DBG Surges 144% YTD on Qatar Collaboration and Record Gold-Copper Prices

Report Highlights

• DBG is trading at $20/oz vs the sector average of $46/oz, a 57% discount. 
• With gold and copper trading at record highs, we anticipate an increase in M&A activity over the next 12 months, as larger companies target juniors to expand their portfolios. We remain bullish on near-term prices due to escalating geopolitical and trade war risks. Upcoming catalysts include drill results, resource update/PEA, and potential M&A/strategic financing.
• The B.C. government’s recent announcement to fast-track approvals for several copper-gold projects, as a strategic response to a potential trade war with the U.S., is a highly positive signal for juniors such as DBG. Additionally, we believe Canada's reversal of a previously proposed capital gains tax increase will likely boost the appeal of resource sector investments and attract new capital inflows

Price Performance (1-year)

Portfolio Summary

Two gold-copper projects in B.C.

Hat Polymetallic Project, B.C. (100% interest)

The property, located in B.C.’s Golden Triangle, features polymetallic porphyry mineralization, hosting copper, gold, silver, cobalt, and scandium. 

The Golden Triangle is one of the most mineralized areas in the world. Located in northwestern B.C., 95 km southwest of Dease Lake, and 190 km south of Atlin

The project has access to power, water, and skilled labor

While the property is remotely located, road access could be established by restoring a historic road, should the project progress to production. In July 2024, the B.C. government and the Tahltan Central Government announced a joint $195M funding initiative to improve regional highways.

Potentially open-pittable resources totaling 5 Blbs CuEq; grades are relatively low, but in line with typical porphyry projects. Based on spot prices, copper accounts for 53% of resources, followed by gold (39%), cobalt (7%), and silver (1%)

2024 Drilling: DBG has announced results from nine holes of a recently completed 10,000m, 18-hole resource upgrade/expansion drill program.

Drilling returned high-grade intercepts over long intervals, highlighting the potential for resource expansion with higher-grade materials. Key highlights: 107 m of 1.42% CuEq, 122 m of 1.34%, and 154 m of 1.07% CuEq

These exceptionally high-grade intercepts indicate proximity to the core of the porphyry system. Awaiting results for the remaining holes

Hat Block Model 

The potential open pit covers 1.7 km by 1.9 km, with depths ranging from 0 to 0.60 km. We believe there is significant resource expansion potential as the deposit remains open laterally, and at depth

Scandium, recognized as a critical mineral, is a rare earth element primarily used in the manufacturing of super-alloys, and ceramic fuel cells 

Scandium Potential: The 2024 resource estimate excluded scandium, as the company is still confirming the potential to produce marketable scandium products. DBG estimates that the project has the potential to host 300-500 Mt of scandium at an average grade of 40 ppm (0.004%) Sc2O3, which we believe is a reasonable estimate based on past drill results. This represents a high-tonnage, low-grade resource compared to other deposits containing scandium. Management is currently evaluating the potential to produce marketable scandium products, such as scandium fluoride.

Tests show scandium can be extracted from the Hat project's tailings during copper and gold recovery, potentially yielding scandium oxide. While it is too early to predict its impact, we believe the presence of significant scandium is a key advantage, setting HAT apart from typical porphyry projects. Note that the U.S. imports all of its scandium from major producers such as Japan, China, Germany, and the Philippines, highlighting a need for domestic scandium production in North America.

Upcoming Catalysts: Management intends to complete a resource update, and Preliminary Economic Assessment (PEA), in the coming months. 

Financials

Strong balance sheet. Subsequent to Q3-FY2025, DBG completed a $1.6M equity financing. In-the-money options can bring in $9.5M

FRC Valuation 

As a result of the promising drill results, we are now using 100% of the resource estimate’s indicated and inferred resources, whereas we were previously using 100% of indicated, and 50% of inferred resources.

DBG is the most undervalued junior on our list of gold explorers, trading at $20/oz (previously $13/oz) vs the sector average of $46/oz (previously $43/oz), a 57% discount

Relative to copper juniors, DBG is trading at $0.035/lb (previously $0.020/lb) vs the comparables average of $0.046/lb (previously $0.027/lb), a 24% discount 

Using the comparables average EV/oz and EV/lb multiples, we arrived at a revised fair value estimate of $1.39/share (previously $0.77/share). We are also reiterating our BUY rating. Valuation increased due to the use of higher resources for valuation, and higher sector multiples. We believe the current undervaluation relative to peers, along with anticipated M&A activity in a strong copper market, will likely attract greater market attention to the stock. The upcoming resource update and PEA are expected to be major catalysts. We will also closely monitor any potential M&A or strategic financing, given the recent initiatives in Qatar.

Key Risks

We believe the company is exposed to the following key risks (not exhaustive):

• Commodity prices
• Exploration, development, and permitting 
• Access to capital and potential share dilution
• Porphyry projects are capital intensive