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We believe the recent drill program has identified additional resources at the Camp and Sveinson deposits, and confirmed mineralization at the George Lake and Cole Lake targets, which were not included in the previous resource estimate completed in 2022.
Drill holes returned multiple high-grade intercepts, including bonanza grades of over 2,000 g/t AgEq.
Management is planning a 20-hole, 6,500 m drill program primarily focused on the George Lake target. We are anticipating an updated resource estimate in 2025.
We maintain a positive outlook on gold/silver in light of the anticipated rate cuts by the Fed in H2-2024. In addition, we believe inflation will remain above its historic average in 2024.
M&A activities in the junior gold sector are on the rise. Notable transactions include Calibre Mining’s (TSX: CXB) acquisition of Marathon Gold for $345M, Dundee Precious Metals’s (TSX:DPM) acquisition of Osino Resources (TSXV: OSI) for $215M, and Silvercorp Metals’s (TSX: SVM) acquisition of Orecorp (ASX: ORR) for $186M.
On average, we estimate that the six most recent transactions were priced at $81/oz. EQTY is trading at just $10/oz, reflecting an 88% discount
Silver Queen Gold-Silver-Polymetallic Project
Location Map
Source: Company
The project is 590 km northwest of Vancouver, B.C.
As major and mid-tier miners are operating in the region, we believe there is potential for M&A opportunities
High-grade resources totaling 1.04 Moz AuEq (85 Moz AgEq) covering four out of 20 known veins
Source: Company
Last year, EQTY completed a two-phase drill program (totaling 26 holes/10,000 m) to potentially expand existing resources at the Camp and Sveinson deposits, and test the George Lake and Cole Lake targets, which were not included in the 2022 resource estimate.
2023 Targets
The Camp and Sveinson deposits remain open at depth, and host resources totaling 345 Koz AuEq (29 Koz AgEq), or 33% of total resources
Source: Company
Drilling confirmed lateral and downdip extensions of both the Camp and Sveinson deposits
Multiple holes intersected high-grades, including bonanza grades of up to 1,971 g/t AgEq
George Lake and Cole Lake Targets
Source: Company
Delineated epithermal mineralization at both George Lake (400 m x 250 m), and Cole Lake (400m x 400 m)
Given the similarity in dimensions between these two targets and the previously identified four targets, we believe the 2023 drill program has added at least 300 Koz gold, expanding the project’s resources by at least 30%
At George Lake, drill holes adjacent to historic underground workings intersected multiple veins confirming high-grade mineralization
At Cole Lake, drilling returned multiple shallow high-grade intercepts
EQTY plans to conduct resource expansion drilling at Camp and Sveinson, and follow-up drilling at George Lake and Cole Lake to delineate maiden resources for these targets. Management’s immediate plan is a 20-hole, 6,500 m drill program primarily focused on the George Lake target.
Targets
Source: Company
A recent surface soil sampling program identified several new targets for follow-up drilling
Financials
Source: FRC/Company
Healthy balance sheet
Subsequent to Q1-FY2024, EQTY raised $1.62M through an equity financing
FRC Valuation
Source: FRC/Various/S&P Capital IQ
As Silver Queen has significant resource expansion potential, we continue valuing the project using 100% of its indicated and inferred resources
EQTY is trading at $10/oz AuEq (previously $20/oz) vs the comparables average of $44/oz (previously $34/oz)
EQTY is trading at $0.13/oz AgEq (previously $0.25/oz) vs the comparables average of $0.47/oz (previously $0.52/oz)
Applying sector multiples to EQTY’s resources, we arrived at a revised fair value estimate of $0.30/share (previously $0.34/share); valuation declined primarily due to share dilution since our previous report
We are reiterating our BUY rating, and adjusting our fair value estimate from $0.34 to $0.30/share. EQTY is the most under-valued junior among our list of comparables. Upcoming catalysts include drilling, and a potential rally in gold/silver prices.
Risks
We believe the company is exposed to the following key risks (not exhaustive):
- The value of the company is dependent on commodity prices
- Access to capital and share dilution
- The company has yet to complete an economic assessment
- Exploration/development
