The Maven Letter: October 7, 2020

Blips, Rollercoasters, and Uncharted Waters. Buy The Dip…And New Deals! Also Buying These Momentum Movers. Full Portfolio Table. Portfolio Updates: Benchmark, Brigadier, Compas, Discovery Harbour, EMX, Erdene, Excellon, GPG, Great Bear, Reyna Silver, Scottie, Tristar, Vizsla.

Rollercoasters, Blips, and Uncharted Waters

In recent talks I have encouraged investors to think about what they want out of a precious metals portfolio – leveraged exposure to a rising gold market or the rollercoaster of speculating on junior explorers, which can dole out much bigger gains but only if you trade them just right.

It’s ironic, then, how Trump’s tweets are turning the entire market into a rollercoaster.

In 24 hours the President slammed the door on any additional stimulus until after the election – “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill” – only to backtrack hours later by saying he would support standalone stimulus measures for individuals and businesses (a piecemeal approach that the Democrats have rejected). By morning he was urging the House and Senate to approve $25 billion for airlines and $135 billion for small business support.

In response, markets tanked and then rose. The US dollar jumped and then slid. And gold slid before starting to ease its way back up, mirroring the dollar as it often does in its first response to major news.

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Now, I say ‘rollercoaster’ but that’s perhaps over the top. The S&P 500 lost 1.8% in the last hour of trading yesterday following Trump’s No Stimulus tweet; it regained most of that ground in the first hour of trading today. Perhaps ‘blip’ is a better descriptor.

But the event and reaction matter as a reminder that we are in very uncharted waters.

The stock markets are running on stimulus. It’s stimulus, not growth, that’s powering things upwards. Despite Trump’s push for airline and small business bills, it’s unlikely the Democrats will agree and so there could well be no new stimulus until February…(warning lights)

The dollar rises when it appears weakness is ahead (backward)

Social unrest is very high

There’s a global pandemic; regular medical advice says the infected President should not be in contact with anyone until about the time of the election, assuming he is now recovering.

There’s a presidential election around the corner that will be rancorous.

COVID case counts are rising though hospitalization rates are lower this time (more younger people), which means politicians have to decide how to react (within a charged environment, to say the least…)

What’s interesting is that a good number of those factors will ease. The US election will happen. There will be another major US stimulus bill, whether now or in November or in February. COVID will continue to ebb and flow until there is a safe, effective, and widely available vaccine; the acute economic pain happened in March and now we have to live with, adapt to, and use stimulus to fill the gaps from the chronic impacts.

In the meantime…blips and rollercoasters it will be, for the markets and for gold.

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An important related thought: gold stands to do well no matter what happens. Here’s a slide where I run through a few either-or scenarios:

I can’t predict how any of these major issues will play out. I also can’t and won’t predict how gold will fare tomorrow or over the coming weeks.

But I remain very confident that we are in a gold bull market. No matter what happens in each instance above, real rates are likely going more negative and the need to hedge stock market risk will persist, with gold as one of the only options. If gold prices stay high then gold miners will continue to shine across equities for robust balance sheets and strong cash flows. Financial strength will encourage M&A (we saw a big deal in Australia yesterday with Northern Star and Saracen announcing a $16-billion merger) and investor interest. More deals and more dollars will fund more exploration, which will generate more discoveries. Exciting discoveries out of a market with strong fundamentals will attract speculators. And so the bull will run.

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Buying The Dip…And New Deals!

I’ve encouraged everyone to use this period of weakness in the gold-silver market and the slew of free trade date price dips to buy stocks you like. I have done so, establishing positions in Summa Silver, Fosterville South, Benchmark, and Brigadier while adding to my position in Reyna Silver (I’ve also added to many other portfolio positions but those are the stocks I highlighted in the last two months).

Sorry to overwhelm you…but it’s time for some more buy ideas. Rather than stocks showing weakness, this is a list of deals that just debuted and stocks with momentum that I think will continue.

Pucara Gold (TSXV: TORO)

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Pucara is a very exciting deal. It came to trade yesterday and jumped from $0.40 (the price of its last private financing) as high as $1.50 on its first day before settling to close at $0.83. It lost a few cents today to close at $0.77.

It’s really hard to know what a stock will do out the gate and trying to help people bet on that first frenzied day gives me anxiety. With Pucara, I thought anticipation would likely cause the stock to overshoot and then settle; as such I didn’t even want to suggest watching it until a reasonable trading range was established. I think current pricing makes sense as an entry point if you want to bet on a strong team exploring in Peru, with a portfolio of projects but focused for now on Lourdes…where the potential prize is very large.

Let me first comment on that portfolio. Pucara was a private project generator for years. In 2016 when the team realized the potential at Lourdes and Pacaska they changed gears, leaving the portfolio approach behind to focus on these projects.

Pucara still has seven other projects in Peru, two of which are optioned to IAMGOLD and Solaris. But those are in the background; all eyes are on Lourdes. Lourdes is a high sulphidation epithermal gold system where Pucara will hammer multiple targets with drill holes shortly. The stock jumped dramatically upon its trade debut because there is a lot of excitement about what Pucara might find at Lourdes.

Pucara’s chief geologist is Ken Balleweg, who is a global expert in high sulphidation epithermal (HSE) systems. Balleweg is beside himself excited about Lourdes.

The project is in the middle of the Andean Trend of mineralized tertiary-aged volcanics in southern Peru. The Andean trend hosts a slew of great HSE deposits and mines, especially to the northwest. This area, in the country’s southwest, was still plagued by Shining Path violence during the 1990s exploration boom and so it has seen less exploration.

Zooming in, Lourdes sits where a local north-south trend of HSE systems intersects the Andean trend.

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The Apumayo gold mine 14 km south of Lourdes is interesting and relevant. Apumayo mines highly friable granular silica – essentially sand with leachable gold mixed in.

It’s an unusual thing. Granular silica usually erodes quickly but at Apumayo it seems a secondary event laced gold-bearing silica veinlets throughout. That combines two very interesting characteristics: granular silica is a highly altered material found most often at the top of HSE systems, which are a great starting place to seek gold, and a secondary gold-bearing event adds to the potential.

This granular silica with veinlets is not the target. It averages 0.4 g/t gold at Apumayo, which works for that small-scale operator, but Pucara likes it for its indication that much more interesting mineralization may lie beneath.

To advance that theory, Pucara has done significant groundwork, from mapping to rock sampling to mag and IP surveys to soil geochemistry. Here’s the summary of that work.

What you’re looking at here is what looks like several big and overlapping alteration systems, as evidenced by alteration mapping, soil geochemistry, rock samples, and geophysics (such as mag lows and resistivity highs under most targets). There are countless vent areas, as per TORO’s mapping, which is how fluids would have flooded up. The breccia zones all look multi-episodic, which makes sense given all the vents and the scale of the system. The four named target areas are Pucara’s top priorities and all four will see drilling shortly.

Good HSE systems are very valuable. They combine scale and grade. Yanaccocha is a good example: Yanaccocha has produced more than 38 million oz. of gold since operations began in 1994 and the mine currently has reserves for another seven years.

Balleweg knows Yanaccocha. He thinks Lourdes looks better. Hillside erosion shows the granular silica transitioning to massive and vuggy silica below, which is how a HSE system is structured. Given Lourdes grades

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at surface – in soils and rock samples, just like at the neighbouring Apumayo mine – there is even a good worst-case scenario, which is that TORO drills into easily mine-able gold-bearing granular silica at surface over a large area. That wouldn’t be dramatic but it could well be valuable on its own.

The real prize, though, is if the system below carries grade. This cross section is from Yanaccocha. A similar system at Lourdes could well generate gold-bearing intercepts from surface.

This is an exploration bet. But it’s one where the potential prize is very large. And it comes in a company with extraordinarily strong shareholders (more on that below), years of prep work prior to listing, and a portfolio of other assets should this one fail. The Pacaska project, which is next in line, is similar to Lourdes but not quite ready to be drilled.

Some of you might hold Auryn Resources (TSXV: AUG), a stock we’ve owned for ages while Auryn works to earn permits to drill its Sombrero and Curibaya projects in Peru. Those are very exciting targets and they sit just east of Lourdes…but the wait has truly been interminable.

That’s why permitting was the first question I asked when the TORO team approached. Importantly: they have drill permits. That’s a key hurdle cleared. And so TORO will start drilling immediately, with a significant drill program funded by $8.5 million in the bank.

We might get drill results before Christmas, or we might not. In the interim Pucara will get out and tell its story, including updates on drilling if doing so makes sense. Add in anticipation over discovery and I think we will see TORO trade higher before any results appear.

Part of my confidence is because of the team. The geologists are top notch, but I’m talking about the capital markets side of things. This is the same group that supported Sun Peak Metal (TSXV: PEAK) through its incubation and trading launch. That went very well, as we know, and Pucara followed in those footsteps. This is also the team that backed Eclipse Gold (TSXV: EGLD), which has traded very well since its debut. That

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ongoing support is important: Sandstorm, Resource Capital, and Pathway Capital did not get behind Pucara for a quick flip but for the chance of a homerun.

I also know that the final private financing (done at $0.40 a share, no warrant), a few months ago, was very popular. Everyone got cut back and lots of people who wanted in got cut out. That creates significant appetite in the market.

The deal listed through an RTO (reverse takeover) of a public shell. The same key shareholders controlled the shell and they rolled it back so the shell shares represent less than 2% of the TORO count (you don’t want shell investors with cheap shares who are disinterested in the new deal and/or who control a big chunk of the new deal as their selling can drag, but that’s not the case here).

I’m glad I didn’t try to buy on day one. I don’t know what the stock will do between now and first drill results but, as I said, I think anticipation and marketing could have it trend up. It might trend down some first though, easing that initial spike and reflecting current ‘weakness’ in the gold market.

As such I will use tranches to enter. I will buy a third of my position tomorrow and will determine what price to stink bid the rest in the coming weeks.

Oro X Mining (TSXV: OROX)

Oro X will come to trade on Friday as the revamped version of Western Pacific Resources (TSXV: WRP). The revamp included buying two projects from Titan Minerals (a private company), raising $6.3 million, and adding Paul Matysek to the team (hence the ‘X’ name).

Let me run through the projects and deal before getting into the Paul factor, which is notable.

The two projects are adjacent. They are separated for two reasons: they are different targets with different gold systems and there is a permitting angle that means projects less than 2000 hectares are much easier to explore.

The yellow project, Coriorcco, is the first focus. It’s a low sulphidation epithermal vein system with 17 known veins at surface. The known veins are 1 to 2.5 metres wide and sit in an area of intense hydrothermal alteration that is 800 metres long by 700 metres wide.

Two of the veins were mined from 2010 to 2013. Those veins grade 3.45 g/t gold, on average, at surface. Mining records show much better grades just 50 metres below surface: the 5,700 tonnes taken averaged 7.45 g/t gold.

We know the grade because the ore was taken to a toll mill for processing and the

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mill has records of grade for each load taken. OroX’s president, Luis Zapata, knows the owner of that mill and so was able to get those records.

Miners also kept some sampling records as they worked. Samples from the underground workings have returned grades as high as 57 and 59 g/t gold across a metre or more.

So grade certainly appears to strengthen significantly with depth, there are areas, perhaps shoots, of very high grade mineralization, and only two of the veins in this swarm were mined.

As such the opportunities here are:

Drill the known veins, focusing on high-grade shoots within.

Understand what the system does at depth (feeder zone opportunity?)

Find more veins to the east under younger rocks.

This has potential to be a nice epithermal vein system.

The exploration plan starts with 3D IP across the property. This will help map the veins below surface, illuminating the bigger, better targets, and should give a sense of what the veins do farther down. If they

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coalesce into feeder structures (vein systems have to come from somewhere) at reasonable depth, those structures become an obvious target.

IP should also see through the cover rocks to the east and suggest whether there are more veins to assess in that area.

That will be the focus for the first few months. The goal is to start drilling by February. The old mining adits are large enough that Oro X will be able to do some underground drilling once it rehabilitates the adits; they will also drill from surface.

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Coriorcco will be the excitement driver for OroX. Let me also comment quickly on Las Antas for completeness.

Las Antas is a disseminated gold target adjacent to Coriorcco. It has all the signs you want of a large disseminated gold system: extensive alteration at surface, brecciation and veining in places, geochem and IP anomalies based on district surveys, and a previous explorer who developed a strong drill target then changed focus.

OroX will advance Las Antas in the background, getting it ready for drilling down the road.

In addition, Western Pacific had a gold project in Ecuador that it will likely spin out into a new company in Q1 2021. Before the Paul-Coriorcco change came about, the plan had been for Western Pacific to focus on Ecuador. Zapata has a few other assets he has been targeting that may or may not also end up in that new, Ecuador-focused spin co.

People

Paul Matysek is a big part of this story. He’s an advisor at this point but he was fundamental to the genesis of the story, he currently plans to spend about a third of his time on Oro X, and his idea is to shift focus to Oro X when Gold X (TSXV: GLDX) sells.

Yes, betting on that means betting that Gold X will sell…but I’m not sure you can signal more clearly to the market that you’re in talks to sell your asset to the Chinese than by building a road from the mine Zijin just bought (the Aurora mine, where Guyana Goldfields built a big mill that needs ore because the open pit was essentially a failure) to your project 25 miles away and by bringing Robert Friedland in as non-executive chairman. Friedland knows more people in China’s mining sector and has done more and bigger deals with them than anyone else in mining.

That’s another story. The point is that Matysek is, I think, going to sell GoldX soon. Not one to sit idle, he is setting up Oro X partly as his next vehicle once that happens.

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Matysek’s track record is pretty unreal, for the number of times his companies have been taken over and for the range of assets, locations, and commodities involved (this guy doesn’t specialize in a certain type of mine; he specializes in capturing moments in the market). I first met Paul in perhaps 2009, when he was leading Potash One. I didn’t know anything much about potash at the time but I remember so clearly how, by the time I left the meeting, I was pretty convinced the world was getting short on fertilizer, especially in good deposits, and that Potash One’s mine would get bought or built as a result. Paul was right; within a few years a German group bought him out for $434 million.

He had already done it with uranium. After potash he did it with lithium, and then with gold. Now he’s doing gold again with Gold X.

I will point out that all of Paul’s previous assets have been advanced projects where the tasks have been demonstrating solid mine plans and economics, advancing permitting, and packaging things up nicely for a buyout. Oro X is different. It’s an exploration play. Why the change?

Two reasons, I think. First, Paul know Luis well. Paul has always been generous with his time helping younger people in the sector in the sector get going. Luis started as one of those but became a friend as they both live in Lima. Both mining deal makers to the core, Paul and Luis spent a lot of time looking at assets for Western Pacific. As the story goes, when they realized Coriorcco and Las Antas were available they both knew they were going to go for it, and together.

The other reason is the stage of the gold market. It’s young, with several years to run. It’s not a market that demands an advanced asset. When he saw opportunity in uranium and lithium, those markets needed advanced assets so that’s what he served up. With GoldRock, he was pushing a project ahead through a bear market so it had to be advanced to stand a chance. Now he’s got a gold bull market at his back and is taking the opportunity to work the added upside of exploration, since it’s a very valid option.

Luis Zapata deserves comment here too. Luis is Peruvian. He has been financing mining deals in Latin America for years. To boot, his family owns a mill that runs toll ore from local miners. All told he is deeply networked in the Peruvian mining scene. The fact that the family friend who owns the mill that processed Coriorcco ore ten years ago gave him the mill’s records for those deliveries is a great example. It also goes without saying that Luis has a strong team of geologists already assembled in Peru.

Luis also matters because permitting in Peru is not easy or quick but he knows the system. He also has an advantage – as a Peruvian, he is able to get the small-scale mining license that Oro X will use to explore. It’s not an option for non-Peruvians. It also helps on the permitting front that Titan had already established an agreement with the community and that this project is at 4,000 metres elevation so no one actually lives on the properties.

Last note on the people side: Darryl Cardey is on the board and is central to the Vancouver side of the story. Cardey is a financier; you won’t find his name on management teams but he has been either a director or a key financier for a laundry list of exploration and mining success stories, including Northern Empire, Underworld, and the predecessor to K92 Mining. There already wasn’t any financing concern given Matysek’s involvement but, even beside Paul, Cardey’s involvement is notable.

Structure and Trading

The $6.3 million raised will go quickly. The first $2 million is needed to pay Titan for the projects. (Titan holds an option on the assets; to exercise it fully requires a $3-million payment but that is not due for almost ten years.) Then Oro X will spend $1.7 million on phase 1 exploration before immediately moving into phase 2, which is currently budgeted at $1.2 million (but could well be expanded if phase 1 shows success).

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Oro X will have 43 million shares out post financing and only 3.7 million warrants. A quarter of the shares will sit with insiders. The last financing was priced at $0.41, which gives the company a $17.6-million market cap.

That’s neither high nor low for a debuting explorer…but I think it’s low given the people involved and a project with an exciting but relatively simple target. As such I think it will trade up immediately. The current pause in the precious metals bull market might mean it doesn’t shoot skyward, though, which is good as it will create better opportunity to enter.

As with Pucara, I hesitate to try to predict how this will trade on day one. It may, like Pucara, overshoot and settle back. In fact I think that’s likely. As such I do not plan to chase this stock on day one. I would rather let the market scramble around on day one and then consider bidding at market on day two or three. From a news flow standpoint there is no rush to enter, as drilling won’t start until February, but the capital markets team will market the story in the interim while the geologic team runs that 3D IP survey to refine targets, get a better sense of what might be going on at depth, and assess the potential for further veins under cover to the east.

Long story short, this is a project with good odds to kick out high-grade gold-silver results when drilling starts, from a company with a tight share structure, a good shareholder registry, a famous name associated, and good marketing abilities. I also think that Peru is rising in the exploration world – assets that can be explored (where permits are in hand) are getting a lot of attention, as Pucara attests. I think OroX will add to that story…as will Kuya Silver, which I outline below.

Kuya Silver (CSE: KUYA)

Kuya Silver came to trade today, the result of a reverse takeover (RTO) of Miramont Resources. I had backed Miramont, which had interesting exploration projects in Peru that failed. Miramont needed new life and its management connected with a private company with an interesting silver project in Peru. The match made sense – Miramont’s investors like Peru, the management teams were compatible good people, and each needed the other.

The deal they struck saw Kuya raise $10 million at $0.90 and saw Miramont roll back it share count 10 for 1 before acquiring Kuya and changing its name. All those corporate wranglings wrapped up yesterday when Kuya Silver started to trade, and immediately jump to $1.40.

Kuya Silver’s focus is the Bethania mine. It was in operation until 2016 when the private owners ran out of steam, towed under by a lack of on-site milling that meant high trucking and toll milling costs plus debt payments. Since then the mine has been on care and maintenance.

In late 2017 Kuya found the mine, saw the potential it offered given an injection of capital, and signed an earn-in deal to acquire 80% of the asset. And the team has been preparing the mine to return to operations in a public company ever since.

Key to that was dealing with the debt that pulled the previous owners under, which Kuya retired in 2019. They also did piles of technical work: digitizing all the geologic data, developing confidence in the known mineralization (which is not defined to 43-101 standards and so cannot be called resources, let alone reserves), completing a technical report, and starting the engineering and permitting work to build a mill on site.

All the while the team at Kuya watched for the right opportunity to go public. Miramont was a great match.

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Rolled-back Miramont shareholders will collectively own 5.6 million shares. Pre-financing Kuya shareholders will own 13 million. The financing issued 13.7 million shares, which means Kuya is coming to trade with 32 million shares outstanding. Management will own 29% of the count; Eric Sprott has a 6% stake.

At its $0.90 financing price it came out with a $29-million valuation. Trading up to $1.45 puts its market capitalization at $45 million. The company also has $12 million in the bank.

I thought $29 million was a low valuation, which is why I participated in the financing (and made it available to Premium subscribers). I think $45 million is still on the low side for a company with:

A permitted silver mine on standby with (non-43-101-compliant) resources sufficient for at least 5 years of production (depending what rate Kuya ramps up to)

A silver asset the market will be pleasantly surprised by, for its vein swarms that have been mined for decades and reliably carry better than 500 g/t silver, plus notable gold, lead, zinc, and copper

The potential for low-cost silver production because of high grades, good recoveries, by-product credits, shallow underground operations, and increasing scale of production.

A tight share structure, $12 million in the bank, and a very strong technical team with deep experience in Peru

As an investor I like owning warrants. The financing did not include warrants but as a shareholder I was happy to see that. It means the structure is tight and clean, which gives the share price good leverage upon success. It also means Kuya will have flexibility when it goes to negotiate the US$10-million financing package it will need in early 2021 to build the mill, expand the underground, and get into production.

All told I think Kuya has the potential to do well from here. It’s a silver story in a market starved for silver with a low valuation, good structure, strong team, and solid business plan. Looking ahead the company has good potential longer term as well – the idea is to use Bethania as the foundation asset for a new significant silver miner. Most of today’s big silver mines started with an asset like Bethania, so it is possible.

The Bethania Mine

Bethania is in central Peru. The mine opened in 1977 based on the discovery of two veins and has been operating, at a small scale, on and off for the last 40 years.

For a vein swarm to have maintained miners’ interest for that long suggests nice grades. And yes, Bethania has very nice grades. The resource is historic; I pulled it from the technical report that Kuya completed on Bethania last year. It stands at 435,263 tonnes grading 573 g/t silver, 4.5% lead, and 1.27% zinc. Copper was not systematically assayed but sampling suggests copper ranges from 0.25 to 0.4%; gold similarly was not systematically assayed but sampling suggests gold grades range from 0.5 to 1 g/t.

So: it’s not a large count but it contains 8 million oz. silver, which is a fine starting point for an operation of this scale. When it was last operating the mine produced about half a million oz. silver a year. Kuya’s idea is to do four to five times that level and it shouldn’t take a huge amount of time or investment to get there.

The cash Kuya has now will do all the things needed ahead of a build decision:

Complete the Bethania acquisition (there is roughly US$3 million to pay to the vendors and half a million left to spend in the ground)

The in-ground spend will go to a drill program that will update the known mineralization to 43-101 standards. This is needed because groups funding a mine build (through debt, stream, or equity) will almost certainly require official resources to fill the mine plan

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Complete remaining engineering work and permitting to build a process plant and restart the mine

All told that will cost roughly $7 million and will take the rest of the year. That means Kuya should end the year with perhaps $4 million in the bank, which will a nice position from which to negotiate the US$10-million finance package they will need to get Bethania back into production.

That US$10 million is a reasonable number, both in terms of what it should cost to build a process plant (this is an off-the-shelf plant, so readily available and not expensive) and in terms of payback (the expanded operation should be able to repay that amount in something like a year, based on my rough calculations).

As for the scale of this system… The pending drill program will focus on confirming known mineralization. Infill isn’t the most exciting kind of drilling but in this case there are two reasons to be optimistic the market will care.

First, very few people are aware Bethania exists. Drilling into known silver and pulling intercepts with high silver grades over good widths will convey to the market what this mine has to offer.

Second, Kuya will try to design at least some of the holes such that they have the potential to add to known mineralization. Holes might go deeper than previously tested or step along strike. None of this is confirmed as yet but it’s very reasonable to assume (geologists always try to get as much information out of every drill program as possible!).

In terms of potential, over the last 40 years of intermittent production the mine tapped into 6 veins. A seventh vein that has not yet been mined also contributes to that count. Drills have tagged into 4 additional veins that have been neither mined nor modeled. And the eastern extent is essentially untested.

All told, there is reason to believe the high-grade vein swarm at Bethania still has a lot of silver to give.

Possibilities

Bethania is not a big operation but scale isn’t the first focus for a new silver producer. In making their case the team at Kuya points to five now large silver producers that all started with profitable small to mid-sized operations that grew and provided the cash for acquisitions: Pan American Silver, Endeavour Silver, First Majestic, Great Panther, and Fortuna Silver.

Note that these operators started out producing 0.3 to 2.5 million oz. of silver a year. Kuya is aiming for the upper end of that range with its restart at Bethania.

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Of course, this chart also highlights that a rising silver price is an essential part of the equation – and bullishness on silver is a key reason I am interested in Kuya today.

This conversation leads to the next question: what characteristics define a profitable small to mid-sized silver mine with the potential to grow?

Small mines in prolific silver districts (Mexico and Peru top the list) are often privately held and as such are capital constrained. A public company is able to access the funds to drill to increase resource and expand the operation, which often reduces costs.

It is helpful if the deposit has recoverable by-products (base metals and gold), as they lower the cost of silver production

Established mines can reduce the risks inherent in mining – operational history provides ample information on geology, mining method efficacy, and processing methods and recoveries.

An existing operation also means existing infrastructure (underground development, process plant, mining equipment) and permits.

Social license is less of a risk because the mine already exists (expansions are far less controversial than new developments)

Bethania checks all of these boxes.

Let’s take permits as an example. Just getting a permit (or more specifically: getting the series of community and government approvals needed) to drill in Peru can take years. That’s not an exaggeration – years. Permitting a new mine build is arduous. With Bethania, Kuya sidesteps almost all of that. The company will still have to apply for a permit to build the process plant but, compared to starting from scratch, the permitting path ahead is simple.

The operational history suggests Bethania should get good recoveries. And the mineralization has notable gold, lead, and zinc, which will reduce silver production costs. The operation carries no royalties and the mine isn’t deep, so haulage costs are not high. All told, there is good reason to believe Bethania will be able to produce silver at low costs.

Bethania looks to me like an ideal starter asset for a new silver miner.

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Wrap Up

I like Kuya for its moderate valuation (it’s still not a well-known story), for the amount of time and work and business thought that has already gone into Bethania, for management’s capital markets abilities and network, and because it’s silver.

Let me briefly expand on that last point. Subscribers ask me all the time for silver investment ideas. The interest makes sense. The silver price outperforms gold in most precious metal markets, after lagging at the start.

And a lack of silver-focused companies means the short list of stocks offering clear silver exposure attract outsized attention. The table below shows averages for gold and silver miners in the Bank of Montreal coverage universe; even though silver miners are generally smaller in terms of production and revenue, they command higher multiples because of their scarcity.

Kuya has had just one day of trading. Today was a whatever day for silver – it gained all day but it was only retaking the ground it lost following Trump’s No Stimulus tweet.

It’s impossible to know how it will trade from here. The team will market and spread the story, which will help; silver will do whatever silver does, which will impact interest; and drills will start turning on that infill program, which means drill results perhaps by Christmas. The financing shares did not have a hold so there are no free trade date pressures ahead.

I participated in the financing but I will add to my position. I will do so in tranches, starting with a third of my desired allocation tomorrow. The other two thirds I will buy before Christmas; I will use stink bids to try to catch dips in price but I’ll let Kuya trade for a few more days before deciding on those bid prices.

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Also Buying These Momentum Movers Three stocks are enough to describe in one letter. But…there are three other stocks that I really like right now that are moving up.

Today I will simply name the stocks, as that’s just all I have time to do. Next week I’ll write each up, as I have done for Pucara, OroX, and Kuya today.

Sassy Resources (CSE: SASY): High grade gold exploration in BC’s Golden Triangle, drilling a discovery made last year in an area exposed by receding snow; drill results pending (from core with visible gold) but surface samples have returned high-grade gold. Lots of news flow coming soon. Tight share structure.

Norra Metals (TSXV: NORA): Polymetallic exploration in Norway; two projects. Undervalued with marketing ahead.

GGL Resources (TSXV: GGL): Explorer changing focus to Gold Point project in Nevada after years focused on diamonds. Project is high-grade oxide gold (underground sampling returned 35 samples averaging 12 g/t gold in oxide!!) that was mined in the 1960s but abandoned after a mining accident and has seen almost exploration. Open underground workings will aid sampling and drilling of 15 known veins; GGL will also explore large area east under gravel cover where EM survey suggests veins continue. Tight structure, strong technical team; currently financing (price pinned until financing complete).

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Full Portfolio Table

Company Ticker Entry Date Entry price

Cost base %

position Price today

Change

Mine Developers

Orezone Gold

ORE.V, OTC: ORZCF

13-Jun-18 $0.81 100 $0.87 7%

Development-ready gold project with scale and strong economics, and a team that has successfully built many mines. Value gains ahead whether ORE builds or gets bought

Pure Gold Mining

PGM.V 15-Nov-18 $0.51 $0.56

(COVID) 100 $2.19 329%

Building a high grade gold mine in Ontario (fully funded). Drilling to keep demonstrating mine plan & exploration upside. Near-term production re-rating & takeout target

UEC.NYSE 21-Jun-15 $1.72 100 $1.07 -38%

18

Uranium Energy

Ready to ramp up low-cost output into developing uranium bull market that will likely offer a premium for US output. One of few clear bets for uranium

Feasibility-Stage Projects

Bluestone Resources

BSR.V 27-Jan-18 $1.45 $1.425 (COVID)

100 $1.98 37%

Steadily moving towards formal production decision. Expect value growth with market and project advancement. Takeout target

Erdene Resources

ERD.T, ERDCF.OCT

08-Jan-17 $0.86 $0.36 (add @

$0.24, COVID)

200 $0.46 28%

Advancing dual tracks: develop BK (first gold by late 2021) and keep exploring. Exploration ongoing and returning new high-grade zones!

Advanced Assets (PEA or Pre-feasibility)

Fireweed Zinc

FWZ.V 01-Jun-17 $0.80 -$0.57 (sold

half at $1.67; COVID)

25 $1.09

Interest in zinc rising and Mac Pass is a standout zinc project. Drilling this summer testing Boundary zone (potential game changer), expanding deposits, and testing new targets

Generation Mining

GENM.V 20-Nov-19 $0.19 $0.10 50 $0.46 360%

Unique PGM asset: large resource in great location with grade and scale upside. PEA returned robust numbers. Feasibility study underway (due early 2021); exploration too. Price rising as investors rotate back to PGEs after COVID scare

Integra Resources

ITR.V; IRRZF: OTCQB

06-Nov-17 $0.90 $2.58

(COVID; rollback)

100 $4.28 66%

PEA outlined good, large mine already. Favoured jurisdiction, strong treasury, exploring for high grade, updating PEA with much bigger mine plan

KORE Mining

KORE.V, KOREF.OTC

27-Mar-19 $0.23 $0.29

(COVID) 100 $1.30 348%

Advanced heap leach Imperial project (permitting story) plus two exploration-stage projects with exciting potential. Fundamental value, potential for splash, lots of news

Marathon Gold

MOZ.T 25-Mar-20 $1.14 100 $2.19 92%

Large, advanced Valentine project in good jurisdiction. Simple mine plan, strong economics. Potential to gain value alone or as takeout target

Tinka Resources

TK.V 01-Nov-17 $0.66 $0.72 (add at

$0.32; COVID)

100 $0.19 -279%

Strong advanced zinc project in Peru. Cash in bank to outlast weak zinc market.

Tristar Gold

TSG.VTSGZF.OTC 24-Jun-20 $0.30 100 $0.35 15%

Hybrid gold opportunity. (1) PEA outlines a robust low-cost open pit mine with 43% after-tax IRR at $1250 gold and pre-feas due out in early 2021 will be markedly better. (2) Renewed exploration effort very likely to find more of the same mineralization (1 g/t average) and could find a high-grade zone.

19

Velocity Minerals

VLC.V 20-Aug-17 $0.32 100 $0.44 38%

Rapidly and successfully advancing projects in Bulgaria towards 100,000 oz/yr+ operation with multiple deposits feeding partner's existing plant.

Exploration

Auryn Resources

AUG.T, NYSE 10-Aug-15 $1.00 $0 (sold third

at $3.01) 66 $2.70

Buying Eastmain, spinning out Peru assets, creating Fury Gold. Bold corporate move to crystlize value. Peru projects still the most exciting but still awaiting permits

Benchmark Metals

TSXV: BNCH, OTCQB: CYRTF

12-Aug-20 $1.23 100 $1.20 -2%

Big drill program to define a big initial resource at Lawyers project in BC. Splashy grade plus scale. Pushing project ahead rapidly. Still under-recognized story

Brigadier Gold

TSXV: BRG, USOTC: BGADF

12-Aug-20 $0.39 100 $0.25 -35%

Just acquired Picachos project in between GRSL's Plomosas and VZLA's Panuco. Similar: high-grade historic mines, underexplored. Area play and project potential for splash.

Canasil Resources

CLZ.V 13-Jul-20 $0.15 100 $0.13 -17%

First results from Candy vein a technical success; market wanted more. Ongoing work could provide. first test of promising structure with high-grade samples and historic mining records. Etablished Mexico-focused silver explorer.

Compass Gold

CVB.V 10-Apr-19 $0.34 $0.355 (COVID)

100 $0.26 -25%

Farabakoura discovery developing. Multiple other targets getting first pass testing.

Discovery Harbour Resources

DHR.V 09-Oct-19 $0.06 50 $0.11 75%

SELL ahead of mid-November free trade date (55M shares at $0.055 cost base)

Eclipse Gold Mining

EGLD.V, EGLPF.OTC

18-Feb-20 $0.75 100 $0.78 4%

Strong team, backing, and marketing means lots of eyes on this Nevada exploration story. First results good if not amazing. Now drilling again

EverGold

EVER.V 04-Oct-19 $0.20 $0.22 100 $0.35 75%

First results from Snoball disappointed (narrow). Still potential for discovery success at Golden Lion; results soon and several targets mean higher chance of success

Excellon Resources

TSXV: EXN, USOTC: EXLLF

12-Aug-20 $0.97 $4.85

(rollback) 100 $3.49 -28%

SELL - stock sliding sharply for no strong reason, reporting issues, and increasing focus on Kilgore (which I don't like)

Fosterville South

FSX.V, FSXLF.OTC

21-Sep-20 $3.20 100 $2.91 -9%

Thesis: use free trade date price weakness to enter one of the hottest exploration stocks today. Exploring south of Fosterville mine, applying methods/ideas that discovered uber high grade gold there. From one of the strongest capital markets groups in mining; spinning out projects into new company mid-October

20

Genesis Metals

GIS.V 19-Feb-20 $0.35 100 $0.26 -26%

Financed for 8000 m drilling in two programs, enough to start demonstrating the potential at Chevrier. First few holes failed to impress.

GFG Resources

GFG.V 18-Oct-19 $0.18 $0.21 100 $0.23 7%

Multiple drill discoveries at Pen project, all deserving attention. Drilling just re-started. Alamos bought in.

Grande Portage Resources

GPG.V, GPTRF.OTC

29-Jan-20 $0.16 $0.19 100 $0.48 153%

Drilling high grade Herbert project in AK this summer for first time in years. Strong contender for standout drill results.

Great Bear Resources

GBR.V, GTBAF.OCT

11-Dec-17 $0.29 $0.48 (sold half to $0,

COVID) 50 $15.42 3113%

GBR doing 300-hole program to define first resource at LP Fault as fast as possible. 10M oz. is likely. Race to resource before getting taken out

GR Silver

TSXV: GRSL, USOTC: GRSLF

12-Aug-20 $0.73 100 $0.56 -23%

Drilling silver-gold veins at Plomosas project, benefitting from First Majestic's unfinished work. Significant vein strike potential; high grades. Also advancing similar adjacent San Marcial project

HighGold Mining

HIGH.V, HGGOF.OTC

Spinout or $0.45

$0.45 $0.41

(COVID) 100 $2.91 610%

Cashed up to test multiple targets at JT project. Goal: show there's significantly more potential than the current resource, through expansion AND multiple new zones. Strong contender for standout drill results, starting in September.

IsoEnergy

ISO.V, ISENF.OTC

12-Dec-18 $0.40 $0.44

(COVID) 100 $1.08 145%

Only junior with a high grade U discovery as uranium bull market gathers momentum. Recent financing was popular; those who couldn't get in had to buy in the market. Tight structure means price jumped. Drilling starting soon.

Kodiak Copper

KDK.V 18-Dec-19 $0.35 $0.42 (COVID 50 $2.65 531%

Major gold-copper porphyry discovery in second drill program at MPD!

Libero Copper & Gold

LBC.V 07-Aug-19 $0.12 50 $0.14 17%

First pass drilling on several exciting high grade gold targets in BC. Results coming. True grassroots gold exploration!

Liberty Gold

LGD.V, LGDTF.OTC

13-Apr-20 $1.15 100 $1.99 73%

Rapidly growing a good oxide gold resource in Idaho. Well capitalized, good momentum

Nevada Exploration

NGE.V, NVDEF.OTC

11-Oct-17 $0.33 $0.30

(COVID) 100 $0.16 -47%

Stalking big gold under cover in Nevada. Have found what looks like a massive system; need to find the hot spot therein. Drilling now underway

NSG.C 29-Apr-20 $0.35 100 $0.38 9%

21

Northstar Gold

Historic Miller project: NSG finding gold in multiple rock types and structures. Drills hitting known high grade veins, disseminated intrusions that hadn't been tested, and vertical veins not previously known. System doesn't fit a tidy model so market doesn't know how to value...but there's a lot of gold and its form will become clear with more drilling (underway)

Osino Resources

OSI.V 13-Apr-20 $0.69 100 $1.32 91%

Gold discovery in Namibia under till. Potential for deposit of scale essentially at surface. Strong shareholder registry and team.

Outcrop

OCG.V, MRDDF.OTC

12-Feb-20 $0.11 $0.10

(COVID) 100 $0.55 450%

Well funded to hammer Santa Ana with holes, aiming to demonstrate good density of high-grade shoots along 14 km vein extent. Strong technical team builds understanding of veins vs breccia with each hole.

Newcore Gold

TSXV: NCAU 27-May-20 $0.36 30% of desired

$0.72 100%

Advancing the PEA-level Enchi gold project in Ghana. Neglected asset getting focused attention for first time. Top tier management.

Precipitate Gold

PRG.V 25-Sep-19 $0.16 $0.135 (COVID)

100 $0.25 85%

Optioned flagship PG project to Barrick (strong deal if it indeed hosts a discovery). Pivoted to explore nearby Ponton project; targets look good.

Prime Mining

PRYM.V 14-Aug-19 $0.15 $0.20

(COVID) 100 $1.58 690%

Decision to postpone construction and focus on exploration being well received by market seeing potential at project. Funded for big exporation push. Drill results soon

Redstar Gold

RGC.V, RGCTF.OTC

30-Jul-20 $0.09 100 $0.12 28%

Merger with private co will strengthen management, fill signficant financing, and add portfolio of Mexican projects. Strong potential for high-grade results that demonstrate scale at the flagship Ungi project in Alaska; drilling underway soon.

Revival Gold

RVG.V, RVLGF.OTC

30-Oct-19 $0.51 100 $1.09 114%

Strong team advancing historic asset to production in Idaho. Tight structure, strong capital markets capacity, looking for additional acquisitions. Upsized summer exploration plans after raising $13M - potential to demonstrate scale if raft of targets work.

Reyna Silver

RSLV.V 23-Sep-20 $1.05 66 $0.91 -13%

Top tier technical and markets team with portfolio of Mexican silver assets. Two projects will be drilled 2021; potential for big success

Ridgeline Minerals

RDG.V 17-Aug-20 $0.55 100 $0.42 -24%

New company with three high potential Nevada gold projects. Selena showing promise for surface oxide gold; Swift and Carlin East are deep, high-grade targets. Well funded, strong backers, tight structure, cheap drill contract

SCOT.V 18-Sep-19 $0.20 100 $0.39 93%

22

Scottie Resources

First pass drilling in 2019 hit good results; drilling this summer has potential to return same AND build story with scale. Cashed up. Drill results pending

Sitka Gold

SIG.V 02-Oct-19 $0.10 0.05 (COVID

half sell) 50 $0.21 320%

Drilling at RC, a big prospective project in Yukon. Also drilling moonshot target at Alpha project in Nevada; exciting results unlikely (vectoring). Tight structure, funded.

Strategic Metals

SMD.V 19-Jun-19 $0.33 $0.295 (COVID)

100 $0.66 124%

Summer drilling at Hinton likely to generate strong results. Still inexpensive relative to cash, share holdings, and project portfolio. Drill results in weeks

Summa Silver

SSVR.V 30-Sep-20 $1.45 100 $1.28 -12%

Hughes property: exploring under and for the offset strike extension of an historic high grade silver mine in Nevada.

Sun Peak Metals

PEAK.V 17-Aug-20 $0.90 100 $1.10 22%

Portfolio of VMS projects in Ethiopia being explored by a team that has made two major VMS discoveries in the same rocks in neighbouring Eritrea. Tight structure, strong backing, cashed up, many strong targets

Tarachi Gold

TRG.V Buy now – market and free trade date weakness

Mexico gold-silver explorer. Emerging from Inventa Capital group; this is a bet that bigger things are on the horizon for TRG

Troilus Gold

TLG.T; CHXMF:OTCQB

19-Jun-19 $0.69 $0.765 (COVDI)

100 $1.15 50%

Large open pittable gold resource at historic mine. PEA captured value; now keep expanding resource and testing regionally for additional discoveries. Clear Leverage-Plus stock in this bull market

ValOre Metals

VO.V 20-Nov-19 $0.24 $0.26

(COVID) 100 $0.27 2%

Good starter PGE resource at Pedro Blanco project in Brazil. Major exploration potential; drilling will start in 2020

Vizsla Resources

VZLA.V 09-Oct-19 $0.41 100 $1.59 288%

Exciting high-grade silver discovery underway at Panuco project in Mexico. Multiple veins to test. Strong team, cashed up, momentum, 4 drills means constant news.

Royalty Companies

Ely Gold Royalties

ELY.V, ELYGF.OTC

28-Sep-16 $0.23 80 $1.24 439%

Market fell in love with growing free cash flow and pattern of good deals

EMX Royalty

EMX.V, NYSE 14-Nov-14 $0.86 $0.98 100 $3.75 283%

Assessing investment opportunities (royalties, stocks, properties - if it makes sense!). Cash flows cover operations. Tight shareholder registry

Portfolio Updates

23

Benchmark Metals (TSXV: BNCH; USOTC: BNCHF)

Drilling on the Cliff Creek target on BNCH’s Lawyers project in northern BC continues to yield good results at depth. The latest batch of assays have produced more significant widths of mineable grade at depth, including 30.6 metres of 3.39 g/t gold-equivalent beginning at 346 metres downhole.

Adding ounces at depth will only grow the project resource BNCH is pursuing on this target. Plus, this program along the 1.2-kilometre trend at Cliff Creek is giving geologists a road map for less advanced targets at Lawyers.

When you already carry a $146-million market cap and are drilling around a resource, more of the same doesn’t often make your share price move. What will make it move is a stronger gold market that makes large and growing gold resources in good locations like Lawyers desirable, turning those results into ounces via a resource update that grows the count notably (which is planned within six months), and showing that resource could support a straightforward, large mine with good economics via a PEA, which should be out by this time next year. Those plans are the reason I’m invested in BNCH and that rationale remains in play.

Brigadier Gold (TSXV: BRG; USOTC: BGADF)

The intimate understanding of the ground at Picachos that BRG’s exploration head Michelle Robinson brings to project is definitely informing the work her team is conducting. The latest samples come from the El Placer area.

There were some nice numbers in the set of results, including 7.4 g/t gold over 3.2 metres, 8.9 g/t gold over 1 metre, 11.7 g/t gold over 1.9 metres, and 8.2 g/t gold over 2 metres, all with varying silver, copper, lead, and zinc alongside.

But reaction to the news (such as investors’ reaction to sampling might be) was muted. I mean, investors don’t often react that much to sampling news anyway, but I think there was another factor at play here: the map BRG included in its update. As you’ll see below, it shows a “grey” area, owned by Fresnillo, that appears to cut across a key portion of the trend at Picachos.

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This gap inside BRG’s property resulted from decisions that Robinson, who accumulated and maintained the property over a period of years before vending it to BRG, had to make to conserve cash. There are significant costs to maintain mineral tenure – the properties Robinson held onto required US$70,000 in annual fees and US$300,000 in annual work requirements. To maintain her properties as a private owner, Robinson had to make decisions about which parcels to keep and which to let go. Based on her deep knowledge of the area, she is confident that she kept the most important parts of the project.

That said, the internal block is an area BRG tried to get, without success. It’s unfortunate, no doubt, but BRG sees significant potential on the ground they do have. If that potential plays out, BRG will attract attention from Fresnillo earlier than they might otherwise have been noticed, given Fresnillo’s neighbouring position. From that angle, Fresnillo’s presence could have some benefit.

It’s a point BRG will have to explain over and over as it explores and it will deter some investors. Given Robinson’s depth of project knowledge, I am comfortable with the idea that BRG has multiple strong targets, the excluded block notwithstanding. In the shorter term, a 5,000-metre program is underway to probe underexplored veins around the San Agustin target for the first time ever. That’s the thesis with BRG and it remains intact.

Compass Gold (TSXV: CVB; USOTC: COGDF)

With the rains in West Africa coming to a close, CVB is getting ready to launch the next phase of exploration at Sikasso. The program will focus on the Tarabala prospect within the Sankarani permit and the Samagouela workings within the Kourou permit. The core of the program will be 3,000 metres of AC bedrock drilling, supplemented by a ground geophysics program that will focus on the Tarabala, Samagouela and Sodala trends.

25

CVB has been very quiet for months but that was expected, as trying to drill during the wet season in Mali would only be a waste of money. They instead spent the time integrating and considering all results to date and now have formulated their next plan of attack.

Compass controls swaths of land hosting a huge number of targets. They have been methodically working through those targets, testing each for potential. This time around, some work will return to targets that generated the most interesting results while other work will continue to test new areas. I’ve said it before: CVB will feel a bit boring until/unless it makes a discovery.

Discovery Harbour Resources (TSXV: DHR) – SELL into strength over next month

I love DHR’s project and targets. I think the technical team is doing great work. And I want to be invested in the stock when they are drilling.

But DHR raised $3 million in mid-July in a financing that issued 54.5 million shares at $0.055. The company had only 40 million shares out at the time, which means that a wall of shares bigger than DHR’s current total share count will come free to trade in mid-November with a cost base of $0.05.

As much as I want to support the team because I like the project, I can’t hold through that deluge. I don’t want to hurt DHR in the process so I will sell my position slowly over the next month. I may well buy back in once the free trade date has passed, at which point that overhang will be cleared and the drill permits may actually be in hand.

EMX Royalty (TSXV: EMX; NYSE-A: EMX)

26

One of the crown jewels EMX’s far-flung royalty portfolio is its 0.5% NSR on key portions of the Timok project in Serbia. The company’s royalty is on the Brestovac license and covers both the Cukaru Peki’s Upper Zone high-grade project and its Lower Zone deposit.

Zijin Mining Group took control of Timok when it acquired Nevsun Resources in 2019 and negotiated for the remaining portion the interest in the Lower Zone, which was held by Freeport-McMoRan.

With Zijin in charge (rather than a public company) it’s not totally clear what is going on at Timok, which is why EMX issued a news release on what it has ascertained. The key is that Zijin plans to crank up initial production on the Upper Zone by Q2 2021. The Upper Zone is a very rich deposit that should support a rich mine, which is why I call this royalty a crown jewel in EMX’s portfolio: it will crank out cash for EMX when it gets started. It would be ideal if EMX had a clearer picture of what is going on, but I like that EMX communicated its understanding to help the market see that this important royalty is drawing near.

Erdene Resource Development (TSX: ERD; USOTC: ERDCF)

The first 10,000 metres of a planned 18,000-metre program on ERD’s holdings in the Khundii Gold District in Mongolia are complete and while the majority of the holes from this effort are at the lab awaiting assay, we go results from an initial batch including hits that will likely expand the Bayan Khundii pit east and west in Midfield North area and around the Striker SW area.

The numbers are good, such as 3.9 g/t gold over 22.4 metres east of Midfield North and 4 g/t gold over 10 metres including 1 metre of 24.5 g/t gold and 3 metres of 20.8 g/t gold in two holes around the Striker SW area.

Just as important as these numbers, though, was news that ERD hit visible gold in ten holes that are now in the lab being assayed.

The goals of this drilling program are fourfold: expand the BK pit area, identify new resources at Dark Horse, Altan Arrow and Ulaan, as well as north and northeast of BK, finish BK condemnation drilling, and follow up on the Altan Nar deposit. In addition to the promising grades from the targets on the edges of the BK pit, ERD is also reporting visible gold in core that remains at the lab from these targets.

The map below is a good start in discussing what those results could do.

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ERD is drilling in the red areas. You can see how adding ounces around North Midfield, Midfield Southeast, and Striker SW would improve mine economics as they would be ounces within rock that already has to be mined but is currently classed as waste. If those ounces are high grade, all the better.

ERD is also drilling areas that could become additional pits sending ore to the BK mill. Striker West is one such area; the others are targets to the north. Those targets feed into the constant ERD refrain, which is that this team made a virgin discovery in underexplored area and then pushed it towards development quickly because the market required it (the bear market would only support projects that showed viable economics and the Mongolian license and permitting regime means you only have 7 years to explore).

That’s great – we’ll see the fruits of that labour soon, as ERD now just needs to secure project financing and build this straightforward project in order to start producing by the end of next year. However, there is also immense exploration opportunity still all around, starting right beside the known resource and extending to ERD’s other projects and targets. That’s why it was so great that Eric Sprott led a financing that gave ERD the funds to explore, as this team and portfolio really deserve exploration…and to boot the BK mine will likely be better for it as well.

There is absolutely a chance that one or more of these ‘visible gold’ holes will return an attention-grabbing result that boosts ERD in the near term. In the medium term, any of the targets that ERD is exploring outside of BK could turn into something interesting at any point. Remember that ERD went on a dramatic share price run in early 2017 because of its drilling at Altan Nar, a separate deposit to the north; a repeat of that is certainly possible. And long term: ERD will be in production in something like 18 months. I like these odds.

Excellon Resources (TSXV: EXN, USOTC: EXLLF) – SELL

28

I don’t really know why Excellon is struggling so but I am going to cut my losses and exit rather than stick around trying to figure it out.

I have a few theories. The company’s recent reporting has been sub-par. I don’t mean the result themselves but more how they are presented. If a company has implemented a slew of upgrades to increase throughput and lower cost at a mine, you would think they would report quarterly or monthly numbers with the previous or prior year period data alongside for comparison. Excellon has not done so, which leaves unable to really know whether the upgrades are working. Sure, you can dig for previous data but it’s not always available for a comparable period…and more generally: not presenting the old data for comparison certainly makes me think the upgrades aren’t working as well as intended.

Second, it’s increasingly apparent that Excellon is focused on Kilgore, the project they acquired by merging with Otis Gold. The thing is: I don’t particularly like Kilgore and had bought EXN for leverage to silver, which is not what Kilgore provides.

Long story short, I made a bad bet and I would rather exit with a 28% loss and egg on my face than continue to hold a stock that is sliding this sharply for no strong reason.

Grande Portage Resources (TSXV: GPG; USOTC: GPTRF)

We got the first assays last week from GPG’s drilling program at Herbert, where the company is attempting to grow its resource by expanding the known mineralized veins and testing new ones. The best assay from the most recent batch was a 170-metre step out on the Goat Vein. Drilled from Pad T (as most assays in this batch were), Hole 20T-3 hit an impressive 2.7 metres of 52.3 g/t. Other assays of note came from the Ridge structure (1.5 metres of 23.8 g/t in Hole 20T-2B) and the Main vein (2.4 metres of 11.5 g/t in Hole 20U-1).

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As you can tell, the results include some nice numbers, to be sure, and the intercepts are calculated true width. That matters: by reporting true widths we can see that the veins at Herbert are wide enough that an underground operation could tap most of the mineralization intercepted to date without too much dilution.

Extending the three known veins to the east was a key goal in this drill program and so far so good. And certainly the Goat vein stands out. Hole 20T-3 is such a big step, in fact, that GPG will have to drill intervening holes to figure out whether the new hit is a continuation of Goat or a splayed structure. Whichever it is doesn’t matter; what matters is that this system is strong enough that GPG could take a big step east and pull a big number.

The other goal this summer is to test some new or inferred veins; that is also working, as you can see with Ridge. There are a lot of mineralized veins at Herbert, and there are many that haven’t been drilled yet.

GPG has completed 7,500 metres of the planned 8,500-metre program on the project. Management has let everyone know that a few of the pending assays are from holes with visible gold. There are no guarantees there, but it does improve the odds of some splash in the next rounds of results.

Slow assays mean results will keep coming for months. I think the market may have gotten ahead of itself with excitement on GPG and is now sitting back, even though the better reaction would be the other way – get excited now for the slew of results to come.

Great Bear Resources (TSXV: GBR; USOTC: GTBAF)

We got more assays from the LP Fault this morning. In terms of numbers, Hole 167 hit 18.9 g/t over 19.3 meters and Hole 157 cut 4.3 g/t over 25.0 metres, both on section 20050. On section 20900, Hole 190 intersected 3.8 metres of 20.8 g/t within 45.9 meters of 2.0 g/t.

The key to this morning’s news was the fact that GBR has now tested section 20050 with eight holes spaced 30 to 75 vertical metres apart. The map cross section shows that drill density and shows great continuity of high-grade mineralization.

With high-grade systems in general, you need continuity and you want grade to improve with drilling density. That’s a function of how far an intercept can reach in informing a resource – in nugget-y systems, modelers do not let high-grade hits stretch very far into the space around because they don’t want a nugget that a drill happened to hit to inaccurately boost the grade.

When holes are spaced far apart, the ground between high-grade hits and their spheres of influence is assumed barren or given a low

30

grade based on geology. The dream for any high-grade system is for infill drilling to improve the grade by adding high-grade hits in those gaps.

That is basically what is happening at LP: drills are returning consistent high grade, whether a hole steps 30 or 100 metres away (or several kilometres, for that matter!).

We can’t know that the same will unfold on every section, but the fact that it’s happening on one absolutely increases the odds that it will happen elsewhere. And it will give interested majors confidence LP is a deposit that could be a reliable mine.

In my opinion, there is little risk and good likelihood of upside accumulating Great Bear at current levels.

Reyna Silver (TSXV: RSLV; USOTC: RSNVF)

Reyna made a couple of additions to its project portfolio over the past week.

First up was the La Reyna project, located 90 kilometres from the company’s Guigui project. Like many districts in Mexico, the “Cusi” district where La Reyna lies has produced a lot of silver (~80 million oz.) in its history, with that bulk of that occurring near the turn of the 20th century. The most recent production concluded in the early 1980s. The principal vein on the property spans 4 kilometres and has seen little in the way of modern exploration. The deal for La Reyna calls for US$1.3 million of escalating payments over four years to take a 100% interest, minus a 2.5% NSR.

The next addition was the Medicine Springs silver-lead-zinc project in Nevada, which RSLV is optioning from Northern Lights Resources. Like Guigui, Medicine Springs is another CRD system that could host high-grade silver resources. Located just west of the Carlin Trend, the project would benefit from ample local mining structure if exploration tags into something significant here. To take an 80% interest in the project, RSLV must spend US$2.4 million by the end of 2023. In Medicine Springs, management see similarities to MAG Silver’s Cinco de Mayo discoveries, and the project is close to drill ready.

These two deals help to build up Reyna’s project portfolio. It’s great that they’re relatively inexpensive, especially at first, and lie within RSLV’s silver and CRD wheelhouse. Exploration is a low-odds game so I like management teams that actively consider the question “What if the project doesn’t work?” Adding these assets is Reyna’s answer. With these assets added Reyna has a pretty darn interesting portfolio behind its flagship project Guigui, which of course I’m excited to see them drill once they have permits to do so.

Scottie Resources (TSXV: SCOT; USOTC: SCTSF)

We got initial assays from the 7,040 meters of drilling SCOT has completed on its Scottie gold project. The highlight assays came from the O-Zone within the historic Scottie Gold Mine, where Hole 27 returned 2.5 meters of 109.4 g/t gold and 32.4 g/t silver. The O-Zone is one of six mineralized areas that prior owners outlined at the mine.

That was the only hole we got from O-Zone. The other two holes probed the Blueberry zone where Hole 22 hit 5 metres of 5 g/t gold and 4 g/t silver within 28.7 metres of 1.8 g/t gold and 1.66 g/t silver. Hole 23 returned 44 metres of 2.05 g/t gold and 1.06 g/t silver, including 30.6 g/t gold over 1 metre.

The market didn’t react much to these initial results, for a few reasons.

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First it was only three holes and not three holes from the areas people are most interested in. That is was just three holes is not Scottie’s fault; it’s the assay lab backlog that I discussed.

Second, the O-Zone hit was good but I think people know the old Scottie mine has grade. What SCOT will need to demonstrate before it gets much credit for the mineralization at the old mine is scale. That takes time and drill holes, of course. Hole 27 is part of the process – that it stepped 30 metres downplunge from the nearest intercept and hit stellar mineralization is definitely good, but investors I think want to see stepwise plunge or strike extensions on several/multiple veins at the old mine before they will really start to believe in a resource of scale there.

Demonstrating potential for scale is really what this year’s program is all about. Last year SCOT got a short program done; they returned some nice hits but the program was too limited to even try to test scale. This year one key goal was to take some big steps and test for scale, because scale is the difference-maker with high-grade vein systems. There are lots of small high-grade systems; to really grow in value, SCOT has to show that one or more of its target areas can get big.

Blueberry took a step in that direction with these results. When SCOT hit 7.44 g/t gold over 34.8 metres at Blueberry last year, they highlighted a system with great width at least in one place. These new results didn’t live up to that result, but they did show good disseminated gold around high-grade intervals. I have to say that the lack of a map or cross section might have hindered response to these results – it’s impossible to understand how the new results relate to last year’s hit without images and SCOT did not provide those.

Since what SCOT really needs to show is scale – I am most excited to see the results from Domino. This is a new zone almost 2 km west of the Scottie mine that was covered by ice until recently. Last year SCOT geologists chip-sampled 10.5 g/t gold over 5.3 metres at Domino, on a structure that alignment says could be a continuation of the Scottie mine system. A hit at Domino would blow open the scale question.

I always want companies to have more than one target and SCOT has many. This is perhaps a blessing and a curse, as spreading attention among a list of targets means limited attention to each target, but it also means that failure or constrained success at one target isn’t a showstopper, as there are several other balls on the roulette table. Here we have a busy table – lots of targets saw testing, and this project certainly has grade, as these new results remind us, so I’m keen to see what else they pull up this year.

TriStar Gold (TSXV: TSG; USOTC: TSGZF)

TriStar has kicked off a drill program that will ply the northern end of the Esperanca South target at Castelo de Sonhos with three-to-five core holes. The core rig will then move to test the CDS Deeps target, a potential high-grade area at depth that could span 5 kilometres between Esperanca West and Esperanca South. An RC rig will also test for more mineralization to the east of Esperanca South.

TSG will likely succeed in finding more of the same kind of mineralization at Esperanca South, as they have done so reliably for years now, and that will strengthen a project that is already looking at producing a strong prefeasibility study within six months (the PEA was good, but the PFS will, I think, be better based only on a stronger gold price and a much better exchange rate). The Deeps target, if it works, could add some serious splash to a prefeasibility-stage project.

Vizsla Resources (TSXV: VZLA; USOTC: VIZSF)

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We got a big batch of assays from drilling on Panuco’s Napoleon vein. Best results included Hole 25 (449 g/t silver-equivalent over 15.3 metres) and Hole 27 (1,696 g/t silver-equivalent over 2.6 metres). These holes extended mineralization 50 metres to the south and the vein remains open at depth.

This large set of results from Napoleon suggest VZLA is building a high-grade shoot there. That matters because high-grade shoots are what Panuco needs.

The long section above shows the contours of the grade x thickness of the assays from the holes released to date. The red “dots” are the holes the company just released and the black “dots” are the holes awaiting assay.

The grades so far from Napoleon range all over the place but that’s why you have to look at the long section to see how the intercepts relate if you want to understand whether the numbers are good or not. In this case, it looks like a series of stronger results is starting to outline a shoot of strong mineralization that plunges to the north (the long section is looking west), within a structure that all carries grade but at a grade that wouldn’t be exciting on its own. That’s why the shoots matter.

The best results from this batch are on the bottom of the mineralized envelope. We’re still awaiting assays from Hole 13, which was apparently delayed because of quality control issues (companies insert blanks in their samples to check assay accuracy; if a blank comes back with a grade then the whole process has to start again, which is likely what happened here). VZLA says that hole looks good; if it grades well, it would add width to the high-grade shoot. We also want to see if the shoot continues up dip, which we will know when we see results from Holes 30 and 31.

The market clearly got carried away when VZLA first hit high grade at Panuco and has been trying ever since to figure out an appropriate valuation for this asset and company. Despite results that consistently built the

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story, the stock slid notably from July through September. In the last two weeks that trend looks to have reversed.

There is yet a free trade date ahead: in mid-June Vizsla raised $4.6 million by selling 10.7 million shares at $0.43 apiece. Those shares will come free to trade next week, against a share price of $1.59, so there may yet be one more bout of weakness.

Once we’re through that, I think VZLA is set to rise again. The discovery spike was wild speculation. Now we’re at a different place: VZLA has multiple rigs turning and has made four discoveries, two of which are already fleshing out nicely (the other two need more holes to get there). And there’s good reason to think the discoveries will continue; I know VZLA’s team has lots of targets they are keen to test.

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