Research Capital analyst Adam Schatzker gives his take on a couple of junior miners making a living in the middle of Canada.
Reviving an old mining camp isn’t easy, but sometimes it helps to tackle a project with a fresh set of eyes. Mr. Schatzker says he felt quite impressed with the discovery and delineation of the Rainbow deposit at Callinex Mines Inc.’s (TSX/VEN—CNX) Pine Bay project – enough for him to initiate coverage on the junior exploration company.
However, it does not yet have a resource estimate published. The analyst says he will likely ascribe a target price once a resource is published. His “speculative buy” recommendation similarly reflects the high risks involved with mineral exploration.
With a number of VMS (volcanogenic massive sulphide) targets at Pine Bay, the analyst suggests there is a good chance that Callinex will define at least one other deposit. VMS deposits are one of the richest sources of metals such as copper, lead, and zinc globally.
Callinex is exploring in the Flin Flon/Snow Lake greenstone belt – one of the more prolific VMS camps in the world. Mining has been carried out in Flin Flon since 1930 with more than 150 million tonnes of ore mined from numerous deposits, including Flin Flon, Trout Lake, Chisel, and Lalor that represent the largest deposits.
Callinex plans to release its maiden resource for Rainbow in the first half of 2023 and it should range between 3.5 million and 4.5 million tonnes grading about 3.25 per cent copper equivalent. The deposit remains open at depth and we think there is a good chance that Rainbow will increase in size as deeper holes test the depth potential, the analyst relays.
There are a number of other targets defined at the Pine Bay project. The highest priority one at this time is Alchemist which lies about 1.5 kilometres east of Rainbow. Three holes have been released for Alchemist and it appears that Callinex has identified another VMS deposit, but more drilling will be required to determine its potential. The geological model and its interpretation by the team at Callinex implies that there are many opportunities for discovery on the Pine Bay property.
“In the near-term, the drill results from Alchemist will be very important as they should help us define the potential of the deposit. Additionally, we think that any positive drill results from the deep drilling at Rainbow will be well-received by investors,” Mr. Schatzker states.
“For investors seeking exposure to a very talented team, exploring in a proven mining camp in a Tier 1 jurisdiction, we think that Callinex offers a very attractive option. The risks remain high as they always are with exploration; however, we think the successful discovery of Rainbow and positive indications at Alchemist offset some of that risk.”
Callinex Mines is an exploration company focused on exploring the Pine Bay area in the Flin Flon/Snow Lake mining camp in Manitoba. The company also has projects in Atlantic Canada.
Received long-awaited environmental approval
On Nov. 30, Generation Mining Ltd. (TSX—GENM) announced that it received long-awaited environmental assessment (EA) approvals from both the provincial and federal governments for its palladium/copper Marathon project in Ontario. It covers an area of 22,000 hectares in northwestern Ontario.
This is a major step forward as the EA process is usually long and complex. Generation Mining only needs three more items – an offset plan for wild caribou; a mine closure plan; and a deforestation permit – to begin construction, which is estimated to take 90-120 days.
Once permits and regulatory logistics are finished, Generation Mining will likely turn its focus to financing the project, with a portion of money needed likely to continue to be received (up to $240 million) from Wheaton Precious Metals Corp. for the development/stream of Marathon.
Mr. Schatzker concludes that Marathon is well on-track to commence production, which could potentially lead to the acquisition of Generation Mining. He sets the target price at $2.55 per share with a “speculative buy” recommendation.
This is an edited version of an article that was originally published for subscribers in the January 2, 2023, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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Investor's Digest of Canada •4/18/23 •