TD updateEvent This morning, Marathon reported the latest drill results from the final 24 drill holes completed as part of the 2021 in-fill drill campaign at the Berry Deposit and an additional four holes from 2021 drilling at the Victory Deposit.
Impact: NEGATIVE The company has now released results from ~100 km of drilling at Berry, which represents all drill holes completed to the end of November 2021. This will be the dataset used in the next Resource update. Berry and Victory are the focus of the company's 2022 exploration drilling program.
As a reminder, in 2021, Marathon completed an ~12 km RC drill program at the Leprechaun and Marathon Deposits, and ~70 km of new exploration diamond drilling at the Berry, Victory and Sprite Deposits. These RC and diamond drilling data will be incorporated into a new Resource (mid-2022E).
With regards to permitting, Marathon continues to anticipate completion of the federal EA process and the receipt of sufficient permits to allow site early works to commence in Q3/22. Principal site mobilization for the construction of the mill, major facilities, and the Tailings Management Facility is expected to commence by the end of 2022.
Recall, last week (see our Flash Note), Marathon announced that it forecasts LOM capital and operating costs to be 15%-20% higher than the April 2021 Feasibility Study (FS). The company plans on completing an Updated FS in Q4/22. The company is guiding for first gold in late-2024.
We have updated our model for higher anticipated operating and capital costs. Net of these and other minor changes, our corporate NAV5% decreases to $3.14/ share from $3.60/share. Our target price decreases to $4.00 (from $4.75) on our lower NAV5% estimate.
TD Investment Conclusion The completion of the EA process (and the initiation of site-specific permitting work) continues to be the principal schedule driver of the project. If permitted, we believe that it has one of the few development projects in Canada with manageable capital requirements and robust economics. We expect the company to continue to rerate by derisking the project through completing project permitting and final project financing thereafter.
4.5 4.5 4 4 3.5 3.5 3 3 2.5 2.5 2 2 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 MOZ-T: Price Company Profile Marathon is a Toronto-based small-cap gold developer listed on the TSX. The company's flagship asset is the feasibility-stage Valentine Gold Project (100%) in central Newfoundland. Gold and Precious Minerals - Mid-and Small-Cap Golds Marathon Gold Corp. (MOZ-T) C$2.44 Latest Berry and Victory Drill Results Arun Lamba, CFA Recommendation: SPEC BUY Risk: SPECULATIVE 12-Month Target Price: C$4.00 Prior: C$4.75
12-Month Dividend (Est.): C$0.00 12-Month Total Return: 63.9% Market Data (C$) Current Price C$2.44 52-Week Range $2.36 - $3.73 Mkt Cap (f.d.) ($mm) $645.4 Mkt Cap (basic) ($mm) $618.8 Float Cap ($mm) $559.7 Current Dividend $0.00 Dividend Yield 0.0% Avg. Daily Trading Vol. 829,378 Financial Data (C$) Fiscal Y-E December Shares O/S (f.d)(mm) 264.5 Float Shares (mm) 229.4 Net Debt/Total Cap 0.0% Cash ($mm) $73.0 NAVPS $3.14 Supplemental Data Year 2020A 2021A 2022E 2023E Gold US$/oz 1,770 1,799 1,915 1,850 Cash as at March 31 All figures in C$, unless otherwise specified Page 1 of 9 April 21, 2022 Details Updated FS in Q4/22
The company plans on completing an Updated Feasibility Study in Q4/22. Marathon will re-assess the optimum pit size for each deposit in the light of a higher gold price environment since the pits were first designed in 2020. No changes are expected in processing and facilities design, infrastructure, mining methodology or tailings deposition strategy. As a reminder, the Valentine April 2021 Feasibility Study estimated an initial capital cost of $305mm, total life-of-mine capital costs of $662mm, total cash operating costs of US$704/oz and AISC of US$833/oz.
Since that time, significant cost inflation and construction market volatility has impacted major capital projects globally. Based on the Project’s current scope and development timeline, Marathon forecasts that LOM capital and operating costs will be between 15% and 20% higher. Our new cost estimates (and prior) are detailed below in Exhibit 1. Balance Sheet Marathon last reported ~$73mm in cash (March 31) and no debt. This is down from $87mm as at December 31. Recall, the company recently closed a 6.5-year US$185mm term loan credit facility with a non-bank lender. The credit facility will be funded into in two tranches (US$125mm at close and US$60mm on December 31, 2022). Subject to the Project’s release from federal environmental assessment, the perfection of security, a construction decision by Marathon’s Board of Directors, and certain other customary covenants and terms. See our April 1 Flash Note here. Resource Update in Mid-2022 As a reminder, the company’s immediate focus is on the Leprechaun and Marathon deposits, where the April 2021 FS outlined Reserves of 2.05 Moz at 1.36 g/t. M&I Resources (inclusive of Reserves) are presently defined by 1.96 Moz at 1.62 g/t (Marathon) and 1.08 Moz at 1.98 g/t (Leprechaun). Management previously reported that it expects a decrease in tonnes and ounces at the Marathon
Deposit and minimal changes at Leprechaun. Inferred Resources (all deposits) are presently defined by 1.64 Moz at 1.72 g/t. This includes 639 koz at 1.75 g/t from Berry (based on 42 km of drilling). Drilling Highlights from Today's Release (Neutral) Berry: VL-21-1181 intersected 1.72 g/t over 83m; and VL-21-1160 intersected 7.18 g/t over 13m. Victory: VGD-21-083 intersected 1.70 g/t over 26m and 1.78 g/t over 16m