RE: broker19 Aug 2020 12:28
1/ New zone of breccia mineralisation discovered
As we stated in our initiation report, the high-grade sulphide zone is surrounded by a lower grade breccia hosted mineralisation which has a footprint of 550m in length and widths in excess of 100m, with a vertical extent yet undefined. The highest grades in the breccia zone occur immediately adjacent to the sulphide zone. In addition, a new breccia zone was discovered to the north west with the holes HAD046W1 and HAD066 reporting 134.6m @ 2.5 g/t Au, 0.07% Cu and 82.1m @ 2.4g/t Au, 0.08% Cu respectively. The two breccia intercepts are 100m apart. Whilst it is too early to gauge the dimensions
of this north west breccia orebody, the identification of this zone illustrates the large-scale footprint of the breccia mineralisation at Havieron leading to a potential bulk mining operation in the future. We expect further data over the
coming months will likely allow us to model a larger block caving operation at Havieron, potentially providing a further boost to our DCF valuation.
2/ Limited execution and funding risk for Greatland
We have updated our internal mineral inventory estimate based on the updated sulphide zone footprint based on newly defined 3 levels in addition with the recently released drill results. Our new mineral inventory estimate is 4.2 Moz Au @ 6.4 g/t and 120 kt Cu @ 0.6%, which is a 5.5% decrease by in gold resource and a 4.4% decrease in gold grade. We expand on our re-calculation of the gold inventory later in this report.
3/ Valuation– GBp17.8 per share valuation implies 46% upside
We update our Greatland Gold valuation based on the updated mineral inventory estimate as well as an increase in our gold price forecast from US$1,700/oz to US$1,950/oz, inline with the current forward curve and Bloomberg consensus estimates. This boosts our DCF-based valuation of Greatland’s eventual 30% stake in Havieron to US$709m from US$541m (unrisked). In addition, we increase our ascribed value for Greatland Gold’s other assets – including the Scallywag prospect on which a new drilling programme was announced today - from US$50 to US$100m based on the significant increase the average valuation of gold juniors in the Paterson province, as well as potential value in the breccia zone which has yet to be
included in our Havieron DCF. After adjusting for net cash and G&A expenses, our updated target valuation on a risked basis is US$795m or GBp17.8/sh, up from GBp12.9/sh. In our view, the most significant potential catalyst over the next 12 months remains the maiden JORC resource, expected before the end of 2020. Further increases in the gold price in the current bull market are also likely to have a positive effect on the Company’s shares.
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