CIBC UpdateJune 15, 2022 Flash Research
MARATHON GOLD CORPORATION
Outperformer
MOZ-TSX, Sector: Materials
Current Price (6/14/22): C$1.62
Price Target (12-18 mos.): C$4.00
Continuing To Advance The Valentine Gold Project
Marathon provided updates on the progress at its Valentine Gold project in Newfoundland and drill results from its 2021 and 2022 programs. Marathon received its 20-year mining leases covering the Marathon and Leprechaun deposits. It also announced the execution of a credit-approved commitment letter with Caterpillar Financial Services Limited for equipment lease financing totaling US$81M. Overall, we see these as positive updates as the company continues to de-risk the project, advancing it towards development. Marathon trades at a slight discount to peers at 0.4x P/NAV vs. 0.5x.
Upcoming Catalysts: The final piece of permitting is receipt of the federal environmental assessment (EA). The EA report was made available for public review for 30 days on May 25, 2022. Following this, we expect a decision on the acceptability of the project for development to be made; a positive decision will mark the end of the EA process, allowing the project to advance to construction. We also expect an updated mineral resource estimate to be released at the end of June with the key focus being on growth of the Berry resource, not included in the mine plan, and an updated estimate for the Marathon deposit, which is expect to shrink slightly. An updated feasibility study which will incorporate the updated resource estimate and revised capex estimates is expected in Q4/22.
Mining Leases Received: The 20-year leases cover the Marathon and Leprechaun deposits and were issued by the Newfoundland and Labrador Department of Industry, Energy and Technology. These leases are a milestone in the permitting process and follow the completion of the provincial Environmental Assessment (EA) process in March.
Equipment Lease Financing: Marathon also announced the execution of a credit-approved commitment letter with Caterpillar Financial Services Limited for equipment-lease financing related to the development and operation of its Valentine Gold project. This agreement is to provide financing for the mobile mining equipment through development and into the first several years of the operation. The equipment lease totals US$81M for trucks, excavators, graders, loaders and dozers for loading, hauling, road maintenance, waste dump maintenance and primary pit support. Marathon will have access to the lease once it’s released from the federal EA process.
Drill Results: Initial results from the 2022 drill program at the Berry deposit, which will not be included in the resource update, are part of an infill program and continue to demonstrate long intercepts of high-grade mineralization. Highlights include: 8.68g/t over 16m, 1.56g/t over 40m and 3.86g/t over 13m. Drilling at the Victory deposit continues to validate the updated thesis that there is potential for new discoveries away from the previous mineral resource. Highlights include 3.85g/t over 17m, including 45.55g/t over 1m. Drilling at Berry, Victory and grassroots prospecting will be the priorities for the 2022 drill program.