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Summary

  • Under the radar gold mining AND exploration play in Manitoba
  • Existing mining infrastructure in place
  • Low capex required to get the mine functioning again
  • New assay technology indicates potential for higher gold yield
  • Estimates point to high positive cash flow if gold stays above $1250/oz

 

Minnova Corp [CVE:MCI / OTC:AGRDF] is a very interesting and we think undervalued gold mining proposition in Manitoba. This is not an exploration play but a mature mining prospect that could be up and running more quickly. It is a permitted mine re-start project with low capex requirements and reserves that are open to further expansion.

Minnova has the rights to the PL Mine which is a past producer with some existing infrastructure in place. It represents a fairly rare gold mining opportunity for a number of reasons.

While gold producers have the benefit of an operating mine and the associated cash flow, and can grow in value and relatively consistently, they are unlikely to produce between 5-100 ROICs. Developers have proven reserves and are working to build a profitable mine, while explorers just have the land package and are trying to establish its provenance.

Mining infrastructure already in place

Minnova is rare in that it has infrastructure in place already and an existing mine that could rapidly become profitable if gold is over $1250/oz, but it also has the prospect of unexplored additional potential reserves on the property.

There is quite a lot of extant infrastructure in place at the site already, including a crusher, fine ore bin, floatation tanks, leach tanks, a laboratory and a gold furnace. A new mine would need to pay for all that to be built. Minnova has it already.

With the prospect of higher gold prices this year and into next year, Minnova gets more interesting yet. The higher the gold price goes, the higher the annual free cash flow and cumulative free cash flow are likely to be for the project.

At a gold price of, say, $1875, the project is estimated to be able to get into cash flow positive territory in 18-24 months, possibly sooner.

The Armchair Trader is expecting more news flow this summer

We are expecting news flow coming out of Minnova in the near term to start generating further interest in the project. This includes further exploration on the property and additional discussions with lenders on project financing.

Minnova has initiated further exploratory drilling at the site. It reckons the grades found historically were understated due to the small assay sample in traditional fire assays. This means coarse gold available on site is not being captured for analysis. It is now carrying out metallic screen fire assays on the site. This is a high impact study which could cause the value of the project to be re-evaluated very positively.

For example, a 10% increase in the mineral reserve gold grade could potentially increase the project NPV from the base case of $36m to over $65m. That’s a pick up of more than 80%.

Minnova says the results to date have been encouraging, with a positive reconciliation of +10% in the MFSA assay versus the traditional fire assay grade. Where grades are greater than 3g/t the variance in the results starts to get a lot higher.

This is important because it shows that more free/coarse gold on the property holds out the prospect of a much higher yield if different processes are used (e.g. gravity recovery techniques).

Early on site drilling results

Minnova carried out drilling on the site last summer in an area SW of the PL Mill and discovered multiple high grade intercepts near the surface, as well as new mineralised structures. This is all supportive of the expanded prospecting thesis for this project.

Early results out from the January/February drilling program saw some very interesting assay results from hole M-21-069 with Au of 27.44 gpt at a depth of around 109m. Au 9.1 gpt was hit at around 81m which also looked promising. This exploration was following on from the drilling last year in the new the FW Tonalite (a major lithology that occurs in the footwall to the PL).

So what next? On the one hand Minnova is preparing to restart mining operations and expects to carry out test mining and the production of a bulk sample. This will include mining at the open pit and underground. Base line studies are also being instituted to permit the Nokomis satellite deposit with updates on this resource expected shortly.

At the time of writing, Minnova Corp had reported early results from its spring drill campaign, yielding early visible gold mineralisation at a depth of 208m. The company confirmed 1mm to 3mm grains at the margins of a 30cm quartz vein. The success of the intercept is the result of a detailed re-interpretation of historic drilling with more recent shallow drilling on the PL North mineralised structures.

Bear in mind Minnova has positive feasibility based on a gold price of $1250/oz Au and a low capex requirement compared to many other projects at this stage. Combined with a high gold price and also potential higher grades from the site, and it starts to look very attractive. Estimates currently sit at around 46,000 ounces per year for five years once the mine is up and running.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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