Dear Reader,
Below is an alert on a company by the name of Fireweed Zinc (TSX-V: FWZ)
from my colleague Eric Coffin, editor of HRA Advisories. Eric is a very well
respected newsletter writer, focused on the junior mining space.
Fireweed just released an impressive resource calculation update and Eric
(as he does) breaks it down clearly for his subscribers below. You'll want
to read this overview too, as this is a company that still has huge upside
potential, as you'll read below.
Sincerely, David Morgan
GROWING LIKE A WEED
JANUARY 10, 2018
Fireweed Zinc (FWZ-V; Halted at $1.24) released an updated resource
calculation for the Tom and Jason zones on its MacMillan Pass project this
morning. I think its fair to say the resource exceeded all expectations. I
had come around to thinking we would see a pretty large bump up from the
2007 version, but the reality is even more impressive than my internal
guesses. The new resource includes 11.21 million Indicated tonnes grading
6.59% zinc, 2.48% lead and 21.3 g/t silver and 39.47 million Inferred tonnes
grading 5.84% zinc, 3.14% lead and 38.15 g/t silver using the base case NSR
cut off of $65CAD/tonne.
The table below shows the resource estimate using several different NSR cut
offs. The new resource incorporates 25 drill holes completed by either
Fireweed or HudBay since the date of the previous estimate. As I noted in
the last couple of FWZ updates, several 2017 drill holes returned higher
grades and, in some cases, far larger widths than anticipated from modelling
of historic results. This would have contributed to the increase in tonnes.
The current estimate used 40 metre maximum drill hole spacing for Indicated
resources and 100 metres for Inferred resources. That is still conservative
for a Sedex deposit as they generally have fairly predicable geometry. The
news release notes that the current estimate includes more accurate specific
gravity than the 2007 version. The s.g. number used was not specified but
the old version was low for this kind of material. Using a new and more
accurate one would have added tonnage as well.
The NSR was calculated using three-year trailing and two year forward
estimates for metals prices and incorporates metallurgical recoveries from
historic met work that indicated recoveries of 79% for zinc, 82% for lead
and 85% for silver. Using spot prices and exchange rates the NSR would be
more like $100/t CAD which seems reasonable. The estimate includes
calculations done using higher cut offs. At an $85/t cut off the resource is
still above 43 million tonnes with a zinc equivalent grade of just above
10%.
|
"This is a very impressive resource upgrade. Tom-Jason is now one of the
largest undeveloped zinc lead resources in the world that is not controlled
by a base metal major." |
And it's not done growing. There are a couple of outlier historic holes that
could not be included in the resource (including one that reported 14% zinc
over good widths 200 metres from the resource envelope) and the currently
modelled zones are open in several directions. There are several targets on
this large project that have not even been drill tested yet. The resource
really doesn't need to be any bigger given the probable mining rates, but
traders do like to see new zones and new high-grade intercepts. As it
stands, Tom-Jason has the potential to be quite a long lived mine, something
that will appeal to potential acquirers.
I expect Fireweed will complete a financing before the start of this year's
field season and hit the ground running with a much larger drill program. In
the meantime, we will get the first pass PEA study for the project that will
give us the first read on the potential economics for Tom-Jason. Given the
size and grade of the new resource I don't expect that study to be a
disappointment. Fireweed has a strong technical management team with plenty
of Yukon experience. I have little doubt that there have been plenty "back
of the napkin" calculations done internally as I don't see these guys
pushing this hard on the project unless they were already comfortable the
numbers would work.
In terms of valuation, there are not a lot of comparable companies that have
resource in the new improved Tom-Jason size range. The only one that comes
to mind is Tinka (TK-V) that recently released an updated resource for its
Ayawilca project in Peru of 42.7 million tonnes Inferred with a zinc
equivalent grade of 7.3% using a similar NSR cut off. Tom-Jason has 20% more
tonnes (some Indicated) at a 35% higher zinc equivalent grade. I'm not
trying to take anything away from Ayawilca which is an excellent deposit but
I don't think its logistics are superior enough to account for the valuation
differences between FWZ and TK. At the share price Fireweed was halted at
its market value is about $20 million, while TK's valuation is almost eight
times higher at $170 million. Clearly, based on comparables alone, Fireweed
has a huge amount of potential upside and is a strong buy at current prices.
I encourage you to sign up to receive future news and updates from Fireweed
Zinc: www.fireweedzinc.com
Regards for now:
Eric Coffin
|
Do you want to learn about stories like these ahead of the crowd? I
initially told subscribers about Fireweed Zinc in April 2017, pre-IPO at 50
cents. It is now trading in the $1.30 range (as of Jan. 10, 2018).
Getting gains like this IS possible when you are a subscriber to HRA
Advisories.
Click here to subscribe to HRA at no risk - you'll receive a full refund
within 30 days if you decide this service isn't for you. But with a track
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TAKEN OVER, can you afford not to give it a try?
www.hraadvisory.com |
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