Manitou Gold: A New Exploration Story In Wawa Ontario

Summary

• Big prospective 340km² land package in Ontario.
• Backing by Alamos Gold and O3 Mining.
• Management with skin in the game.
• Uses artificial intelligence technology of Goldspot.
• Has a $c11.5mm market cap and $3.6mm working capital.

Manitou Gold ($MTU.v) is a small unknown junior explorer that works on a big 340km² land package next to the Island Gold Mine operated by Alamos in Wawa Ontario. Manitou trades on the Toronto Venture Exchange under ticker MTU.v

Location

Manitou has put together in different phases a big land package in 2018 and 2019. The company has carefully selected its land package with a clear focus on less explored parts of these secondary shears in the Michipicoten Greenstone belt. To the west the Island Gold Mine operated by Alamos can be found and situated on the East side is the old Renabie owned by Barrick that produced 1.1mm ounces at 6.6gpt until 1991. North of Manitou holds Trillium Mining Edwards and Clive, both past producing mines. Another player in close approximation is Argonaut Gold that owns the Magino deposit. From a geological point of view, considering the size distribution of the known deposits in the area, there is probably at least one 2mm+ oz deposit left to be discovered and potential for several smaller >200k oz deposits to be found with continued exploration.

source: company

Goldspot

First to recognize the potential of Manitou was Goldspot ($SPOT.v) and they partnered up with Manitou in February 2019 in a deal where Goldspot bought a stake in Manitou and where Goldsspot’s proprietary artificial intelligence and machine learning technology will be used on exploration targets. The partnership is paying off, as Manitou announced at the end of April AI-targeted drilling intercepts of 12.8g/t at Manitou's Patent property near Clive and Edwards.

source: Goldspot

Phase-1 work program and the Baltimore Deformation Zone

Manitou has been building a large land package in 2018 and 2019 and that reached completion with the Shinan Property purchase in last June. Management can turn its focus now 100% on exploration, the Manitou property has not seen modern exploration. Fieldwork conducted in the second half of 2019 was promising and not only led to the interest of Alamos that has the nearby producing Island Gold Mine, but also O3 Mining took a stake in the company.

In their phase-one drill program announced at the beginning of the year, Manitou identified five targets 1. Patents 2. Rockstar vein 3. Tracanelli Occurance 4. Stream (Stover property) and 5. Reid vein of which some results have been published in recent weeks and months. There are still results pending and expected to be announced over the summer.

While the Rockstar vein has potential, the most interesting part of Manitou is their Baltimore Zone that is seen as the fault offset continuation of the Goudreau-Localsh Deformation Zone (GLDZ) where Alamos has its Island Gold Mine producing. Manitou’s Stover property covers 12km of this incredibly prospective zone. A recent completed ground geophysical IP survey identified significant untested IP anomalies in the close proximity to the Stover occurrence which is not confirmed by historical drill data that brought out low grading results. The airborne and ground based geophysical data will be incorporated into the property database generated by GoldSpot. Following this new data integration, Goldspot will proceed to the machine learning phase of their work in order to generate their final targeting for a phase-2 exploration at Manitou's Goudreau Project.

Phase-2 and a 6.000meter drill program

The company is currently doing a phase-1 3.000meter drill program with some results still pending. While still early days, at Stover that was acquired only in June 2019, Manitou is drilling 8 holes of each 25 meters of which MTU-20-05 returned 5.5g/t for 0.5meter. The 3000meter drill program, a completed ground Mag and IP surveys and a completed airborn geophysical survey will be used in the Goldspot proprietary database to define targets that can be explored in a second phase. That is expected to start a drill program of approximately 6.000m in September/October of this year.

Management and shareholder base

Manitou is led by geologist and CEO Richard Murphy who has strengthened his management team and Board of Directors in the past two years. Donato Sferra joined as Vice President Corporate Development, but in particular the Board of Directors is of interest with Dan McCormack (ex-Malartic) adding tons of experience. After the January 2020 financing, Blair Zaritsky, CFO of O3 Mining and Peter MacPhail, COO of Alamos joined the Board of Directors.

Of note is the strong shareholder base of Manitou. In January 2020 Alamos and O3 mining took part in a $3mm financing providing Alamos with a stake of 19.9% and O3 Mining 15.7% on a partially diluted basis. Goldspot owns around 3.4% while management and other insiders own over 10% of the company. CEO Richard Murphy owns 3.5%. This leaves 50% of the shares tightly held.

In total there are 231mm shares outstanding while the number of options and warrants amount up to 87.2mm, but important to note is that exercise price comes only in at c$0.09 for the warrants and c$0.10 for the options. Management owns around 28mm options and warrants.

Balance Sheet and Marketcap

Manitou has a clean balance sheet with no debt outstanding and $c3.6mm in cash&prepaids on the balance and that allow the company to continue its exploration activities into 2021. Costs and consultation fees are in-line with industry. At a share price of $5c, Manitou has a marketcap of c$11.5m.

Conclusion

At current valuation, Manitou offers an appealing risk/reward. Downside in this $11.5mm marketcap is low as Manitou is funded and has the strong backing of Alamos and O3 Mining. Management has a decent skin in the game, half of the outstanding shares are held tight and overhang of warrants and options only kicks in at much higher levels and should not be a concern of potential selling as most of options and warrants are held by management, Alamos and O3 Mining. On the reward side there is blue sky potential. The exploration of Manitou is still early stage, but the land package is well assembled, the approximation of big deposits and early fieldwork results provide for a basis with solid future exploration potential. Shorter term a merger between Trillium Mining and Manitou would make sense to consolidate the land package east of Alamos Island Gold. Longer term and depending on further exploration successes, a takeover by Alamos would be a the logical exit scenario for Manitou.

Price target

Manitou has not joined the steep rally seen with most Toronto Venture listed junior exploration companies. A re-rate of Manitou should be twofold. One in a catch-up versus its peers and secondly pricing in exploration potential. A marketcap today of c$20mm to c$25mm should give Manitou a more fair valuation upon further exploration results. Versus today's stock price of $0.05 this implies upside to $0.085 - $0.105 per share and is the base case situation. If Manitou would be successful with further identifying the GLDZ continuation at Stover or hit grades at Rockstar in the near term, a fully diluted marketcap north of c$40mm to c$50mm seems more fair to price. That indicates a price target of $0.125-$0.15 per Manitou share.