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Survey of Junior Resource Companies Under Coverage Strong Focus on Exploration and M&A in 2021

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Weekly Cannabis Commentary

Weekly Cannabis Commentary Author: Sid Rajeev, Iftekhar Mahmud Cannabis Industry Performance Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard &...

Weekly Mining Commentary

Weekly Mining Commentary Author: Sid Rajeev, Head Of Research Global equity markets stayed relatively flat in the past week. Markets rallied today as treasury yields retreated. Rising yields typically result in lower equity valuations (from higher discount rates), and...

Gold and Equities to Benefit from the Fed’s Intent to Keep Rates Low

Two of the three companies we shortlisted last week, in the “Reddit Discussed Stocks” section, returned positive returns. Global equity markets stayed relatively flat in the past week. Markets rallied today as treasury yields retreated. Rising yields typically result...

European Residential REIT (TSX: ERE.UN) Record 2020 Results Prompt an Increase in Distributions

Since our initiating report, ERES acquired multi-residential properties totalling €35M in the Netherlands. Suites under management increased to 6,047 by the end of 2020, up 7% YoY. ERES expects to continue to grow through acquisitions in the Netherlands. We estimate the company has access to €240M in funds for acquisitions. Rent collections through the pandemic have been in line with historical averages. Rents grew 3.7% in 2020. Management expects the portfolio average rent to grow 3%-4% in 2021.

Steppe Gold Limited (TSX: STGO / OTC: STPGF) Extended Mine Life With an Updated Resource

An updated resource estimate reflected an 82% increase to 2.45 Moz Au Eq (gold equivalent) vs the 2017 reserve/resource estimate of 1.35 Moz. 88% of the 2021 resource is in the M&I category. The significant increase in resources was a result of resource expansion at ATO-4 (one of three known mineralized pipes), inclusion of a maiden resource at Mungu, and lower cut-off grades amid higher gold prices.

Weekly Cannabis Commentary

As of February 22, 2021, there are 1,601 retail cannabis stores, a week-over-week increase of 44 stores across Canada, of which, Ontario had 22. As we noted before, we continue to see Ontario’s store growth significantly outpace other provinces due to the recent mandate of the Alcohol and Gaming Commission of Ontario (AGCO) to increase retail store authorizations.

Weekly Mining Commentary

Global equity markets retreated last week primarily due to rising yields from a major sell-off in the bond market, amid expectations of an economic rebound and rising inflation expectations. As shown below, all the seven indices we track reported losses (orange bars). Rising yields typically result in lower equity valuations (from higher discount rates), and higher borrowing costs. The P/E ratio of the S&P 500 is currently 22.2x vs the long-term average of 15.3x (Source: Refinitiv). As we do not expect an economic recovery until H2-2021, we expect a market correction, and the P/E ratio to revert to its historic average.

Rising Bond Yields to Lower Equity Valuations

The electric vehicle space continues to be the most actively discussed among retail investors. We also noted a decline in discussion on cannabis stocks. Global equity markets retreated last week primarily due to rising yields from a major sell-off in the bond market, amid expectations of an economic rebound and rising inflation expectations. Rising yields typically result in lower equity valuations (from higher discount rates), and higher borrowing costs. The P/E ratio of S&P 500 is currently 22.2x vs the long-term average of 15.3x (Source: Refinitiv). As we do not expect an economic recovery until H2-2021, we expect a market correction, and the P/E ratio to revert to its historic average.

Monarch Mining Corporation (TSX: GBAR) – Formed After Selling Predecessor Company to Yamana for 5x Return – Initiating Coverage

Monarch Mining (“Monarch”) was spun-out from Monarch Gold, which was acquired by Yamana Gold (TSX: YRI) for $152M in December 2020. Yamana acquired Monarch Gold’s Wasamac property and the Camflo mill for $61M in cash, and $91M in shares.Prior to the acquisition, four advanced stage gold assets, and the Beacon mill, in the Abitibi mining camp in Quebec (valued at $47.5M), and $16M in cash, were spun-out into newly formed Monarch Mining. The assets sold to Yamana were part of a portfolio acquired from Richmont Mines in 2017 for just $25M. The sale to Yamana reflected a return of over 5x in under four years. Monarch Mining is run by the same team that ran Monarch Gold.

Weekly Cannabis Commentary

Weekly Cannabis Commentary Author: Sid Rajeev, Iftekhar Mahmud Cannabis Industry Performance Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard &...

Weekly Mining Commentary

Global equity markets continued to rally due to a decline in new cases of COVID-19 in almost all of the hardest hit nations, and continued vaccine rollout. All the seven indices we track reported
gains (orange bars).

Expecting 50% of the U.S. Population to be Fully Vaccinated by August

Global equity markets continued to rally due to a decline in new cases of COVID-19 in almost all of the hardest hit nations and continued vaccine rollout. The U.S. is currently administering over 1.8M doses per day, up from 1.4M in the prior week. We estimate that 50%...

Weekly Cannabis Commentary

Weekly Cannabis Commentary Author: Sid Rajeev, Iftekhar Mahmud Cannabis Industry Performance Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard &...

Weekly Mining Commentary

Silver prices dropped 4% after a 13.5% gain in the prior week. As detailed in our report last week, the price run-up was instigated by retail traders on Reddit. As silver has relatively fewer short positions (compared to GameStop/NYSE: GME and AMC Entertainment/NYSE: AMC), we were not expecting the Reddit army to trade silver for too long. Base metals moved up due to the above-mentioned factors relating to equity indices.  

Capital Direct I Income Trust – Minimally Impacted by the Pandemic / Lowers Risk Profile

Despite the pandemic, Capital Direct expanded its mortgage receivable by 21% YTD to $243M, across 1,697 properties, by the end of Q3-2020. The company maintains its spot among the 15 largest mortgage investment entities in Canada.Due to lower lending rates, and slightly higher losses (0.28% of portfolio in 2020-9M vs 0.24% in 2019), annualized dividends declined in 2020 (9M) to 6.9%, from 7.4% in 2019 (full year). We expect yields to increase to 7.2% in 2021.

Introducing Reddit Sentiment Tracker

This week, our analysts introduced a Reddit sentiment tracker to potentially identify mover for the company week. Our analysts have also started tracking the psychedelic industry’s performance, following launch of the Horizons Psychedelic Stock Index ETF on January 27, 2021.

ION Energy Ltd. (TSXV: ION / FRA: 5YB / OTC: IONGF/ OTCQB: IONGF) – Preparing for the First Ever Lithium Brine Drill Program in Mongolia – Initiating Coverage

ION’s share price is up 47% since our introductory note on December 16, 2020. The company is recipient of Mongolia’s first ever exploration license for lithium brine.ION’s project is strategically located just 24 km from the border with China – the world’s largest Electric Vehicle (“EV”) and battery manufacturer.

Weekly Cannabis Commentary

Over the past week, the Horizons Marijuana Life Sciences ETF (TSX: HMMJ / “HMMJ”), the Standard & Poor’s/MX International Cannabis Index (“MCAN”), and the Standard & Poor’s/TSX Cannabis Index (“XCAN”) generated returns of 5%, 1%, and 6%, respectively. Notably, Canopy (TSX: WEED) was up 21% over the past week. We believe the run up was due to the launch of Martha Stewart’s CBD product line for pets. This product line, manufactured by Canopy, claims to help dogs reduce stress and keep their joints healthy. We note that pet adoption has increased during the pandemic, based on data from various sources. Canopy will release its Q3-FY2021 financials on February 9, 2021.

Weekly Mining Commentary

Our outlook is improving because of the decline in new cases, and a pick-up in the pace of vaccine rollouts. Currently, 7.6% of the U.S. population has received vaccinations vs 5.3% at the same time last week. This compares to 13.7% in the U.K. (up from 9.4%). Israel continues to lead the pack at 35.6% (up from 29.5%).

Silver or Silver Stocks?

Silver prices were up 7% today as the Reddit army shifted focus from GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC). Our top silver picks were up 15% on average. As for WoW performance, silver was up 14% vs 23% for our top picks.

South Star Mining Corp. (TSXV: STS / OTCQB: STSBF) Receives Mining License / Advancing to Production Next Year

On January 6, 2021, STS announced receipt of a three-year mining license for its 100% owned Santa Cruz graphite project in Brazil.STS has all the required permits to advance to construction, commissioning, and production.Management intends to develop the project in two phases: a Phase- 1/5,000 tonne per year (“tpy”) pilot plant operation (with a CAPEX estimate of US$7.3M) in the first two years, followed by a larger 25,000 tpy Phase 2 operation (US$27.2M CAPEX).

Apple Inc.(NASDAQ: AAPL) – Q1 Earnings Beat Expectations / Stronger than Expected Sales in China

We are raising our revenue forecasts for FY2021, and FY2022, on the back of faster growth from iPhone sales as well as strong contribution from wearables, home and accessories, and services. We expect iPhone sales to remain strong on continued consumer upgrading, as 5G networks have yet to be fully implemented across the globe. As a result of our higher revenue/EPS projections, and higher sector-average valuation metrics, we are raising our fair value estimate by 21% to $148.12, suggesting a potential return (including dividends) of 8.3% in FY2021.