Matador Mining Ltd (ASX:MZZ) recently started its 2020 drilling program at the Cape Ray Gold Project in Newfoundland, Canada, which includes 12,000 metres of diamond drilling as well as an extensive greenfields exploration program.
Based on current cash reserves of around $10.65 million after the completion of a capital raise in July, Matador is fully funded for the 2020 and 2021 exploration seasons.
Shaw and Partners has initiated coverage on Matador with a Buy recommendation and an 80 cents per share price target (current price: 44 cents).
The following is an extract from the research report:
We initiate coverage on Matador Mining (MZZ) with a Buy recommendation and A$0.80ps price target. Matador Mining is a gold exploration company focussed on the Cape Ray Gold Project in Newfoundland, Canada.
- Matador has exploration tenements in the lightly explored but highly prospective Cape Ray Shear Zone in Newfoundland, Canada. The Cape Ray Shear Zone is a geological structure that extends approximately 400 km through Newfoundland.
- Matador is the largest holder of ground along the Cape Ray shear, with approximately 120km of continuous strike along the shear. The Company’s total holding in Newfoundland stands at 425km2.
- The Company’s tenement boundary is located approximately 50km along strike from Marathon Gold’s (MOZ.TSX, market cap C$431m) 4.2Moz Valentine Lake Gold Project.
- Matador released a Scoping Study in 2020 proposing a 1.2 Mtpa standalone mining and processing operation. The preliminary economics indicate the Project has positive financial metrics over an initial mine life of 7 years with capital payback during the first 1.75 years of the Project’s life
- Cape Ray’s current resource stands at 840koz at 2g/t, with 96% of the resource less than 200m from surface.
- Matador appears relatively cheap compared to a sector average EV/oz multiple of A$93/oz for ASX listed gold exploration companies. Matador trades at A$66/oz.
- Matador’s corporate strategy is to increase its resource base to a size that will support a 10 year operation. This will come from a combination of expanding the resource at existing discoveries and drilling at greenfield targets.
- Matador recently completed an A$8.7m share placement which will fund its 2020 and 2021 drilling programs. The company is also expecting to receive $2.1m from the exercise of in the money options which expire in August 2020.
- Matador has commenced a 12,000m drilling program. The program will be focussed on Window Glass Hill (3,000m of drilling), Isle Aux Mort (2,000m) and greenfield targets at Granites, Bigpond-sleeper and Grandy’s Lake - Benton (2,000-7,000m).
- The A$ gold price recently hit an all-time high of A$2,800/oz and we expect the US$ gold price to remain well supported with US interest rates in negative real territory.
- The Matador board has recently been restructured including the appointment Executive Chairman Ian Murray who helped build Gold Road from an explorer into a +$1bn company. Justin Osborne (Gold Road) and Mick Wilkes (Oceania Gold) have also joined Non-Executive Directors.
We initiate coverage on Matador Mining (MZZ) with a Buy recommendation and A$0.80ps price target. We have set our price target at a fully diluted DCF valuation.
Catalysts for the stock to reach our price target include;
- Exploration activities (12,000m of drilling) have commenced and are on-going through the rest of 2020.
- Resource upgrades following further exploration success.
- Further increases in the gold price in a negative real interest rate environment.