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Is Scottie Resources An Under-Followed, Undervalued Golden Triangle #Gold Junior?

|About: The Scotts Miracle-Gro Company (SMG)
Summary

Scottie Resources owns and/or controls 18,544 hectares of prime Golden Triangle properties in two sizable contiguous blocks.

The seven properties are located in between properties owned by Ascot Resources and Pretium Resources.

With the gold price having soared by nearly US$300/oz., to over US$1,500/oz., (C$2,000.oz.), M&A activity will likely increase in the Golden Triangle.

Scottie Resources would likely look quite attractive to prospective acquirers.

In June I conducted an in-depth interview with Brad Rourke, President & CEO of Scottie Resources (SCOT.V). Scottie owns / controls 18,544 hectares (~45,823 acres) in the world famous Golden Triangle(“GT“) in northwestern BC, Canada. Some of the best historical gold intercepts on the company’s seven properties are; 107.1 g/tover4.18 m,108.3 g/t over 3.44 m, 2.13 m of 174.2 g/t, and 4.2 m of 70.6g/t.

Yet, these historical results barely scratch the surface of a newly expanded land package consisting of two substantial contiguous claim blocks in one of the hottest parts of the red hot GT. Since my interview, gold is up ~$220/oz. to $1,515/oz., but Scottie Resources’ share price is down 31% to C$0.145.

Both of Scottie’s sizable, contiguous land packages share borders with Ascot Resources (AOT.V). {see map below}. The 1) Bow, 2) Scottie Gold Mine, 3) (newly optioned, 100% of 4,877 ha) Summit Lake & 4) Stockproperties, totaling 8,178 hectares, are 20-30 km south of Pretium Resources‘ (PVG.T) ultra high-grade, 400k oz./yr. Brucejack mine and west of Ascot’s advanced exploration, past-producing Premier-Dilworth project.

Scottie’s second contiguous block consists of 1) Ruby Silver, 2) Bitter Creek & 3) Black Hills, a combined 10,366 hectares. These properties are west of Ascot’s Red Mountain project. A 2017 BFS done on Red Mountain using US$1,250/oz. gold returned an after-tax IRR of 32%. At $1,450/oz., the IRR jumps to 44%. And, that’s with only a 5.4-yr operating mine life.

Is Scottie Resources under-followed & undervalued?

CEO Rourke and team believe their company is worth considerably more than its enterprise value [market cap + debt – cash] (“EV“) of C$9.1M = ~US$6.9M. {see corporate presentation}. Scottie is trading at a 92%discount to the average of EVs of GT Gold (GTT.V), Ascot Resources (AOT.V) and Tudor Gold (TUD.V).

Admittedly, those companies warrant significant premiums. For one thing, they have a lot more drill results in hand. However, neither GT Gold nor Tudor have delivered maiden resources on their primary Golden Triangle properties.

Ascot has 3 or 4 projects on its combined 25,164 hectare holdings, including the recently acquired IDM Mining& Silver Coin properties. They want to produce from multiple mine sites, feeding a central mill. Ascot’s CEO recently said that he thinks AOT could reach production by the end of next year. That would draw a lot of attention to Scottie, look at the map!

Scottie’s best intercepts, and past production profile at the Scottie Gold mine property, (95.4k ounces @ 16.2 g/t gold) could prove superior to Ascot’s grade (2.826 million ounces Measured, Indicated + Inferred @ ~7.4 g/t gold). Higher grade, 10+ g/t gold, would be valuable to Ascot to mix with its 7-8 g/t mill feed.

To be clear, Scottie has a lot more drilling to do before it can provide line of sight to a meaningful high-grade resource.

Every GT junior says it’s in a great spot, some are misinformed….

There’s reason to take Scottie’s CEO and new full-time VP of Exploration seriously when they brag about their properties being situated in a top location in the Triangle. Two of the very best geologists working in the region, JoAnne Nelson & Jeff Kyba, said the following in this 2014 British Columbia Geological paper,

One of the most important mineral trends of northwestern British Columbia extends from near the town of Stewart north to the Treaty Glacier, in the western part of the Stikine arc terrane. Major deposits along this trend include KSM (Seabridge Gold), Brucejack, (Pretium Resources), Silbak-Premier, Big Missouri & Red Mountain (Ascot Resources) and Scottie Gold (Scottie Resources).”

Scottie Resources offers a compelling risk-adjusted investment opportunity. Look no further than the gold price. It was at ~$1,295/oz. the day my CEO interview was posted. Earlier this month it smashed through $1,500/oz., and is now at $1,515/oz. Gold is at a 64-month high!

“Rock Star” VP of Exploration has tremendous GT experience

In June, Scottie hired a literal, “rock star,” a full-time VP of Exploration. Thomas Mumford Ph.D., P.Geo, is an exploration geologist with a comprehensive field, technical & academic background.

He’s passionate about grassroots exploration and has 15 years’ extensive project management experience. Thomas’ expertise, much of it gained in the GT, greatly enhances the team’s ability to design cost effective, high impact drill programs.

2,000 meter / 12 hole drill program to being by mid-September

On August 20th, the company announced 2,000 meters, in 12 holes, split between the Scottie Gold mine and Bow properties, will start by mid-September. The program is designed to follow up on, and step-out from, historic near-surface high-grade intercepts at Bow. And, assess a newly discovered zone on the Scottie Gold property recently exposed from glacial retreat.

Thirteen gold-bearing vein zones have been identified between the contiguous Scottie Gold & Bow properties, but mine production was primarily from a single vein (the M-zone). {see image below}.

Highlights from Bow property historical drill hole intercepts include:

84-7: 70.15 g/t Au over 4.17 m / 91-5: 57.94 g/t Au over 2.60 m

91-6: 28.11 g/t Au over 2.64 m / 05-03: 18.48 g/t Au over 1.83 m

All intercepts reported above are true widths and are located at vertical depths of less than 45 m. No drilling has tested mineralization below 55 m in vertical depth. Management believes that the near-surface, high-grade veins pinch & swell, meaning that mineralization could be open at depth. Results are expected in late October.

CEO Rourke commented in the latest press release,

Based on the historical drilling & extensive fieldwork over the last 2 years, the initial drill program is designed to expand & confirm the geometry & continuity of high grade gold zones. The 2019 fieldwork & drill program will lead to a larger, more targeted exploration program on the Scottie & Bow properties, as well as our newly acquired Summit Lake claims in 2020.”

180K tonnes of tailings could be monetized starting next year

I estimate Scottie has 9-10,000 ounces of gold contained in tailings. Monetization of this valuable asset could start as soon as next year. Both the economics of the proposed operation and the ability to fund start-up costs have dramatically improved. The in-situ (in-the-ground) value of 9,500 ounces would be twice Scottie’s EV of C$9.1M. These ounces are above-ground, they’ve already been mined!

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Disclosure: I am/we are long SCOTTIE RESOURCES.