TD UpdateTarget $3.50
Event This morning, Marathon announced the results of an updated Resource Estimate for its Valentine Gold Project (100%) in central Newfoundland. The company will host a technical session today at 10:00 AM (Webcast Link).
Impact: MIXED Recall, management previously reported that overall ounces were expected to increase with the inclusion of Berry. However, the company expected a decrease in tonnes and ounces at the Marathon Deposit and minimal changes at Leprechaun.
We note, MOZ shares have underperformed since April 1 (MOZ shares down 56% vs. the GDXJ down 36%). In our view, this was partly due concerns around this resource update.
M&I Resources increased to 3.96 Moz (up ~26%) at 1.90 g/t, up from 3.14 Moz at 1.72 g/t (April 2021). Overall ounces increased as the addition of Berry (+1.09 Moz) more than offset a decline at Marathon/Leprechaun (-0.27 Moz). Resources were estimated using a US$1,800/oz gold price (US$1,500/oz previously).
Inferred Resources decreased to 1.10 Moz (down ~33%) at 1.65 g/t, down from 1.64 Moz at 1.72 g/t.
As a reminder, the company’s immediate focus is on the Leprechaun and Marathon deposits (Berry is not in the current mine plan), where the April 2021 FS outlined Reserves of 2.05 Moz at 1.36 g/t. Marathon plans to complete an updated Feasibility Study (FS), which will include a new reserve update, in Q4/22. Management previously reported that it expects that LOM capital and operating costs to be between 15%-20% higher than the April 2021 FS. We currently model pre-production capex of $375mm (April 2021 FS estimate of $305mm).
Marathon also reported "High Grade” open-pit M&I Resources (greater than 0.7 g/t Au and designated as direct mill-feed in the Project’s mine plan) of 3.4 Moz Au (+28% in ounces compared to the previous estimate). We look to get additional color during today's technical session for possible implications to the new mine plan.
As at March 31, Marathon reported $73mm of cash and no debt. Anticipated Timeline
Possible Release from Federal EA Process — Mid-2022E
Updated Feasibility Study — Q4/22E