Disclosure: Mammoth Resources Corp. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Project Location
Source: Company
Tenoriba is located in the prolific Sierra Madre metal belt
The region hosts several well-known multi-million ounce mines, and advanced stage deposits owned by majors
Exploration has identified four initial targets (Carneritos, Masuparia, El Moreno, and Cerro Colorado) along a 6 km trend of gold-silver mineralization. A review by experienced geologists confirmed Tenoriba's potential for hosting a high-sulfidation epithermal deposit across a 15 sq. km area, concluding the following: “Tenoriba is a high-quality exploration project with potential to host an economic high-sulfidation epithermal deposit”.
We note that Tenoriba also has potential for a porphyry copper-gold deposit at depth, as high sulfidation systems typically originate from porphyry metal systems. A 2018 drill program had returned 3.6% copper over 7.2 m.
High-sulfidation deposits typically host low cost, bulk tonnage, open pit, heap leachable deposits
Tenoriba vs Other H-S Projects in Mexico
Tenoriba's size compares favorably to the surface projections of other multi-million ounce high-sulfidation projects in Mexico
Similarities with Alamos Gold’s Mulatos mine, and Agnico Eagle’s La India mine
Target Areas
Source: Company
Four targets have been identified along a 6 km mineralized trend
2021 Soil Anomaly Map
Source: Company
A 2021 soil sampling survey returned grades of up to 6.3 g/t gold; we note that this is exceptionally high for soil samples
In 2022, the company completed 27 drill holes (totaling 3,244 m) testing five target zones within three areas (Carneritos, Masuparia, and El Moreno). Additionally, preliminary metallurgical tests returned promising gold recoveries of up to 90%.
2021-2022 Drill Location Map
Source: Company
Drill Intercepts (cut-off grade: 0.18 g/t AuEq)
Source: Company
90% of drill holes intersected mineralization, with an average grade of 0.61 g/t AuEq; this grade compares favourably to similar heap leach projects
MTH is planning a three-phase drill program aimed at potentially delineating a maiden inferred resource, possibly in 2025. Based on historical results, management has calculated an exploration target of 1.8 Moz AuEq within Carneritos, Masuparia, and El Moreno.
Proposed Drill Locations
Management is planning resource definition drilling in H2-2024, contingent upon securing financing
Exploration Target
*The study used a weighted average true drill interval thickness of 34 m.
Source: Company
Management’s exploration target covers just 8% of the project’s mineralized area (1.2 sq. km out of 15 sq. km)
Based on our review of prior drilling results, and the dimensions of the three targets, we believe management’s exploration target is conservative. There is a strong likelihood that the property hosts significantly higher tonnage, given that the exploration target only accounts for 8% of the identified 15 sq. km area. Should 25% of this area prove mineralized, we anticipate the project could potentially host up to 5.4 Moz AuEq.
These tables present our base-case estimate, and its sensitivity to key inputs
Source: FRC
Source: Company/FRC
MTH intends to raise up to $1M- $1.5M for follow-up drilling
Source: FRC / S&P Capital IQ / Various
Gold juniors are trading at $39/oz, based on 100% of M&I + 50% of inferred resources
MTH is trading at $4/oz, a 90% discount to the sector average
For conservatism, we are basing our valuation on 25% of MTH’s exploration target
Applying the sector average EV/oz of $39/oz to 25% of MTH’s exploration target, we arrived at a valuation of $0.16/share
We are resuming coverage with a BUY rating, and a fair value estimate of $0.16/share. We are more bullish on gold stocks than the metal itself, with gold producer valuations averaging 17% lower compared to the past three instances when gold surpassed $2k/oz. The lack of an NI 43-101 compliant resource estimate may deter investors. However, we believe the company’s exploration target, and our preliminary/speculative estimates, should enhance market confidence. We anticipate the stock will gradually align with our fair value as investor awareness of the company grows.
We believe the company is exposed to the following key risks (not exhaustive):
• Volatility in gold prices
• No NI 43-101 compliant resource estimate
• Exploration and development
• Access to capital
• Share dilution
