In a Feb. 4 research note, analyst Kevin MacKenzie reported Canaccord Genuity initiated coverage on Great Bear Resources Ltd. (GBR:TSX.V; GTBDF:OTC) with a Speculative Buy rating and a CA$4.75 per share target price. The current share price is about CA$3.14 per share.
"We highlight Great Bear as a prospective investment for risk-tolerant investors," MacKenzie indicated. The mining company wholly owns "an emerging discovery with the right signature," and drilling is ongoing at Great Bear's Dixie project in Ontario. Interesting intercepts to date have been high grade, at 68.7 grams per ton (68.7 g/t) gold over 7 meters (7m), 16.8 g/t gold over 10.4m and 1,602 g/t gold over 0.7m. MacKenzie described Dixie as "dynamic" and "evolving."
As for its "signature," Dixie's structural-geological setting, mineralization type and emerging grade profile resemble those of established deposits in the Red Lake camp, characteristics Canaccord Genuity considers "fundamental precursors for a potentially substantial discovery" at Dixie, MacKenzie pointed out.
The true value of Dixie, and therefore Great Bear, has yet to be unlocked, asserted MacKenzie. "Drill testing to date at Dixie has only just scratched the surface of what may be a much more expansive gold-bearing system plunging to depth."
He purported the "potential value proposition, and associated investment thesis" greatly surpasses Canaccord's current base and upside cases. The former outlines 0.75 million ounces (0.75 Moz), 71% returns and a $4.71 per share net asset value. The latter assumes 1 Moz, 160% returns and a $7.23 per share net asset value (NAV).
The analyst clarified that "although we look to the results of near- to medium-term drilling to provide support for our applied target resources, the long-term exploration upside at Dixie is potentially much greater."
Great Bear has a strong technical team, with more than 100 collective years of experience working in Red Lake, that is "well positioned to execute," MacKenzie pointed out. It is headed by Chris Taylor, president and CEO.
Regarding its financial standing, the company has $15 million and, MacKenzie said, "an attractive share structure, with 49 million shares outstanding fully diluted." This is enough to fund the next one to two years of exploration.
As for Great Bear's upcoming potential catalysts, the primary near-term one is drill results from its 30,000m drill program. MacKenzie noted it is critical that "ongoing drilling continues to support the developing continuity of mineralization, both along strike and down plunge, within the currently identified zones of mineralization."
The analyst wrote, "With continued exploration success, we expect that Great Bear will be well positioned to issue a maiden project resource estimate in 2020."
Longer term, Dixie is a potential takeout target, potentially by another operator in the Red Lake camp. "The associated potential synergies to multiple operators within the camp significantly derisk the project's development threshold," MacKenzie added.
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Disclosures from Canaccord Genuity, Great Bear Resources Ltd., Feb. 4, 2019
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analystís personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analystís coverage universe and (ii) no part of the authoring analystís compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Required Company-Specific Disclosures (as of date of this publication):
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Great Bear Resources Ltd. in the next three months.
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