The massive sell-off in capital markets in recent weeks due to COVID-19 has created opportunities for value investors to acquire shares of fundamentally solid juniors at reasonable valuations.
Considering that China and Italy have been gradually getting the virus under control, we speculate that the rest of the world will also experience a short-term spike in cases, but will be able to contain the virus in the coming months.
We expect gold prices to be highly volatile in the near-term. During the last recession, gold prices had initially dropped 25% (from February 2008 to October 2008) prior to a 150% run-up from late 2008 to 2011.
Since our previous update in October 2019, Monarch Gold Corporation (“MQR”, “company”) divested four non-core projects and acquired additional claims surrounding its core projects. The non-core projects were sold to O3 Mining Inc. (TSXV: OIII) and Probe Metals Inc. (TSXV: PRB)
In November 2019, the company started the mining permit application process for its flagship Wasamac gold project.
A 10 hole / 4,202 m 2019 diamond drilling program on the McKenzie Break project returned encouraging results, including multiple high-grade intercepts over long intervals.
Production at the Beaufor mine was suspended in June 2019. Subsequently, in July, toll milling operations at the Camflo mill were temporarily suspended for clean-up. In the six-month period ended December 31, 2019, MQR generated $5.61 million in revenues, with a gross profit of $3.34 million, from gold recovered from the clean-up. No revenues are expected in Q3.
Key expected catalysts include – drilling on the McKenzie Break project, a feasibility study on the Fayolle deposit in Q2-2020, and resumption of toll milling at the Camflo mill.
MQR’s properties hold measured and indicated resources totaling 3.23 million ounces (“Moz”), and inferred resources of 0.42 Moz. We estimate that MQR’s shares currently trade at just $10 per oz versus the comparables’ average of $38 per oz.
