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Minnova Corp: An Interesting High-Risk/High-Alpha Gold Mining Stock.

Nov. 10, 2021 2:19 PM ETMinnova Corp. (AGRDF)4 Comments
Don Durrett profile picture
Don Durrett's Blog
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Growth, Contrarian

Seeking Alpha Analyst Since 2008

Author of How to Invest in Gold & Silver: A Complete Guide with a Focus on Mining Stocks. Expert on gold and silver mining stocks. 

Website: https://www.goldstockdata.com.

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  • A very high-risk stock for investors with a high-risk appetite.
  • Their PL project is very close to being construction-ready, with a permitted 1,000 tpd mill in Manitoba.
  • One of the lowest valued near-term gold producers in Canada.
  • They are only a $20 million bank loan away from a fast restart.
Gold bars or ingots in a row. Financial  and investment concept.

Bet_Noire/iStock via Getty Images


Are you a gold mining investor with a high-risk appetite who is looking for big alpha? Minnova Corp fits that category. Their high risk comes from challenges to financing their capex (they need a $20 million loan). However, if they can get their capex financing in 2022, the upside looks quite appealing.

I like it because they have a tiny market cap, a 1,000 tpd mill in a good location (Manitoba), and a large enough resource to produce 50,000 oz. for at least 10 years. Plus, exploration potential to increase the mine life.

Minnova Corp

Stock Name

Symbol (US)



Share Price (US)

FD Shares

FD Mkt Cap (11/7/2021)

Minnova Corp.



Late Stage Development




Minnova Corp is trying to advance their PL project (5,000 acres) to production in Manitoba, Canada. This is a past-producing mine with a 1,000 tpd mill in excellent condition. The capex to return it to production is about $30 million. The mine only operated for a single year, so the mill is in good shape.

The resource is 600,000 oz. It is both underground (6+ gpt.) and a high-grade open pit. The reserves are 250,000 oz. at 7 gpt. They plan to begin production at around 45,000 oz. to 50,000 oz. underground and then add production via an open pit (around another 10,000 oz.).

The resource is open in three directions, and management is confident that it will grow in size. This is their only project, so they will focus their free cash flow on exploration.

The feasibility study from 2017 had expected cash costs of $715 per oz. and an AISC of $942 per oz. The feasibility study after-tax IRR was 100% at $1,500 gold and 50% at $1,250 gold. So, even if the expected costs are higher, it should be an economic project. 

I always pad the feasibility cost numbers when I do my valuations because I think it is prudent to expect costs to be higher than expected. This is especially true with recent inflationary pressures. I expect cash costs will be around $850 per oz. and all-in costs (break-even) around $1,250 per oz. And to be even more conservative, I plan to use an all-in cost per oz. of $1,400 to value the company (note that I expect their costs to be below this number, and perhaps significantly). 

The location is excellent, being in Canada and a past-producing mine. The property is large with exploration potential. They think they can find at least 1 million oz., which will extend the mine life significantly.

They are targeting acquiring a loan to finance the capex in 2022. The CEO owns 10% of the shares and does not want to dilute shareholders into the ground. He has been patient, trying to get a large loan instead of using massive dilution to finance the capex. However, he does know that significant dilution will be required to obtain a loan. Currently, they are targeting a loan of $20 to $25 million. The capex will be around $30 million.

They do not want to use streaming or gold loans to finance the capex, which they think will hurt shareholder value. Strong hedging requirements are also something they want to avoid.

The mill is rated at 1,000 tpd, but can be run at lower rates. They plan to begin mining underground at 600 tpd. They can then use the excess capacity for mining open pit ore, or potentially more underground ore. They still need to permit for open pit mining (they will file an amendment after they begin mining underground, which should only take a few months to achieve).

They likely will do test mining and bulk sampling, which will cost around $5 million in 2022. This will likely be needed to get the larger loan and satisfy the bankers. They are low on cash, so significant share dilution is likely soon to complete requirements to obtain a loan.

Scorecard (1 to 10)

Properties/Projects: 6.5

Costs/Grade/Economics: 7

People/Management: 6

Cash/Debt: 3

Location Risk: 8

Risk-Reward: 6.5

Upside Potential: 8

Production Growth Potential/Exploration: 6.5

Overall Rating: 6.5


Significant upside potential.

Strong economics.

Good exploration potential.

Highly undervalued.

Good location.

A permitted mill. Low capex.

Risks/Red Flags

Risk of not obtaining a loan.

Poor balance sheet.

Management needs to prove that it can operate this mine and hit their guidance targets.

Likely share dilution.

Feasibility study is from 2017.

Very little news on their website for 2021.

Valuation ($2,500 gold prices)

Production estimate for the long term: 50,000 oz.

Cash Costs (conservative): $900 per oz.

All-In Costs (break-even): $1,400 per oz.

50,000 oz. x ($2,500 - $1,400) = $55 million annual FCF (free cash flow).

$55 million x 5 (multiplier) = $275 million

Current FD market cap: $6 million

Upside potential: 4,440%

Note: This valuation does not include the cost to finance the capex. Dilution could reduce the upside by 50%, depending on how much dilution is required. I would say a realistic expectation is about 2,500%, if they get a loan of at least $20 million and the price of gold trends to $2,500.

Investment Thesis

The risk level is significant due to their tiny market cap. It’s very difficult for companies of this size to receive large loans without significant impact to shareholder value. Usually, high share dilution is required, along with hedging and gold streams. Until they finance the capex, consider this a very high-risk speculation stock.

The key to this stock is if they can finance the capex without damaging shareholders significantly. The risk-reward is not fantastic, but as a speculation stock it is interesting. If they can get the loan, the build will not take long. That means this stock could get re-rated very quickly and then become very juicy with free cash flow coming in.

For me, the excitement is the large mill and exploration potential, along with the big alpha potential. Here is a picture of the mill.


If you want to gamble on higher gold prices and a small gold mine with big alpha potential, this one might be a good spec bet. Although, with that high alpha also comes high risk. For this reason, keep your allocation low to reduce your exposure. For big spec bets like this, I keep my allocation under .5% (less than 1% of my overall cost basis).

Analyst's Disclosure: I/we have a beneficial long position in the shares of AGRDF either through stock ownership, options, or other derivatives.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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