Aston Bay: Game Changing Discovery Potential in a Premier Jurisdiction

Transcription

1 RCKS TALK Paolo Lostritto President Paul Fowler VP Corporate Finance Derek Macpherson VP Mining Analysis Aston Bay Holdings Ltd. TSXV:BAY Aston Bay: Game Changing Discovery Potential in a Premier Aston Bay Holdings Ltd. (TSXV:BAY) is a C$11.5 million market cap company run by an impressive list of geologists who have invested their own money in the company. This is a base metal exploration company in Northern Canada that many small cap resource investors have looked at before because of the projects location and early high-grade hits. However, the company has materially changed over the last year, and warrants a fresh look. In our view, as the company prepares for this summer s drilling campaign, it presents an attractive risk-reward scenario for investors. New CEO, BHP exits stage left and ready to drill in In late 2016 the company appointed a new CEO, Thomas Ullrich, who was the Chief Geologist for North America for Antofagasta. They have also recently completed a small capital raise, undertaken new gravity surveys on their primary targets (that will facilitate targeted drilling in 2018), and dissolved the JV agreement with BHP, which now puts 100% of the potential upside squarely into the hands of Aston Bay shareholders. With a land package along strike from Polaris (a zinc mine operated by Cominco for over 20 years), we think that the size of the potential prize here dwarfs the current C$11.5 million market cap. It is certainly the sort of risk-reward scenario we like when screening junior resource companies. Figure 1: Property Locations Priced as of prior trading day's market close, EST (unless otherwise noted). All values in CAD unless otherwise noted. For Disclaimer and Applicable Disclosures, see the end of this report

2 Figure 2: Locations of Seal Zinc property and Storm Copper property within the property package Big land package, on tidewater, in a good neighborhood. Aston Bay has put together a large land package of over 400,000 ha (>1,000,000 acres) on Somerset Island, Nunavut, (Figure 1) adjacent to Teck s past producing Polaris mine which is approximately 200km to the north. They are elephant hunting for sediment hosted Copper / Zinc deposits and have some historical drilling (and a new ) to confirm the presence of both Zinc and Copper mineralization at their Seal Deposit and Storm prospect, respectively (Figure 2). We know that mineralization is present in this system, and we know that the local geology can host high grade, economic deposits. The question is whether we can identify a geological thesis that points towards a significant deposit that has not yet been discovered, and why the prior owners (including BHP via a JV with Aston Bay) failed to find it. We think that the evidence is compelling, and certainly worth betting on while the company is valued at C$11.5 million. The involvement of Dr. David Broughton, the right guy when looking for sediment hosted copper and zinc deposits. In the spring of 2017, Aston Bay announced the appointment of Dr. David Broughton as Chief Geologist. Investors familiar with resource investing will recognize Dr. Broughton as being cocredited with the discovery of Kamoa-Kakula, perhaps the most significant sediment hosted copper discovery of recent times. In our view, Dr. Broughton certainly lends credibility to the idea that Aston Bay is sitting on something exciting. Crucially, 2018 will be the first time that Aston Bay gets to test their new geological model with the drill bit. 2

3 Looking for reservoirs of copper and zinc. The basic thesis is that the confirmed copper and zinc mineralization at surface may be an indicator of concealed sediment hosted copper and zinc deposits at depth, where the fluids have mineralized a deeper permeable horizon. To use a petroleum exploration analogy, the copper discovered at Storm is like a tar pit at the surface, an indicator of the mineralizing process, but the target is the large reservoir that may be trapped at depth. The structural setting makes this a viable thesis; we know that this is a sedimentary basin with limited faulting or disruption. A similar geological thesis was behind the discovery of both Polaris (200km to the North) and Dr. Broughton s sediment hosted success story, the Kamoa-Kakula deposit in the DRC. Clearly this sounds highly compelling, but it leads to the question of why BHP didn t find it when they were invited into a JV on this property. Figure 3: Exploration Concept Source: Aston Bay presentation Why has the sediment hosted deposit at depth not yet been found? Our understanding is that BHP was principally using historic geophysical surveys to locate shallow conductive material that could be indicating copper mineralization. One focus of BHP s drilling was a large GEOTEM anomaly located well to the south of Storm, which BHP subsequently drilled and discovered wet clay. However, three drill holes that were targeted using VTEM all hit copper mineralization, with one-hole intercepting 3% Cu and 12 g/t Ag. So VTEM was clearly successful in targeting shallow copper mineralization. These hits, however, were in the tar pit, and with no idea where to go for the reservoir, BHP stepped away from the project. 3

4 First step was geophysics once BHP walked away. Since the properties have been back under 100% ownership, Aston Bay has completed an extensive airborne gravity survey (CGG s Falcon Plus survey, during the summer 2017) to examine the basement architecture and hopefully discover evidence for the mineralized sedimentary horizon that underpins the company s thesis. The survey on the Storm Copper deposit is presented in Figure 4, and certainly hints at a stratigraphically and structurally controlled mineralization at depth (note how the gravity highs trend within known fault lines). The gravity surveys also show that the gravity highs are correlated with both the existing drill holes that hit shallow copper mineralization at Storm (Figure 4), and the existing successful drill holes (and inferred resource) at Seal Zinc (Figure 5). None of this disproves the possibility that the gravity survey is highlighting something as innocuous as dolomite alteration, but the correlation with near surface mineralization certainly reduces this risk. Figure 4: The Storm Copper Gravity Surveys, Completed

5 Figure 5: Seal Zinc Gravity Survey The size of the potential prize is significant. If we only focus on the geophysical anomalies near the Storm Copper project, then we could be looking at one or two sizeable deposits. Rough math gives us a potential target that could be 2km long and 800m wide. If we assume an average thickness of 20m, specific gravity of 4.0 t/m3 then we could be talking 5-10 billion pounds of high grade copper in Canada near tidewater. Something like this is likely worth between US$0.01 and US$0.03 per pound giving us a potential range of values of US$ million depending on grade and thickness. Make no mistake, this is not your only kick at the can as Aston Bay has the whole belt. In fact, the anomalies to the south are interpreted as being closer to surface and Dr. Broughton sees many similarities to Kamoa-Kakula there. We highlight that the upcoming drill program is key to determining the likelihood of this potential. Don t forget about Seal. In addition, the geophysical targets near Seal Zinc are also an idea worth testing. As some might remember, Polaris was a blind discovery located under near surface mineralization that was found using geophysics and diamond drilling. Polaris mined 21 million tonnes of higher grade material and operated until Such a deposit would likely be valued by the market between US$ million. The current market cap and the size of prize provides an attractive balance to the risk of early stage exploration. Like many junior resource stocks (and especially base metal ones), Aston Bay has been subject to considerable investor apathy in 2017 and there were a limited number of catalysts to change this. However, following all the recent changes, (listed below) 2018 could be a very interesting year. We re excited that new investors get to buy in to a C$11.5 million company which is funded to drill test an exciting geological thesis in the summer of 2018 and has the potential to be sitting on a significant base metal discovery in a highly prospective part of Canada. We note that while the upside is significant, should Aston Bay s drill program prove to be successful, a miss is likely to be negative for Aston Bay s share price. 5

6 Share Price (C$) Volume - Shares Traded Recent news and upcoming catalysts - Timing is everything November 2016: Thomas Ullrich appointed as CEO, replacing Benjamin Cox. January 2017: BHP steps away Spring 2017: Dr. David Broughton appointed as Chief Geologist: May 2017: Announces C$2 million capital raise, flow through shares at C$0.16 and non-ft units at C$0.13 November 2017: Results from property-wide airborne gravity gradiometry survey (see figures 4 and 5) December 2017: Announces capital raise for up to C$4 million, a non-ft and FT financing at C$0.15 and C$0.16 respectively. January 2018: Seal Zinc Initial Resource Estimate: Initial inferred resource at seal: 1 million >10% Zn. Gravity survey suggests potential extensions along strike and down dip. H1 2018: Drill hole targeting by Dr. Dave Broughton and Aston Bay technical team, potential additional airborne geophysics (VTEM and/or gravity). Aston Bay is now planning a 3,000m to 4,000m drill program starting in June 2018 Company Information: Aston Bay Holdings Ltd. (TSXV:BAY) Aston Bay is a mineral exploration company focused on the 976,066-acre (395,000-hectare) Aston Bay property located on northwest Somerset Island, Nunavut, which hosts its Storm Copper and Seal Zinc prospects. The company completed a 12 hole (1,951m) summer exploration program in 2016, including the collection of 2,005 soil samples testing both geophysical and structural targets. In 2017, the company undertook a property-wide airborne gravity survey. TSXV.BAY - Stock Chart Key Projects Current Resources Property Stage $0.35 1,000,000 (Inferred) Notes $ , M lbs ZnEq Aston Bay Exploration 800, % ZnEq) Drilling planned for a number of targets in $ ,000 Financials Peer Comparison 600,000 $0.20 Price (C$/sh): $0.15 Company Mkt Cap (C$) EV/lb (C$) 500,000 $ ,000 Basic S/O (M): 79.3 TSXV:BAY $11 $0.041 $ ,000 Fully Diluted S/O (M): 91.2 TSX:CZN $36 $ ,000 Market Cap (C$ M): $11.5 TSX:TI $142 $0.109 $ ,000 Cash (C$ M): $1.1 TSXV:TK $119 $0.016 $ Debt (C$ M): $0.0 TSX:AQA $84 $0.024 Volume - Shares Traded Price per Share (C$) EV (C$ M): $10.4 TSXV:CZX $59 $0.009 TSXV:FOM $60 $0.016 Sources: RCKS, Capital IQ, Thomson Reuters, Company Reports Peer Average $0.031 Paolo Lostritto President Paul Fowler VP Corporate Finance Derek Macpherson VP Mining Analysis Red Cloud Klondike Strike Inc. 105 King Street East, 2 nd Floor Toronto ON, M5C 1G6 RCKSTalk@RedCloudKS.com /rcks-talk Disclaimer Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and the Yukon. Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services. Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This publication should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not 6

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