NEW YORK, NY / ACCESSWIRE / February 9, 2016 /
Metanor Resources Inc. (TSX VENTURE: MTO) (OTC: MEAOF) (Frankfurt: M3R) is the subject of
two newly released analyst advisory reports; one from mining analyst Jay Taylor
of Hard Money Advisors Inc., upgrading MTO.V from 'Watch list' to 'Buy', and one from mining analyst Mr. Thibaut Lepouttre, Managing Director at Belgium-based mining and commodity
research BVBA firm Caesar (managers of Caesars Report mining newsletter).. Metanor is a commercial gold producer at its 100%-owned Bachelor
Gold Mill in Quebec. Over the last few months Metanor has released a series of
stellar drill results from its new South Zone/Moroy Property located south of
the pluton, only ~900 meters south of the headframe at Bachelor (e.g. 10.1 g/T
Gold over 26.2 m, 6.7 g/t Au over 38.4 m, 18.9 g/t Au over 5.6 m, 15.3 g/t Au
over 6.6 m), in the BVBA report the analyst extrapolates results to date and
sees potential* for 1,000,000+ new high-grade gold ounces from the South Zone.
Mining analyst Jay Taylor of Hard Money Advisors released an advisory to his
paid subscriber base on the merits of establishing a long position in MTO.V and
recommended with a US$0.15/share price target for MEAOF (~$0.20 Canadian on the
TSX Venture Exchange for MTO.V; MTO.V is currently trading ~5 cents CDN). Mr. Taylor has a business MBA in Finance & Investment, in-depth accredited
studies in geology, has decades of mining sector analysis under his belt, and is
known for being reserved in his advice. Full copy of Mr. Taylor's advisory along
with chart and additional insight may be viewed at
http://sectornewswire.com/MTOJayTaylor-Feb-2016.pdf online.
Excerpts from Jay Taylor's February 2016 advisory on Metanor:
I placed this company on my watch list and published a report in my June 19,
2015, weekly letter when it was trading at slightly over US$0.03, a price level
where it remains still now. I am actually adding this to my "buy" list now,
despite its large number of outstanding shares and despite a less-than-stellar
history in owning this stock. To top it off, the company has increased its
shares outstanding by more than 18% since then. However, I believe the chances
of doubling or tripling the value of your investment if you can pick these
shares up in the US$0.03 to $0.04 range are very good, given the following
factors:
1) Assets are undervalued. At its current price, not only does the company's
book value far exceed its market cap, but even its value in a "fire sale" would,
in my view, be equal to or beyond the current market cap of the company. That's
because, it's fair to say, its value even in a fire sale is more or less the
current market cap of the company. Its Bachelor Lake efficiently operating
800-ton-per-day mill, which is situated in the middle of Quebec's greenstone
belt gold mining country where numerous known small gold deposits exist, which
in addition to production of its own, can provide toll milling services.
2) Cash flows should turn more positive this year. The company produced 8,060
ounces of gold for the quarter ending 9/30/15. The company showed a loss of C$2
million, but on an EBITDA basis, it generated a positive cash flow of C$1.3
million despite a lower grade and the continued sale of 20% of production to
Sandstorm at US$500/oz. The company's operating performance should improve
beyond the current quarter as it starts gradually to mine higher-grade material
from the Hewfran sector of the Bachelor Mine, which is the area to the west of
the light brown angled line shown in the illustration above.
3) The new Moroy Discovery located one kilometer from the Bachelor Mine and Mill
looks like it could add a significant high-grade resource to the company in the
not-too-distant future. Hidden under approximately 10 meters of overburden,
significant intersections like 3.3 meters grading 9.8 g/t, 6.6 meters grading
15.3 g/t, 0.6 meter grading 11.5 g/t, and 7.4 meters scoring 4.5 g/t give reason
for optimism. Structural analysis as well as down hole IP readings suggest at
least several hundred thousand higher-grade ounces may be hosted in this
deposit, though that can only be determined by more extensive drilling.
Unfortunately, any gold production that would come from this deposit is subject
to the Sandstorm agreement. But the proximity of what looks to be a higher-grade
deposit extending to surface and located within a kilometer of the Bachelor Mill
may provide additional mill feed that could enhance the economics of Metanor's
operation.
4) Planned production from the Barry Deposit should enhance the company's
economics of production despite the cost of hauling the company's ore some 116
kilometers to the Bachelor Mill, for at least two reasons. First, any gold
production from the Barry open-pit mine is not subject to the Sandstorm
agreement, which would subject Metanor to selling 20% of its production for
US$500. Secondly, the addition of this lower-grade feed to the higher-grade
Bachelor/Hewfran ore would help lower unit costs overall. Previously, when
Metanor produced some gold from the Barry Deposit, there was no higher-grade
mill feed from Barry over which costs could be shared with feed from the Barry
Deposit. Now, with higher-grade production (5 g/t to 6 g/t) from Bachelor/Hewfran,
and with production from Barry not subject to the Sandstorm agreement, overall
economics should improve.
THE BOTTOM LINE
Given this company's current assets, it's difficult for me to see much if any
downside risk from the company's current share price of US$0.03. On the other
hand, given the positives noted above, combined with a gold price that may
indeed be ready to resume its secular bull market that was interrupted in 2011,
I think it is highly likely we will see at least a double from the current price
and a distinct possibility of a rise upward to and beyond US$0.10, which would
provide more than a triple for those who buy these shares now. Longer term, if
management can start to grow this company with internally generated cash funds
and increase production from Barry, an upside considerably beyond US$0.10 is
possible. However, given the company's current assets, plus all it has going for
it in terms of its exploration potential and the potential to combine its assets
more efficiently under a well capitalized company, my view is that Metanor will
become a takeover candidate by Osisko Gold Royalties or another major operating
in Canada, and a sweetener for a suitor would be a tax loss of $15 million. If
I'm right and gold is now starting out its next leg up in this secular bull
market, a move upward into the US$0.06 to US$0.15 range could come sooner rather
than later.
A couple years ago Mr. Lepouttre, Managing Director at Belgium-based mining and
commodity research BVBA firm Caesar, made Metanor his top Canadian pick and personally
conducted a site visit. Currently trading with a market cap ~$17 million - ~$21
million he believes Metanor presents exceptional upside opportunity. Full copy
of the BVBA advisory may be viewed at the following URL
http://marketequitiesresearch.com/marketbulletin-mto-feb-2016.htm online.
Excerpts from BVBA February 2016 advisory on Metanor:
...As the grade should increase again over the next few quarters, so will the
operational cash flow on the back of the higher production rate. The weak
Canadian Dollar is now working in Metanor's favor, but the production rate will
have to increase again to reach the free cash flow neutral/positive stage again.
If we would reach a production rate of 10,000 ounces per quarter again in the
next few quarters, Metanor Resources will very likely be able to generate quite
a bit of free cash flow as our estimates would point in the direction of C$5M of
free cash flow at a gold price of C$1575/oz.
But after Metanor's most recent exploration update, our focus has shifted a bit
from the production-story to the exploration story, as a recent IP-survey and
follow-up drill program has uncovered a potential new game-changer.
A new exploration target might boost the company's valuation again:
As Metanor continued to explore on its rather extensive and promising land
package, a new exploration target suddenly popped up on the company's radar
screen, and Metanor is now even so optimistic to call the Moroy target 'the next
gold mine'. This target was discovered through an IP-survey that was conducted
below the tailings facility of the Bachelor Lake mine.
Fine, that's an interesting description, but what exactly is this exploration
target and what could it mean for the company's total operations?
Moroy is located less than one kilometer away from the Bachelor Lake mine and
this means it already ticks our first and second boxes. The first box is the
proximity to the mill. As the IP-target identified a specific zone of interest
very close to an existing, permitted and operating mill, Metanor Resources won't
have to figure anything out on the processing front, and the haulage distances
will be negligible.
A second box is the proximity to the existing underground developments at the
Bachelor Lake mine. As the Bachelor Lake shaft and the underground workings at
the mine are also extremely closeby the Moroy zone, it would make a lot of sense
to just push an exploration drift from the Bachelor Lake mine towards this new
Moroy zone as it will be cheaper to conduct an underground drill program rather
than continuing to drill holes from surface (as the sweet spot of the IP target
is located approximately 600 meters below surface).
The discovery hole was already very interesting (with an intercept of almost 6
meters at 10 g/t gold) in hole 15-14, but we weren't too excited just yet. And
then we talked to the company's management team at the past Cambridge House show
in Vancouver. Metanor now has an exploration target of 500 meters by 570 meters
(and the most aggressive expectations are now pointing in the direction of a 500
X 700 meter zone of interest), and is assuming an average width of 4 meters.
That's roughly in line with the first exploration results at Moroy which
returned for instance 6.6 meters (true width: 3.6 meters) of almost half an
ounce (!) of gold per tonne of rock, as well as 10 meters at 5.4 g/t (with a
true width of 8 meters!). These exploration results are very intriguing and as
the higher grade mineralization seems to be starting close to surface, Metanor
could still upgrade the current exploration target as the Moroy mineralization
could be more widespread than originally thought.
If we would now base a rough exploration target based on a 500 X 600 X 4 meter
target zone, this zone would contain 1.2 million cubic meters of ore. Using a
density of 2.65 tonnes per cubic meter, we are talking about an exploration
target of 3.2 million tonnes of rock. It's of course way too early to discuss
numbers, but if Moroy would have an average grade of 6 g/t, these 3.18M tonnes
of rock would contain almost 600,000 ounces of gold.
Should the internal target of 500 X 700 meters be realized, this exploration
target would increase to in excess of 700,000 ounces of gold. We compiled a
table with different tonnages as well as average grades to give you a better
idea of how sensitive the total amount of ounces is versus the total tonnage and
average grade. [see table online at
http://marketequitiesresearch.com/marketbulletin-mto-feb-2016.htm]
Again, these are just preliminary back of the envelope calculations and Metanor
will have to spend quite a bit of cash to drill the mineralized system, but we
just wanted to explain how interesting this target really is. 2016 will be a
very important year for Metanor on the exploration front as the Moroy project
has the potential to increase the mine life of Bachelor Lake quite
substantially.
The deal with Sandstorm Gold:
As you might remember, Metanor Resources has signed a deal with Sandstorm Gold (SSL.TO,
SAND) whereby Sandstorm acquired a gold stream on the ounces produced at
Bachelor Lake. According to the original agreement, Sandstorm is entitled to
purchase 20% of the Bachelor Lake production rate at a fixed cost of US$500/oz.
Of course, the most important question on our minds was to know whether or not
Sandstorm Gold would also be entitled to receive proceeds from any potential
future production of the Moroy target. According to Metanor Resources'
management team, this is indeed the case, as Sandstorm would be entitled to 20%
of the ounces that will be produced from ore zones within a 1.5 kilometer radius
from the Bachelor Lake shaft.
If Moroy turns out to be what it looks like, Metanor could be a very interesting
acquisition target:
We would like to take a step back now and have a look at the bigger picture.
Bachelor Lake by itself had a short mine life and the Barry project (which
contains in excess of 780,000 ounces of gold) was too low grade to truck the ore
from Barry to the Bachelor Lake mill.
This doesn't mean the Barry project is worthless, not at all. The production
stop only means the trucking distance was too far compared to the average grade
of the Barry project, so the economics didn't make any sense. But you should
also keep in mind the production was ceased when gold was trading at C$1200/oz,
whereas we're closing in on C$1600 per ounce right now, so the economics of
trucking the ore to Bachelor Lake could be looking much better.
This does NOT mean the economics of a new mill at the Barry project (or perhaps
just a concentrator to upgrade the ore before trucking it to Bachelor Lake) will
be negative as well, and we would actually expect Barry as a standalone project
to be quite profitable as the grade is in excess of 1g/t and the weak Canadian
Dollar is definitely providing a very nice tailwind for Metanor Resources.
Not only is this exciting for Metanor's shareholders, we're certain the
developments on Metanor's exploration front will also draw a lot of attention
from other companies that are either active in the Abitibi greenstone belt or
would be interested in gaining exposure to a safe region with proven gold
production. Barry has the potential to be enormous and the new Moroy zone is now
also shaping up to become a new source of high-grade underground material that
could keep the Bachelor Lake mill up and running.
In any way, Metanor Resources now seems to be fully focusing on bringing a
second asset into production to reduce its reliance on the Bachelor Lake mine.
Barry seems to be the easiest solution as Metanor can simply truck the ore to
the mill. But should Metanor find a decent average grade at Moroy, developing
that zone could be more exciting.
Conclusion:
Metanor Resources seems to be moving away from a pure production play towards an
exciting exploration play supported by a pretty decent gold production at the
Bachelor Lake mill. It will be important to indeed increase the average grade of
the ore that will be processed at Bachelor Lake as it obviously doesn't help
anyone if the mine is losing cash.
Our first impressions of the new Moroy gold zone are quite positive, and the
size of the IP hotspot might be even larger than what we were anticipating and
the potential to discover at least half a million more ounces of gold is
actually very realistic now. Metanor is now waiting for the ice bridge to be
completed before it will go back in with some drill rigs to gather more
information about this 'area of interest'. After having closed a C$3.5M
placement, Metanor can spend quite a bit of cash on defining how big Moroy could
be.
Yes, the company has a lot of shares outstanding, but with an operating mill, an
exciting exploration target at Bachelor Lake and almost 1 million ounces of gold
at Barry (which is still open in most directions), the current market
capitalization of C$17M (and enterprise value of around C$30M), Metanor is still
very reasonably priced. And should Moroy confirm our expectations, there's no
reason why this stock couldn't go back to a double-digit share price.
This release may contain forward-looking statements regarding
future events that involve risk and uncertainties. Estimates of potential made
by the mining analyst are non 43-101 and not from the Company. Readers are
cautioned that these forward-looking statements are only predictions and may
differ materially from actual events or results. Articles, excerpts, commentary
and reviews herein are for information purposes and are not solicitations to buy
or sell any of the securities mentioned.
Contact information:
Simon Levinson, Managing Director
Market Equities Research Group
s.levinson@marketequitiesresearch.com
SOURCE: Market Equities Research Group