Introduction

This is the third instalment of the review of how valid the advice was that Crux Investor gave following a review of the plans and prospects of companies selected as subjects for Analyst’s Notes. The publication dates span from November 2022 for Skeena Resources, to February 2022 for Arizona Sonoran. It means that more than one year has passed since the most recent article. This is not much time for the mining sector, but we may be able to determine whether or not the analysts got it right or wrong. 

Skeena Resources

Analyst’s Notes Summary

As Crux Investor had used Skeena Resources Limited (“Skeena”) (TSX:SKE) (NYSE:SKE) twice as a reference point to compare peer companies against, it published an Analyst’s Notes report on 29 November 2022 to verify whether or not this company was a valid reference.

The company's main focus is the Eskay Creek deposit in British Columbia, a high-grade epithermal volcanogenic massive sulphide (“VMS”) deposit that is distinct from other VMS deposits by its high concentrations of gold and silver. Barrick previously mined the deposit underground, and the ore was predominantly processed off-site to extract gold and silver. The high grades made the operation feasible despite high operating costs and difficult metallurgy.

Skeena’s strategy has been to explore extensions of the deposit, dominantly of the much lower-grade deposits underneath and adjacent to the mudstone deposit mined by Barrick. Successfully adding resources from such deposits brings open pit mining into play, with the added advantage of the mineralisation of the extensions having less complex metallurgy.

Through much additional drilling (236 holes) by Skeena, mineral resources could be defined that are almost all in the Measured and Indicated resource confidence categories. Of these, 95% of the contained gold is present as open-pit resources. For this reason, the feasibility study completed in September 2022 considered open-pit mining only. 

The 2022 mineral reserve statement has 2.9 million ounces (“Moz”) gold (“Au”) and 76 Moz silver (“Ag”) at a grade of 3.0 g/t Au and 79 g/t Ag. These are excellent grades for an open pit operation with a prospective stripping ratio of 7.5 : 1. Small wonder the feasibility study arrived at an attractive after-tax net present value (“NPV”), at a 8% discount rate, of C$0.95 billion assuming pre-production capital expenditure of less than C$0.6 billion.

Crux Investor identified some areas of concern in the feasibility study such as the very short life of mine (“LOM”), reserve grades anomalously higher than resource grades (especially silver), metallurgy, an apparent skinny geotechnical dataset, and low input costs.

• Skeena elected a relatively high production rate for the size of the orebody, with mining completed in eight years. The relationship of mine life to throughput rate exposes the project to considerable risk from teething problems, something that is likely due to the complex nature of the deposit. Skeena is complex in terms of various host lithologies, mineralogy, hardness, deleterious elements, and varying rock mechanical characteristics. 
• The Probable Reserves have a silver grade 31% higher than Indicated Resources, a much larger upgrade than for gold, which is 16% higher. There is no obvious reason for such an upgrade, in particular as gold was the dominant factor in determining the block value. 
• Due to the many different lithologies and 11 tectonic structural domains the rock mechanical conditions are complex and it raised the question of whether or not 26 geotechnical boreholes had provided sufficient data to base a feasibility study on. 
• Similarly, metallurgy is complex, with mill feed characteristics for hardness, recovery, deleterious elements, and difficulties in achieving a sufficiently dry product widely varying. 
• Crux Investor rejected the suggested mining cost rate of C$3.25/t mined as too low considering the complex nature of the deposit, the requirement of extensive grade control measures, substantial stockpile rehandling to manage the composition of the plant feed, the isolated location, and the difficult climatic conditions. An additional 15% was included in the valuation. 
• Crux Investor also raised the processing cost rate from C$16.63/t to C$20.0/t to account for the hardness of the ore and complex process route and raised the annual G&A expenses by 25% to C$20 million. 

The calculated NPV8 of C$0.95 billion compared very favourably to the diluted Enterprise Value at the time of C$0.55 billion. This is further enhanced when the estimated value of C$67 million for the Snip project is deducted.

Subsequent Developments

Skeena has kept on consolidating its mineral holdings, which must be seen as a sign of confidence. On 28 October 2022 it acquired from Tudor Gold Corporation (“Tudor Gold”) (TSX:TUD) (FRA: H56.F) (USOTC:TDRRF) the Eskay North mineral property near Eskay for 231,404 common shares issued and a cash consideration of C$1,4 million paid in April 2023.

In April 2023, Skeena regained full ownership of the Snip prospect after Hochschild Mining Holdings Limited (“Hochschild”) decided to terminate their option agreement. The company had carried out an extensive drilling campaign with all data reverting to Skeena, which was used for an update of the Mineral Resource Estimate (“MRE”) released six months later with 0.82 Moz gold at an average grade of 9.35 g/t in the Indicated Resource category and 0.11 Moz at a grade of 7.10 g/t in the Inferred Resource category. Getting full ownership of Snip can only add to the company's overall value.

On 20 June 2023, Skeena announced an updated MRE, that incorporated an additional 278 drill holes totalling 67,885 metres, called “enhancements to the resource estimation methods” and updated metallurgical process recoveries. The company states that total pit-constrained Measured and Indicated Resources grew to 5.6 Moz at 3.47 g/t gold equivalent (“AuEq”), which represents “growth of 8%”. This statement is somewhat disingenuous as the 8% refers to tonnage. The gold content dropped by 0.8%, while silver content grew by 0.2%.

On 7 July 2023, five mineral claims around Eskay Creek were acquired from Eskay Mining Corporation (“Eskay Mining”) (TSX-V: ESK) for a cash consideration of C$4.0 million, of which C$2.0 was paid on closing, and C$1.0 million was paid on 31 October 2023, and again on 31 December 2023. The mineral claims are subject to a 2% net smelter return (“NSR”) royalty, of which 1% of the NSR royalty can be purchased at any time for C$2.0 million. 

The most important development was the release of the updated feasibility study, effective 14 November 2023. 

Table 2.2_1 compares the 2023 reserve statement to that of 2022.

The table shows that total reserve tonnage has increased by 33%, higher than the 8% for mineral resources. This means more resources were converted to reserves in 2023 than in 2022. The quality of reserves has dropped, with grades around 18-20% lower than for the 2022 reserves. The net effect is that approximately 16% more metal is forecast to be mined. 

Table 2.2_2 compares the updated feasibility study to the 2022 study. Crux Investor records that, of the areas of concern expressed in the Analyst’s Notes, the latest study has not updated the geotechnical studies and maintained cash operating costs at levels that were deemed too low. The new plan has, however, a longer pre-production period and longer LOM, addressing two other concerns. The process route has been revised to a simpler flowsheet based on additional test work during 2023. There has, therefore, been a degree of de-risking of the project.

With 16% more gold in the plant feed and slightly lower metallurgical recovery, the gold produced over the LOM is 15% higher. For silver, it is +20. This, combined with higher forecast prices, improves attributable revenue by 42%. Total unit operating cost is at the same level as in 2022. The company seems to disagree with Crux Investor’s contention in its Analyst’s Notes that operating costs are unrealistically low by even further dropping the mining cost rate. 

Initial capital expenditure has increased somewhat with sustaining capital expenditure orders of magnitude higher. 

In summary, the updated feasibility study differs in a major way from the 2022 study:

• A much higher conversion rate of metal in mineral resources to mineral reserves, results in a longer LOM and more metal produced;
• Higher metal prices;
• Higher capital expenditure; and
• After Tax, Net Free Cash Flow is 44% higher. 

Figure 2.2_1 shows the share price on the Toronto Stock Exchange (“TSX”) since 29 November 2022.

The graph shows a declining trend in the share price despite the publication of an updated feasibility study that improved on the C$1.4 billion value from the previous economic assessment. At the share price of C$6.41 on 18 April 2024, the market capitalisation is C$579 million. Still, with generous net current assets, the diluted Enterprise Value is lower at C$519 million, almost C$30 million less than when the Analyst’s Notes report was issued.

Does this mean that Crux Investor has changed its opinion?  Not at all, given that the gold price and almost all other parameters have substantially improved. Crux Investor would again include higher operating cost rates for any revaluation and arrive at an NPV5 lower than the indicated C$2.0 billion, but not enough to get close to the C$0.52 billion Enterprise Value. Skeena remains good value.

Wallbridge Mining

Analyst’s Notes Summary

On 9 December 2022, Crux Investor published a report on Wallbridge Mining Company Limited (“Wallbridge”) (TSX: WM, OTCQX: WLBMF), a company advancing the Fenelon and Martinière properties on the Detour-Fenelon Gold Trend in Quebec. Fenelon and Martinière lie within an approximately 830 km2 exploration portfolio. Both deposits are located in greenstone belts and are related to shear zones. 

The company could boast about declared total resources for both properties of 2.67 Moz gold in the Indicated Resource category and 1.72 Moz in the Inferred Resource category. 

Crux Investor’s review of exploration results identified several concerns:

• There was an evolution over time from defining small, narrow, but very high-grade gold structures in the northeast of the Fenelon project area to less frequent but more consistent NW trending gold structures to the southwest to an SE trending vein swarm further southwest in Area 51. The development strategy of the company changed from a focus on small high-grade deposits to increasingly bulkier targets;
• With the change in pitch, the presented illustrations also changed from images that started in great detail to being increasingly more broad-brush. When moving away from narrow vein targets to bulk mining targets, the key is the average grade between the veins. Wallbridge did not make a clear case for such a scenario;
• The drill fences and azimuth of drill holes were such that both the NW trending and SE trending vein swarms were intersected under a very oblique angle, thereby overstating the width;  and
• Crux Investor's close inspection of cross-sections showed good intersections, often close to drill holes above and below that are either almost barren or have very spotty mineralisation. This makes the reader wonder about the overall grade for a block around the highlighted results.

Crux Investor concluded that Wallbridge only highlighted suitable intervals for selected drill holes without placing these into the context of adjacent holes and adjacent cross-sections. Wallbridge could allay concerns by making its complete drill database publicly available or by publishing a series of detailed parallel cross-sections at short distances from each other. The litmus test will be the presence (or lack thereof) of wide intervals of potential economic grades that are vertically and laterally consistent.

Subsequent Developments 

During 2023, Wallbridge released the results of a preliminary economic assessment (“PEA) study based on a revised MRE, effective 26 June 2023, arriving at an NPV5 value of C$721 million for an initial capital expenditure of C$645 million, assuming a gold price of US$1,750/oz. The study also included an update for the Martinière project without carrying out an economic assessment. As this project is less important than Fenelon, Crux Investor has ignored it. 

Fenelon's excellent economic assessment result was mainly based on mineral resources with dramatically higher grades than the 2021 MRE. Table 3.2_1 compares the updated MRE to the 2021 MRE. 

The table shows that there have been dramatic changes between the two exercises, with open pit resources dropping to a negligible level, constituting only 3.5% of the total resources. Total contained ounces have increased by 14%, but the most noticeable and important change is the overall increase in grade to 3.17 g/t Au from 1.72 g/t Au, which amounts to an 84% improvement. With 310 more boreholes in addition to the 1,040 holes used for the 2021 MRE, more drilling was needed to explain the improvement in grade from better drill intersections alone. What change in approach caused this?  The answer is modelling high-grade zones that are much narrower than in the 2021 exercise.

The 2023 geological model includes 112 high-grade zones (in 2021 that were 60) “designed to the true thickness of the mineralization (on average down to a minimum thickness of 0.5 m but locally down to 0.2 m, depending on the assay length) and based on a cut-off grade of 1.0 g/t Au”. In 2021 the minimum true thickness was assumed to be 2.0 m. In other words; there was a tremendous assumed improvement in selectivity. The 2023 technical report continues by stating that “these high-grade zones represent mineralized structures based mainly on gold grade”. It means that high grades were connected without geological support, something highlighted as a significant concern by Crux Investor about the 2021 MRE. Wallbridge has doubled down on this issue!

Whereas Crux Investor had called upon Wallbridge to substantiate the continuity of the high-grade structures by providing parallel cross-sections with vertically and laterally consistent grade intervals, it has failed to do so in the 2023 MRE report. Figure 3.2_1 shows cross sections A-A’ where Crux Investor has enlarged two areas where continuity is distinctly poor, more so as the orange dots do not represent “high-grade” intervals, but are >0.45 g/t Au intercepts.

The 2023 MRE report shows a longitudinal section of the wireframe of the Cayenne 1 structure in the Tabasco Zones (shown in the red-brown colour in Figure 3.2_1) with grades of intercepts through the structure (refer to Figure 3.2_2). Immediately apparent is that large areas have been sparsely drilled, considering that the coordinates are 200 m apart. What is also evident is how few of the pierce points are in orange, red, and purple, indicating a grade above 3 g/t Au. Crux Investor concludes that the illustration is poor substantiation for an average grade above 3 g/t Au for underground resources.

In the discussion about Area 51 mineralisation (on the left of the section in Figure 3.2_1), the technical report observes: “Gold mineralisation is mainly associated with isolated or regularly spaced subparallel sheeted translucent grey quartz veins that are generally 1-2 cm thick and rarely up to 5 cm thick.”  This statement does not give much confidence in the validity of outlining high-grade zones. Figure 3.2_1 may illustrate large blocks of ground with grades more than 0.45 g/t Au, especially along the contact zone of Area 51, but not for blocks of ground with an average grade over 3.2 g/t Au. Contrary to addressing Crux Investor’s concern, the 2023 MRE has reinforced our reservations about the validity of the estimation methodology. 

In estimating mineral resources with Reasonable Prospects for Eventual Economic Extraction (“RPEEE”), the cut-off grades (i.e. 0.45 g/t for open pit and 1.45 g/t for underground) are determined in a manner that is very inconsistent with the resources modelling assuming continuity over large dimensions. For example, stopes with a mining shape of 10 m along the strike, a width of 2.0 m (note: not the 0.5 m used for resources), and a height of 15-20 m is assumed. This would make longhole open stoping (“LHOS”) a possibility. 

The economic analysis goes a step further and assumes that Longitudinal LHOS (for stopes 5-8 m wide) will account for 40% of production and the balance from Transverse LHOS stopes, designed for stopes with 8 to +15 m width. There is a total disconnect between the geological description of very narrow structures to an MRE based on a minimum 0.5 m width and the mining plan assuming wide deposits.

Crux Investor has not bothered to validate the PEA study, as the above indicates problems with fundamental issues. Until Wallbridge addresses these concerns, Crux Investor maintains its original conclusions.

Figure 3.2_2 shows the price performance of Wallbridge on the TSX since 9 December 2022.

The market also has a dim view of the company’s prospects. 

Orezone

Analyst’s Notes Summary

On 13 January 2023, an Analyst’s Notes were published on Orezone Gold Corporation (“Orezone”) (TSX: ORE) (OTCQX: ORZCF), the owner of the Bomboré project in the Ganzourgou Province of Burkina Faso, West Africa. This deposit is also in a greenstone belt and structurally or rheologically controlled. 

At the publication date, production had recently started after many years of exploration and studies dating back to 2006. In 2008, Orezone declared 2.7 Moz Au in mineral resources using a cut-off grade of approximately 0.25 g/t Au. The main problem was the low grade, around 0.60 g/t Au for these resources. 

In the Analyst’s Notes, Crux Investor warned that low-grade projects suddenly found to be economically feasible should be approached with extra caution. The review of the business plan highlighted the following issues:

• Some major assumptions and unusual validation underpinned the MRE;
• The project had little margin at a reserve grade of 0.69 g/t Au as the feed had to be processed conventionally and not employ a cheaper method, such as heap leaching. Whereas the material is free-dig, the strip ratio at 2.34 is not low;
• The feasibility study reached a positive conclusion using exceptionally low operating cost inputs. Benchmarking by Crux Investor of other similar operations in Burkina Faso showed that overall operating costs should realistically be 60% higher;
• Operational data from commissioning suggested that Orezone needed help distinguishing between waste and ore in mining. The limited information at the time indicated that both run-of-mine grade and strip ratios were lower than planned, indicating a blurring of the boundaries and mine dilution. Less waste, but with the result of lower average grade delivered to the stockpile; and  
• Delays in getting to commercial production had resulted in the company's difficult working capital situation, particularly cash on hand. However, decent production in December 2022 combined with a pop in the gold price meant that Orezone could start servicing its loans, which was comforting. 

Crux Investor concluded that the diluted Enterprise Value exceeded the calculated NPV₈ of its valuation by 28%. This is for a scenario without any mishaps. Orezone was, therefore, deemed to provide little upside.

Subsequent Developments

Crux Investor wants to start this section by complimenting management for the excellent reporting, except for one metric: the grade of ore mined. The Management Discussion and Analysis (“MDA”) reports are comprehensive and detailed, even providing operating cost rates for the main activities, something sorely missing in most mining companies’ operational reports. This greatly facilitated comparing the actual to the plan, as summarised in Table 4.2_1.

The table illustrates that ore production exceeded the planned rate by almost 19%, but mine production was 7% down because of much lower waste stripping. Lower stripping could be planned but also unplanned, with management needing to correctly distinguish between waste and ore, sending more waste for treatment than planned. With no information provided about the grade mined, Crux Investor cannot establish this. 

The material treated exceeded the plan by more than 10%, but the grade was almost 17% lower. 

The cost rates are well above those provided in the 2020 feasibility study, proving that Crux Investor was correct by rejecting these and adding 60% to its valuation model's total operating cost rate. The 2023 actual operating cost rate is almost 60% higher, but the individual cost rates are even higher. These much higher rates are not reflected in the overall cost rate due to lower mining volumes and the higher treatment rate. 

Table 4.2_2 below compares the actual cash generation compared to the feasibility study used for the construction go-ahead. Crux Investor has taken the numbers of production Year 2 in the feasibility study schedule as this was the first year at full production, something Orezone managed to achieve in 2023.

The first significant change evident from the table is the almost 50% higher actual gold price of US$1,940/oz compared to the forecast US$1,300/oz. It resulted in revenue exceeding the estimates by 35%. However, with higher than forecast operating costs as per Table 2.4_2, cash flow generated from operations was a disappointing US$80 million, or 18% lower than forecast. Apart from higher mine-based operating expenses, it is also explained by actual numbers, including off-site corporate expenses generally ignored in feasibility studies and ongoing exploration and evaluation costs. 

Investments exceed sustaining capital expenditures in the feasibility study, mostly because the plan includes “growth” capital expenditures and “non-sustaining exploration and evaluation costs” that are ignored. Table 4.2_2 shows that this constitutes a major cash drain exceeding the plan by more than 450%.

Feasibility studies model cash flow on a total equity basis, which explains that there is no provision under “Financing”. However, on 31 December 2023, the company had loans of almost US$122 million, of which US$33 million was due for repayment within a year. This explains the outflows under financing.

The net result is that actual free cash flow has been almost 90% lower than the US$89 million forecast. Whereas this should have been a banner year, the cash balance only increased by US$10.3 million to US$19.5 million at the 2023 year-end. This does not bode well for financing the Expansion Project.

Crux Investor’s concerns about mineral resources and cost assumptions proved valid. At this stage, there are only indications, not proof, that the operation has problems distinguishing between ore and waste, as the actual treated grade is 17%, and the reported strip ratio is 33%, lower than forecast. Shareholders cannot take comfort from Orezone, omitting reporting on mined grades.

Figure 4.2_1 shows the price performance on the TSX since the Analyst’s Notes on the subject on 13 January 2023

The graph shows that the market has taken an increasingly dim view of the company's prospects, probably aggravated by the perceived political risk in the country. The political situation comes at a cost apart from risk. Effective October 2023, the royalty rate increased from 5% to 7% when the gold price exceeded US$2,000/oz. In addition, a new levy has been introduced in 2023 of 2% on after-tax profits to raise additional funds to support efforts to improve national security. 

Arizona Sonoran

Analyst’s Notes Summary

Crux Investor published an Analyst’s Notes on Arizona Sonoran Copper Company (“ASCC”) (TSX:ASCU) (OTC:ASCUF) on 13 February 2023. 

The company is developing in Arizona the Cactus West deposit (formerly ASARCO’s Sacaton mine), the Cactus East deposit and the Parks/Salyer deposits, all in close proximity to each other. At the publication date of the Analyst’s Notes, ASCC was planning to treat the oxidised and supergene-enriched portions of the mineralisation overlying the primary mineralisation by leaching the material on heap leach pads, followed by solvent extraction and electrowinning (“SX/EW”) to produce copper cathode. The plan was to publish a pre-feasibility study (“PFS”) in Q4 2023, or Q1 2024. 

Upon reviewing the PEA, which had an effective date of 31 August 2021, Crux Investor expressed many concerns about the quality of the study, including inconsistencies between mineral resources and mineable inventory, incomplete metallurgical test work, forecast acid consumption being inconsistent with test work, and operating costs being too low. 

Despite these concerns, Crux Investor found the overall Cactus project fundamentally encouraging. Using several more conservative assumptions in addition to the basic parameters provided by the PEA, Crux Investor arrived at an NPV8 of $445 million. The project was robust at a copper (“Cu”) price of $4.09/lb, with a cash operating margin of 55%.

Subsequent Developments 

During 2023, ASCC continued drilling, mostly infill drilling, to convert Inferred Resources to Measured and Indicated (“M&I”) Resources. For ease of reference, Crux Investor shows the relative location of the various resource areas and the new exploration target called Mainspring, south of Parks/Salyer, in Figure 5.2_1.

Infill drilling focused on Parks/Salyer, where attractive grade resources that will be mineable by bulk underground methods have been found. Exploration drilling was carried out at Mainspring to the south of Parks/Salyer, which is expected to continue southward mineralisation. The infill drilling allowed the company to announce an updated MRE on 16 October 2023, with substantially more M&I Resources to the 31 August 2021 MRE. Table 5.2_1 shows the change. Please note that the tonnage is expressed as short tons, not metric tons.

The table shows that the infill drilling has converted a substantial proportion of the Inferred Resources to Measured and Indicated Resources. The small proportion of measured resources is new, and the indicated resources increased by +187%, with a grade of 9% higher. Inferred Resources dropped by almost half and the grade by 13% for 55% less contained copper. The total amount of contained copper increased by 13% without any change in overall grade: 0.543 % total copper. 

The above comparison is for resources at Cactus West open pit, Cactus East underground, Parks/Salyer underground, and the surface stockpiles. The company also provides resources for each of the deposits individually, but the same inconsistency, which Crux Investor expressed concern about in the Analyst’s Notes, is again apparent here. This seems to be partially caused by the inconsistent manner of reporting, sometimes including primary mineralisation numbers, sometimes not, and sometimes having leachable resources broken down as oxide and enriched, sometimes not. An example of the inconsistencies is 138.2 Mt Leachable Indicated Resources for the Cactus West open pit with 1.33 Mlbs Cu reported in the press release of 16 October 2023 and 147.2 Mt with 1.47 Mt Cu in a corporate presentation dated February 2024. 

The significant increase in M&I Leachable resources to almost 360 Mt (see highlighted cells in Table 5.2_1) allowed ASCC to complete a PFS based on heap leaching only. The results were announced on 21 February 2023, but the technical report still needed to be published for Crux Investor to review. The study could rely on additional metallurgical test work during 2023, addressing one of the concerns expressed in the Analyst’s Notes.

The company is now looking into adding the treatment of primary mineralisation to the project using the Nuton™ leaching technology developed by Rio Tinto. Nuton LLC (“Nuton”) has a 7.2% interest in ASCC and seems to have been encouraged by initial test work it has carried out, as in December 2023, it entered into an option agreement with ASCC in terms of which it has the exclusive right to acquire a substantial minority interest in the Cactus Project. The option agreement provides for funding of up to US$33 million payable in tranches, with US$10 million already paid, up to US$11 million payable for certain land acquisitions, and up to US$12 million payable towards test work in support of a PFS including the processing of primary resources. 

Nuton has the option to acquire between 37.5% to 40.0% of the Cactus Project (once it has made all payments) if the Integrated Nuton Case PFS (“INC-PFS”) indicates that the NPV (comment: no discount rate specified) is at least 1.39 times the NPV of the Cactus Project without applying the Nuton technologies (“the Standalone Case”). In addition, ASCC’s equity contribution to the INC-PFS project should not exceed the equity contribution to the Standalone Case, assuming 50% financing with debt. The acquisition price will be based on 0.65 x the NPV (comment: no discount rate specified) of the Standalone Case, net of any pre-payments made. 

The complex terms below make it difficult to determine how attractive the option agreement is for ASCC. However, based on the published results of the Standalone PFS, it looks very attractive. The NPV8 is US$509 million, assuming a copper price of US$3.90 and an initial capital expenditure of US$515 million. The acquisition price for Nuton would be US331 million, minus the US$33 pre-payment, leaving US$298 million. Assuming this gives Nuton a 40% stake, ASCC would have at least a US$425 million beneficial stake in the NPV₈ of the INC-PFS case, considering a minimum value of 1.39 x US$509 million = US$708 million. Again, assuming a 60% interest for ASCC, the initial capital expenditure for the INC-PFS project should be at most US $ 858 million. 

Figure 5.2_2 shows the share price performance of ASCC on the TSX since 15 February 2023.

The graph shows that the price has a declining trend, interrupted in December 2023 when Nuton entered into the option agreement. The announcement of the Standalone PFS in February 2024 was received with disappointment.

At the share price of C$1.46 on 18 April 2024, the Enterprise Value of ASCC was C$136 million, or US$99 million, which is US$9 million lower than when the Analyst’s Note was completed. The project has since only improved by adding substantial resources at a higher confidence level, additional leaching test work, completion of a PFS, acquisition of additional freehold, and a degree of endorsement by Nuton. 

Crux Investor sees no reason to change its original conclusion that ASCC is attractive. This is provided there are no future permitting obstacles, which has become an issue in Arizona lately. The company, however, holds freehold rights over the area needed for any mining operation.

Investment Return Since Publication Dates

Table 6_1 shows the returns on the various shares since the publication dates using the prices quoted on the Toronto Stock Exchange.

Crux Investor got it wrong for the companies to which it gave positive advice. Developments are slow in the mining sector, with the advancement of studies and construction of mines taking many years. There are no reasons for Crux Investor to change its opinion about Skeena and ASCC. There may be a reason for Crux Investor to change its opinion about Orezone after its sharp downgrade and the release of a new feasibility study. This will be the subject of the next Analyst’s Notes.

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