Source: Peter Epstein for Streetwise Reports 01/07/2020
Peter Epstein of Epstein Research profiles this explorer and explains why he believes it could be a take-out target.
Strong drill results have confirmed and expanded the Bend Vein target on Scottie Resources Corp.’s (SCOT:TSX.V) 100%-controlled Bow property. During September, the company completed 878 meters of diamond drilling, 2 km NE of the 100%-owned past-producing Scottie Gold Mine located in the Golden Triangle (GT) of northwest British Columbia, Canada.
Readers are reminded that Scottie Resources owns or controls 18,500 hectares, all in the GT, across seven properties, contained in two groups of contiguous parcels. Some properties border Ascot Resources (between Ascot’s Premier Mine and Red Mountain projects), others border Pretium Resources’ property south of the world-class, high-grade, operating Brucejack mine. Pretium’s enterprise value (EV) is $3.3 billion.
Very high-grade gold at Bow, Scottie Gold & Summit Lake properties
Drill hole SR19-11 hit an interval of 73.3 g/t gold (Au) and 71.0 g/t silver (Ag) (or 74+ g/t Au Eq) over 4.3 m, (true width 80%–90%). That blockbuster interval included 1.9 m of 152.5 g/t Au plus 143.6 g/t Ag, equal to 154+ g/t Au Eq. Additional drill results are expected as soon as this week. Importantly, all of the reported intervals to date are near-surface, between 25 and 85 meters in depth. The best intercept in this latest batch is between 25.5 and 30 meters.
According to Scottie’s CEO & president Bradley Rourke,
“These new assays confirm the superb results of previous studies and demonstrate a truly under-explored high-grade gold and silver target. Past drilling on the Bend Vein only probed to a vertical depth of ~55 m. Our drilling this season proves that the mineralized structure extends deeper. We substantially increased the strike length of known mineralization. Drilling in the 2020 season will allow us to further prove the scale of this structurally-controlled, high-grade vein deposit.”
Scottie’s technical team integrated historical and recent (2018–2019) exploration work into new structural models to better understand the geometry of mineralization. Prior to the company’s 2019 drill program, Bow’s Bend Vein had only 1,525 meters of drilling on it. No exploration-style drilling had been done to test along the Bend fault structure to assess the potential of a bigger system.
Management is thrilled that drilling in 2019 substantiated the very high grades contained in the historically known ore block, and extended the structure both at depth and along strike. The drill campaign (so far) has already shown gold mineralization expanding east an additional 375 meters. 2020 is off to a great start! Over the past year, management has achieved excellent bang for their exploration buck, with more results any day now.
Previous drilling on the Bend Vein returned the following select high-grade assays:
Notice that drill hole SR19-11, mentioned above, had a [grade x thickness] of 318. Compare that to these other [high-grade] intervals in the GT in 2019. Also, the midpoint of each interval’s depth is provided. Scottie’s blockbuster interval was found at 28 meters. The average depth of peer intervals is 115 meters.
Surface grab samples at Summit Lake look very promising….
CEO Rourke and VP exploration Thomas Mumford, PhD, are ecstatic over the latest drill results, and also recent surface samples from the much larger Summit Lake property.
The above surface (grab) samples were reported three weeks ago. The best eight (in green) range from 11.0 to 62.8 g/t Au Eq, and average 22.2 g/t Au Eq. There are high-grade showings of copper, lead, zinc and silver, (884 g/t = 28.4 troy oz./t Ag). Summit Lake, Bow and the past-producing Scottie Gold mine total 5,672 hectares. As can be seen in the map above, the top half of this three-property contiguous block borders Pretium.
These impressive Summit Lake samples were reported about a month after even more exciting samples were announced on November 14th. The best four samples are listed below. They come from the newly discovered Domino zone on the 100%-owned Scottie Gold mine property.
Referring to the Domino zone, VP of Exploration Dr. Thomas Mumford commented,
“These initial sample results are exciting, their distribution and high-grade nature fit spectacularly well with our working geological model. This mineralized structure will be a high-priority drill target for the 2020 field season. The potential that it may connect to the Scottie Gold Mine mineralizing system make this an exceptional discovery. Sampling of many of these sites was only possible due to significant glacial retreat in recent years. We are eager to get back on the ground to find and delineate additional drill targets.”
Scottie Gold mine property hosts past-producing mine
We already know for certain that the Scottie Gold mine property hosts high-grade mineralization, from 1981-1985 it produced over 95,000 ounces of gold at a tremendous average grade of 16.2 g/t. That’s a much higher grade than Pretium’s world famous Brucejack mine is currently producing at ~9 g/t.
In addition to high-grade production records, there are some outstanding historical drill results at the Scottie Gold mine project as well. How about 108.3 g/t Au over 3.4 meters, or 107.7 g/t Au over 4.2 meters? Not bad at all! All known mineralization on Bow and Scottie Gold, from a total of 525 drill holes, is found at shallow depths. I find it encouraging that these blockbuster grades were found across 3.4 and 4.2 meters, not merely half-meter, one-hit wonders.
Mining M&A in N. America & the gold price making big moves!
Three big gold deals were announced in 4Q 2019 alone, including Kirkland Lake’s plans to acquire Detour Gold. If Detour is taken out, Pretium would be one of the last single-asset gold companies in Canada. Brucejack, situated less than 50 km from Scottie, is one of North America’s lowest-cost, highest-margin producers.
Pretium is 234x the size of Scottie Resources. If it’s not acquired, it might try to acquire one or more GT juniors like Ascot, GT Gold, Skeena Resources, Tudor Gold or Garibaldi Resources. As an aside, Seabridge Gold is also a potential acquirer. Those companies, with EVs ranging from $84 to $217 million, could in turn look to buy a company like Scottie Resources, with an EV of $14 million.
I don’t mean to overplay a takeout thesis, but, the gold price is now at US$ 1,576/oz, up ~US$ 112/oz since U.S. impeachment proceedings and Iran / North Korea troubles commenced, and up ~US$ 300/oz from the low of 2019. Gold in $USD is the highest it’s been in 80 months. Furthermore, 2019 was reportedly the biggest year for gold mining M&A in North America since 2010.
Neighboring Pretium and Ascot valuations bullish for Scottie
Looking at the map, it’s clear why Pretium might want to acquire Scottie Resources. Or, at least move to control the three properties where Pretium and Scottie share a border. Scottie’s valuation is so low relative to Pretium’s that it might be cheaper to pursue Scottie’s properties than to drill virgin areas on Pretium’s existing footprint.
Perhaps more likely—look at the map again—Ascot certainly has a compelling reason to care about Scottie, and the company’s digestible EV of $14 million is right in Ascot’s sweet spot. Ascot has multiple projects and properties, but only one with evidence of very high-grade mineralization like that of Scottie’s Bow (new drill results), Scottie Gold mine (past production + historical drill results + new surface samples) and Summit Lake (new grab samples).
Ascot’s EV of $210 million is 15x that of Scottie, and its share price is up 85% in the past two months alone, resulting in Ascot trading at $8,631/ha vs. $766/ha for Scottie. While Ascot’s Red Mountain and Premier projects have substantially more drill holes on them, both have lower gold grades, and high-grade mineralization starting roughly 100 meters deeper than that of Scottie’s near-surface deposits.
Tudor & GT Gold have giant intercepts of sub 1.0 to 1.5 g/t Au Eq as thick as one kilometer or more. Grade x thickness readings for these assays are quite good, but drilling and mining through 1,000+ meters of rock can be costly and time consuming, especially if the projects are far from critical infrastructure.
Garibaldi’s assets in Canada are base metal (especially nickel + copper) heavy. Diversification into high-grade gold and silver could be an attractive option. With an EV of $96 million, it too could comfortably afford to make a run at Scottie. After 2020’s drill results (I believe Scottie is thinking about 5,000 meters of drilling, subject to adequate funding), the company will be well more advanced.
Soon after 2020 drill results, one or more resource estimates likely
Within 12–18 months, management should be able to deliver a robust NI 43-101 compliant resource estimate from one or both of the Scottie Gold and Bow properties. In 2H 2021, shareholders might receive a third-party Preliminary Economic Assessments (PEA). In my opinion, Scottie could secure a JV or farm-in partner as soon as next year, upon which time funding requirements would drop dramatically.
Located at the southern end of the GT, Scottie’s properties are an easy drive of about an hour, on paved roads, from Stewart, BC. For the most part, infrastructure in the southern portion of the GT is significantly better than the middle and northern regions.
Conclusion
With gold prices and M&A activity up substantially, all eyes are on the Golden Triangle. However, not all of the GT juniors have had recent drilling success. Not all are focused on shallow, high-to-ultra-high-grade gold deposits. Not all have good infrastructure. Not all own or control 100% of sizable land packages. Not all have enterprise values of $14 million or less.
Scottie Resources (TSX-V: SCOT) is blessed with many positive attributes and has successfully advanced its flagship properties very nicely in 2018–19 with limited capital expenditures. There have been three major initiatives over the past several months, and three fantastic outcomes.
1] great new drill results on January 3rd at Bow, 2] excellent surface samples on the Scottie Gold mine property and 3] great grab samples at Summit Lake. This is a company to watch closely in 2020. In fact, watch closely the rest of January, as further drill results are imminent.
Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University’s Stern School of Business.
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