Northern Miners take Beacon Securities – This morning, Arizona Metals reported latest drill results from 5 holes at its Kay Mine deposit in Arizona. These holes continue to showcase the significant potential of the deposit and of the property.
Highlighted Intercepts:
• Hole KM-23-103: 10.5m grading 6.2% eqCu including 2.7m grading 10.5% eqCu and 1.5m grading 8.9% eqCu, extending 20m north from hole KM-21-19 and 70m north of KM-22-68. It indicates the potential of a high-grade zone in the western portion of Kay Mine deposit.
• Hole KM-23-105: 7.3m grading 4.6% eqCu starting at 553.2m depth and 28.8m grading 1.2% eqCu including 2.3m grading 5.9% eqCu. The hole enhances the continuity of mineralization at an unexplored 50m gap of the central part of the deposit.
• Overall, these holes confirmed the presence of mineralized zone spanning ~175m strike and 300m in depth.
• The company has deployed a third drill rig to specifically target extensions of the high-grade mineralization around hole KM-23-103. This rig will also focus on areas with less drill density, and shallow areas above 200m depth.
The drill activities have been ongoing since February 2023 at Western target. Assays are pending for KM-23-104 and KM-23-104A.
• Although we cannot infer grades, the company confirmed visually stringer type mineralization.
• Hole KM-23-107 is currently in progress to test ~250m to the north of KM-23-104, whereas hole KM-23-108 is testing 125m south of KM-23-104.
• AMC reported that: Recent surface mapping and sampling on the West target and previously sampled at surface, returned 8.6% Cu. Nine new surface samples all returned percent-grade Cu, up to 4.9% Cu, and averaging 2.9% Cu. These samples also contained anomalous Au, up to 0.5 g/t Au. The surface strike length of mineralization exposed at surface in this area is now approximately 800 m.
With $49M cash as of Q1/23, AMC is fully funded for the remaining phase 2 and the entire phase 2 program.
Our Take: We continue to be encouraged by the fact that initial drilling at the Western and Central targets encountered VMS style mineralization. The recent results confirm VMS mineralization outside of the Kay deposit. AMC can use the recent results to vector into a core of the system where it can potentially encounter more massive sulphide zones. The impact of a discovery and defining a resource at the Central target and/or Western target cannot be understated. It can completely change the scale and scope of what is currently expected from the Kay Mine alone. The overall result of recent works is positive as the company continues to discover new areas of VMS mineralization. Any additional tonnages to that already discovered at the Kay Mine is positive to overall project economics. We only model ~20MMt at the Kay Mine for now. Given the Central and Western targets proximities to each other and Kay Mine, even a smaller discovery at either location is positive to NAV.
Valuation: AMC is trading at ~0.25x P/NAV. Our valuation is now based on a conceptual minable resource of 20MMt, through a milling rate of 1.6MMtpa and 80% base metal recovery and 60% for precious metals. We use a 0.70x NAV multiple, a discount rate of 7% and corporate adjustments to derive our price target. Our assumptions are informed by AMC’s exceptional exploration success thus far. We maintain a BUY and a 12-month target price of $10.50 per share.
Catalysts:
• Continuous drill results through FY23 from ~1,250m Phase 2 drilling program and Phase 3 76,000m drilling.
• Potentially more permitting Central and Western targets.
o Expand permitting and start EPO.
• Resource modeling underway & MRE update potentially by year end.
• General and continued exploration results through 2023.
• Potential M&A at Sugarloaf Peak.
• Further metallurgical tests.
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Clarus Securities – Additional drill results from Kay mine; 3rd and 4th holes currently being drilled at Western
EVENT: AMC announced additional drill results from 5 holes at Kay mine, all infill holes from the northern part of the deposit. Mgmt. also provided a drilling update at Western where 3rd and 4th holes are currently being drilled.
Kay infill drilling highlights
- Infill drilling intersected strong mineralization in hole KM-23-103 returning 10.5 m at 6.15% CuEq (with 2.4% Cu & 3.25 g/t Au), establishing continuity in the upper northern portion of the resource.
- Hole #105 returned 7.3 m at 4.6% CuEq, incl. 2 m at 8.7% CuEq from the central-southern portion of the deposit. This hole confirms the excellent continuity, thickness, and grade of mineralization within a previously unexplored 50-meter gap in the central part of the Kay Mine Deposit.
- AMC has mobilized a third rig for targeting extensions of the high-grade mineralization encountered in hole KM-23-103. This rig will also focus on areas with lower drill density, including the northern part of the deposit and shallow areas above a depth of 200 m.
- A maiden resource at Kay is planned for Q3/23.
- Drilling to date continues to strengthen our confidence in our estimated potential for 24 Mt (~3% – 5% CuEq cut-off grade dependent) based on 300 – 325 m strike, 800 – 900 m vertical extent (without incl. northern extension) – depending upon infill drilling. Metallurgical testing results maybe released around the same time.
Western drill update
- The first two holes, KM-23-104 and branch hole KM-23-104A, have been completed, and assays are currently pending (potentially results from #104 in June).
- We note that visual mineralization was confirmed in both these holes with #104 intersecting 63 m of disseminated sulphides containing 16 m of VMS mineralization, incl. visible chalcopyrite and sphalerite.
- Currently, hole #107 is being drilled 250 m north of #104. Also, #108 is being drilled 125 m south of #104. We note that the parasitic fold extends to both the north and south of #104.
- Down hole EM on #104A has been completed while on #107 is 85% complete. This could support identifying extensions of observed conductors from surface EM. Analysis of down hole EM is ongoing and will guide future drilling.
- Additionally, surface outcrop sampling at Western has returned significant grades of both copper (up to 4.9%) and gold (up to 0.5 g/t), extending the strike length of mineralization exposed at surface in this area to approximately 800 m.
- The surface samples suggest increasing intensity of mineralization to the north.
Conclusion – discovery at Western could drive a significant re-rating
- Drilling to date at Kay Mine continues to strengthen confidence in our estimated resource potential with upside from the extension drilling along strike and up-dip as the resource remains open toward surface as well as along strike to both the north and south.
- We believe the update expected in Q3/23 could demonstrate a resource in the range of ~24 – 30 Mt at ~3% – 5% CuEq at Kay Mine alone.
- We are very excited by the prospects at the Western Conductor target which is the largest and strongest geophysical anomaly on the property. As a result, we think Western Conductor may be as big or bigger than the Kay Mine deposit.
- We highlight that our ~C$10/share corp. NAV est. only accounts for our estimated 24 Mt at Kay Mine, providing a high floor for the valuation. Including Western Conductor target could materially bolster the project NAV.