What Will Make Market Notice This Gold Company?

Peter Epstein

FenixOro’s Colombian gold challenge is simply 15km from a world-class, high-grade gold mine that the staff’s COO helped uncover and develop earlier than it was offered for CA$1.4 billion. FenixOro believes it has an identical mine within the making with probably 6 to 10 million ounces of medium or high-grade gold, but the market values the corporate at CA$14 million.

I’ve been following, writing, and located myself invested in FenixOro Gold Corp. (FENX:CSE), an exploration-stage firm targeted on Colombia, for almost two years now.

For the previous 12 months, the valuation has been caught within the CA$12-CA$24 million vary (present Enterprise Worth [EV] market cap + debt – money} = ~CA$14M). Throughout this time, the gold value has been as little as ~$1,675/oz. Now, at ~$1,855/oz., it’s inside 11% of an all-time excessive.

In prior articles, I’ve talked about that the most effective analog mine to the Firm’s 100%-owned Abriaqui challenge is Zijin Mining’s Buriticá mine ~ 15km away. Buriticá was acquired by a Chinese language agency for CA$1.4 billion in late 2019, (when gold was ~$1,550/oz.), however at present costs, the after-tax NPV from its Financial institution Feasibility Examine could be ~CA$2 billion.

With out overstating the favorable comparisons of Buriticá to Abriaqui, each deposits have higher than 140 intently spaced, slender high-grade veins in corridors a whole lot of meters broad, blended with areas of lower-grade mineralization.

Each take pleasure in mineralization over substantial vertical extents (1,200+ meters) and are open at depth. Each are close to the northern finish of the 200km Center Cauca geologic pattern, the place greater than 80M ounces of gold have been found since 2007.

The next picture reveals Buriticá’s most important useful resource in comparison with Abriaqui. Discover that 12 million-plus ounces are hosted on about one-third the dimensions of FenixOro’s challenge. Buriticá’s total land package deal is larger than 70,000ha, however the gold being mined is contained in a small fraction of the general property.

That is what vertical extents of over 1,200 meters for each Buriticá and Abriaqui can ship—tens of millions of ounces on small footprints.

Supporting that CA$2 billion benchmark is Newcrest’s acquisition of Pretium for CA$2.8 billion. Adjusted for Pretium’s larger annual manufacturing, the read-through for Buriticá’s valuation can also be ~CA$2 billion. Buriticá is marked-to-market at ~143x FenixOro’s [pre-maiden resource] Abriaqui challenge.

An enormous differential like which may make sense within the depths of a bear market, however not in what seems to be a bull market in gold. Take into account the choice worth alone of a challenge that (mgmt. thinks) might host 6 to 10 million ounces [assuming the Southern Block (SB) is as well mineralized as the Northern Block (NB)].

Final month administration introduced its highest grade ever, a mine channel pattern of 425 g/t gold, and the invention of a Central Zone (CZ), which is a lateral extension of the NB. Along with the 425 g/t pattern, 5 others grading over 50 g/t have been discovered to date. Three preliminary holes within the SB every intersected seven to 10 veins with a number of slender intervals of higher than 10 g/t gold.

Though early days, the useful resource potential within the newly outlined CZ is promising with the newly drilled interval of 1.25m @ 23.55 g/t.

The next is a quote from the Might ninth press launch, In administration’s view, these developments are important and underscore that we’re nonetheless within the early levels of absolutely understanding the challenge’s final potential. New zones and extensions of present zones proceed to be found.

Partial outcomes from preliminary drilling on the SB point out that many extra veins have been intersected than indicated from floor and mine mapping. The world is 200-400 meters larger in elevation than the NB and CZ.

Administration experiences that mine samples within the SB recommend a considerably larger silver to gold ratio than within the NB (~15:1 vs. ~2:1), plus elevated copper values. The SB has but to be meaningfully drilled, however just like the NB, administration believes it might host tens of millions of ounces.

Since 2020, 11,663 meters have been drilled on the challenge. As reported on a Might seventeenth funding name, administration believes there’s sufficient smoke (however no hearth) to deduce 3-5 million ounces of gold on the NB alone. Having mentioned that, the Firm has but to ship a maiden mineral useful resource.

Traders don’t share administration’s assured, optimistic view. In the event that they did, the valuation could be a lot larger. They seem like holding out for extra proof of a medium-to-high grade, multi-million-ounce useful resource. They need to see wider intercepts COMBINED WITH excessive grades, maybe just a few 100+ [g/t gold x meters] intervals.

When Buriticá filed its maiden mineral useful resource estimate (MMRE) in September 2011 it contained 3.13 million Indicated + Inferred ounces of gold at a weighted common grade of 12.3 g/t (primarily based on 54,200 meters of drilling). To date Fenixoro has drilled ~21% of the variety of meters that produced Buriticá’s MMRE.

Nevertheless, Fenixoro is drilling with the data of Buritica’s geology and construction—Buriticá had no analog mine to emulate. That’s an enormous distinction. I imagine that administration ought to have the ability to ship an MMRE of 1 million-plus ounces subsequent 12 months.

Some buyers might not impressed with 1M oz. when administration is pointing to the opportunity of 6 to 10 million, which is why the Firm’s valuation languishes.

On the investor name, CEO John Carlesso talked about that Majors have been watching Fenixoro’s progress. That implies there are at the very least two methods to win right here. First, just a few blockbuster intervals, and second a strategic funding from a mid-tier or a Main. Both or each of these occasions might occur this 12 months.

Bonanza intervals from the NB, SB, or CZ would pressure buyers to rethink the potential scale of the general Abriaqui challenge and to take comparisons to Buriticá much more severely. A strategic funding on the challenge stage would alleviate the worry of steady capital raises and could be a powerful vote of confidence in Fenixoro’s staff/challenge.

Fenixoro shouldn’t be the one gold junior that has been crushed in latest months. Even after substantial sell-offs, 9 high-grade juniors within the chart beneath are buying and selling at a median EV/useful resource of CA$44/oz. On common, these friends are down 53% from their 52-week highs versus -59% for Fenixoro.

There are surprisingly few high-grade juniors with present NI 43-101 compliant assets. I estimate that lower than 5% of exploration-stage firms have useful resource grades of 5+ g/t gold. The 9 names I selected are consultant of the universe of pre-PEA names.

I excluded extra superior initiatives buying and selling at larger valuations, firms like Sabina Gold & Silver Corp. (SBB:TSX; RXC:FSE; SGSVF:OTCPK), Skeena Assets Ltd (SKE:TSX.V), and Osisko Mining Corp. (OSK:TSX).

Since Fenxioro is pre-MMRE, it deserves to commerce at a reduction to the CA$44/oz. common (for its exploration goal). Based mostly on drilling on simply FenixOro’s NB, and its proximity and similarities to Buriticá, there’s little question that tens of millions of ounces are attainable.

It’s a matter of how nicely linked the 140+ slender, high-grade vein techniques are—the challenge’s continuity—and the (decrease) grade of surrounding mineralization. If the interceding materials averages 1.5-2.0+ g/t, that’s nice, however below 1.0 g/t would make the challenge much less thrilling.

If the corporate might delineate a two-million-ounce useful resource and commerce at CA$22/oz. [half the peer average], the inventory could be a triple (not incl. fairness dilution between now and supply of a 2m ounce useful resource).

As I’ve said in different articles—if administration can delineate even 1m ounces in a fashion that validates the calculations of its exploration goal, then buyers would have line-of-site to a a lot bigger useful resource.

The SB has been described as having the identical mineralized potential because the NB. What number of initiatives all over the world have the potential to be each 6m+ ounces and greater than 5 g/t Au? Please take a second to assessment the friends. a useful resource of 6 – 10 million ounces could be large.

How a lot would a producer pay for a good shot of higher than 6M+ ouncesat greater than 5 g/t? A participant with a valuation nicely into the billions of {dollars} might simply afford a a number of of FenixOro’s present CA$14 million EV to broaden its presence in-country or to ascertain a contemporary begin in Colombia.

Not solely would an acquirer receive a really promising (exploration-stage) asset, it could keep away from years of helpful time spent discovering and buying property, doing preliminary research, profitable area people assist, allowing, and drilling (and ready for outcomes) to achieve the stage that FenixOro is at in the present day.

The share value efficiency of FenixOro Gold Corp. has been a disappointment, however it’s not alone in its important sell-off in latest months. Nevertheless, a budget valuation (albeit with appreciable dangers), presents buyers the chance to step in forward of hoped-for large information [a strategic investor and/or blockbuster drill results].


Peter Epstein is the founding father of Epstein Analysis. His background is in firm and monetary evaluation. He holds an MBA diploma in monetary evaluation from New York College’s Stern Faculty of Enterprise.

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