In a Dec. 18 research note, Canaccord Genuity analyst Eric Zaunscherb provided updates on Marathon Gold Corp.'s (MOZ:TSX; MGDPF:OTCMKTS) Valentine gold project, including the imminent resource estimate, prefeasibility study and exploration.
Regarding the resource update for Valentine in central Newfoundland, it is expected in early 2020. Marathon will incorporate in it about 270 kilometers worth of new drilling and 190,000 assay results, "25% of which are from metallic screening, an indication of a significant proportion of high-grade gold mineralization," Zaunscherb noted.
The resource update is delayed from the original year-end 2019 target, which "reflects a combination of change in priority and increased geostatistical rigor," purported Zaunscherb. "Management's focus at Valentine has shifted from maximizing ounces to maximizing grade and margin while minimizing risk."
On schedule, however, is completion of the prefeasibility study, anticipated in mid-2020, Zaunscherb relayed. With it, Marathon aims to develop a project with maximal profitability and minimal risk.
As such, the study will outline a mining operation using a conventional mill and starting at a lower throughput rate but higher grades then ramping up. Cash flow would be the primarily funding source "to capture economies of scale on lower-grade ores," the analyst noted. With a smaller plant to start, initial capex will be lower and the environmental footprint smaller, thereby affording better economics.
With this low to high grade input scenario, Zaunscherb highlighted, exploration becomes more important as high-grade ore discovered in the future could replace the low-grade ore stockpiles slated for mining later in the plan. This would postpone a required expansion of the operation and boost its economics.
The Sprite zone at Valentine could provide such high-grade ore, noted Zaunscherb. "Although Sprite will not be included in the prefeasibility study, it may find itself in the future feasibility study after follow-up 2020 drilling," he added. Recent drill results from Sprite include 7.6 grams per ton (7.6 g/t) gold over 22 meters (22m), in hole VL-19-786; 10.43 g/t gold over 5m and 4.8 g/t over 6m in hole VL-19-776; and 7.25 g/t gold over 10m in hole VL-19-780.
Canaccord Genuity has a Speculative Buy rating and a CA$2.50 per share target price on Marathon Gold, whose stock is currently trading at around CA$1.65 per share. "We give the company highest consideration at the exploration and development stage based on Valentine's size, scalability and low risk location, which make it a strong candidate for potential mergers and acquisitions activities," Zaunscherb commented.[NLINSERT]
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Disclosures from Canaccord Genuity, Marathon Gold Corp., December 18, 2019
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Required Company-Specific Disclosures (as of date of this publication)
Marathon Gold Corporation currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Marathon Gold Corporation.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Marathon Gold Corporation.
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or comanager of a public offering of securities of Marathon Gold Corporation or any publicly disclosed offer of securities of Marathon Gold Corporation or in any related derivatives.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Marathon Gold Corporation in the next three months.
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