The project comprises 80 kilometres strike of the prospective Cape Ray Shear, which forms part of a larger system that transects Newfoundland and hosts numerous deposits, most notably the +4Moz Valentine Lake Project belonging to Marathon Gold Corp (TSE:MOZ).
Hartleys has initiated coverage on Matador with a speculative buy recommendation and a 12-month price target of 38 cents per share.
Following is an extract from Hartleys’ research report:
Steady stream of resource growth to feed Scoping Study
Matador completed acquisition of the project in mid-2018 and prior to undertaking drilling, released a maiden JORC resource of 750koz @ 1.7g/t Au. The previous 525koz @ 2.4g/t resource was under NI43-101 guidelines and excluded the Isle Aux Morts and Big Pond deposits. MZZ then delivered a 36% increase to 1.02Moz @ 2.2g/t Au in January 2019. In February 2020, MZZ released its latest resource of 16.6Mt @ 2.2g/t Au for 1.18Moz (and 3.9Moz Ag); an 18% increase from the last resource, for US$12/oz discovery cost, and a 125% increase since acquiring the project less than 2 years ago. MZZ is contemplating a 1-1.5Mtpa open pit scenario to produce up to 100kozpa. Given the highest grades appear closest to surface, one could expect greater production in the earlier years to help with capital payback. Almost 100koz at 4.3g/t Au is present in the top 50m at the Central Zone deposits. We expect the Central Zone deposits to form initial base feed, with additional satellite ore from Window Glass Hill, Big Pond and Isle Aux Morts. Window Glass Hill has large potential for resource growth and could form the backbone of the latter half of a mine plan. MZZ is contemplating project construction in 2022, ahead of first production in 2023. A Scoping Study for the project is due this quarter. We model processing of 1.2Mtpa over 7 years to produce ~100kozpa in the first 3 years with higher-grade ore sourced from various deposits at Central. In the latter 4 years of LOM, we model ~65kozpa through the 1.2Mtpa plant, predominated fed by Window Glass Hill ore.
1.2Moz and growing
Matador has a conceptual exploration target of 30-36Mt grading 1.4 to 2.4 g/t Au for 1.3Moz to 2.8Moz across the 80km of ground it holds along the Cape Ray Shear Zone. Of this, 5km contains its 1.2Moz resource with extensions likely at depth and along strike. This 5km cumulative resource zone forms part of the 14km of ground that MZZ considers as a brownfield exploration target following recent soil geochem, rock chipping, mapping and geophysics. The remaining 66km of strike along the shear has had little to no exploration undertaken on-ground and presents an excellent target for future growth.
Very cheap on EV/Resource - Initiate with a Speculative Buy
On EV/M&I resource, MZZ is a strong buy but is still to release a formal study and hence presents some risk, as does current market conditions (i.e. Coronavirus impact); however, at 2.2g/t Au Cape Ray is the highest grade, sole open pit resource of the 45 ASX-listed companies we have reviewed. We therefore initiate coverage with a Speculative Buy recommendation. We do not write off the potential for near-term M&A, and note SBM.asx’s 2019 acquisition of Atlantic Gold and its low-grade 1.9Moz (reserve) Moose River Gold Project in the neighbouring province of Nova Scotia, for A$768M. Following a recent capital raise (A$5.2M @ 20c), MZZ is well funded to continue its aggressive exploration program along the Cape Ray Shear Zone in 2020. Our 12-month Price Target is 38cps assuming market recovery.