Highlights

  • 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.

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