Going all-in on Nevada gold

By Peter Kennedy

Mindful that geopolitical volatility can be a major concern in the global mining space, GMP Securities LP is making the case for Nevada as one of the more stable jurisdictions for mining investment.

In keeping with that theme, GMP has launched coverage of four companies with key projects in Nevada, including Gold Standard Ventures Corp. [GSV-TSX, NYSE], Northern Empire Resources Corp.’s [NM-TSXV; PSPGF-OTC], Corvus Gold Inc. [KOR-TSX; CORVF-OTCQX] and Fiore Gold Ltd. [F-TSXV; FIOGF-OTCQB]. GMP has buy recommendations on the four companies for reasons that we will get to later.

In a report titled Going all-in on Nevada, GMP says Nevada has emerged as top destination for exploring, developing and producing gold companies with respect to each stage of the mining life cycle.

According to the Fraser Institute annual survey of mining companies 2017, Nevada ranks third out of 91 jurisdictions in terms of investment attractiveness. It is outranked only by Finland and Saskatchewan.

From 2010 to 2017, Nevada produced an average of 5.4 million ounces of gold annually, an amount that represents 5.7% of global production during that period.

GMP is making the case for Nevada in the belief that Nevada-based companies are more likely to be acquired than their peers in less desirable locations. It said that view is supported by the recent deals such as Hecla Mining‘s [HL-NYSE] March, 2018 acquisition of Klondex Mines Ltd. [KDX-TSX; KLDX-NYSE] and its three high-grade gold mines. The cash and stock deal valued Klondex at US$462 million.

On the same day, Alio Gold Inc. [ALO-TSX, NYSE] agreed to acquire all of the outstanding shares of Rye Patch Gold Corp. [RPM-TSXV; RPMGF-OTCQX] under a plan of arrangement deal worth $128 million.

The implication is that any or all of the companies mentioned in the report could also become takeover targets. Here’s why:

Gold Standard Ventures Corp. [GSV-TSX, GSV-NYSE]: GMP has launched coverage of Gold Standard with a buy rating and a target of $3.10, saying that Gold Standard has done what few have been able to do by consolidating a sizeable land package in one of the world’s most prolific jurisdictions. “We see Pinion-Dark Star, with resources of 2.7 million ounces, as one of the most buildable heap leach projects in the state, with more upside coming as the company continues to delineate the nearby Jasperoid, Wash and Dixie deposits,” GMP said. Gold Standard is a 12.7%-owned affiliate of Goldcorp. [G-TSX; GG-NYSE]. Another key shareholder is OceanaGold [OCG-TSX; OCGT-ASX], which has 15.5%.

Fiore Gold Ltd. [F-TSXV, FIOGF-OTCQB]: Fiore Gold, launched by financier Frank Giustra, is an Americas-focused gold producer with an initial plan to produce 150,000 ounces annually, and later emerge as a mid-tier company. Its key Nevada assets are an open pit heap leach operation known as the Pan Mine.

It also has the Goldrock property, a 200 km² land package along the Battle Mountain and Eureka trends. The company is hoping that production at Pan will increase from a target of around 40,000 ounces in 2018 to 50,000 ounces in 2019. GMP has launched coverage of Fiore with a buy rating and a target of 70 cents.

Corvus Gold Inc. [KOR-TSX; CORVF-OTCQX]: Corvus Gold’s flagship assets are the North Bullfrog and Mother Lode projects. Both are located in Nevada.

Corvus acquired a 100% interest in the Mother Lode open pit project in June, 2017. It is comprised of 65 federal unpatented mining claims covering an area of approximately 5.2 km². The project was previously mined in the late 1980s, and produced 34,000 ounces of gold, averaging 1.8 g/t gold via heap leach recovery methods. However, fluctuating gold prices forced the mine to close.

Back in September, 2017, the company launched a 13,000-metre Phase 1 drill program (utilizing three rigs). The aim was to focus on confirmation of an existing 172-hole database and establish priority exploration targets in four main zones of historic mineralization. As a combined project, North Bullfrog and Motherlode could potentially support significant gold production of 250,000 ounces, GMP said. The investment firm has launched coverage with a buy rating and target of $3.20.

Northern Empire Resources Corp. [NM-TSXV, PSPGF-USOTC]: Northern Empire has previously attracted attention amid expectations that the company can double the inferred resource at the company’s Sterling Gold property. The Sterling Gold property became Northern Empire’s flagship asset when it acquired the former heap leaching mining operations from Imperial Metals Corp. [III-TSX] in April, 2017.

The project is comprised of two claim blocks – Sterling and Daisy – which together host three former open pit mines that produced 194,996 ounces of gold from 853,984 tonnes of ore between 1980 and 2000. The average gold grade was 7.44 g/t.

The company said the Daisy claim block has indications of a large Carlin-style system, which has seen very little exploration since the late 1990s.

“With activity heating up in the immediate area near Beatty, there is also potential for future synergies with Northern Empire’s neighbours,” said GMP, which has a buy rating on Northern Empire with a target of $1.90.