays are pending from 80 holes from Berry and 44 holes from Sprite / Victory. Marathon will release guidance for 2022 exploration plans in January 2022. 22 December 2021 Page 2
Why we like Marathon 1. Low cost vanilla gold pit in Tier 1 jurisdiction is without peer in >150koz group 2. First satellite Berry has the potential to exceed our modelled 325koz in reserves 3. Potential for further satellites in Berry – Marathon ‘gap’ and NE of Marathon at Narrows 4. Builder-mentality of management, multiple recent staff bulk build team 5. Fully-diluted NAV in production sits at ~C$5.00/sh Catalysts 1H22: Permitting approval 4Q21/1Q22: Drill results from Victory, RC grade control program, and Scott Zone CY21: Equity and debt financing 1Q22/4Q23: Construction starts / first pour, subject to adjustment in 4Q21