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 Daily KRO 2022 Favorites Report
    Publisher: Kaiser Research Online
    Author: Copyright 2020 John A. Kaiser


Daily Kaiser Research Favorites Report for January 21, 2022

Spec Value Rating Key - 2019 onwards
Unrated Spec Value Zombie Spec Value No Spec Value Poor Spec Value
Bottom-Fish Spec Value Fair Spec Value Good Spec Value KRO Rating Guide
Bottom-Fish SV Favorite Fair SV Favorite Good SV Favorite Click SV Rating for KRO Search

KRO Favorites Market Activity for January 21, 2022
SV Rating Updated Value Volume High Low Close Day
Aurion Resources Ltd (AU-V) Fair Spec Value Dec 31, 2021 $97,793 76,700 $1.300 $1.250 $1.280 ($0.030) Jan 19, 2022
Eskay Mining Corp (ESK-V) Fair Spec Value Dec 31, 2021 $601,720 196,000 $3.190 $2.950 $3.040 ($0.080) Jan 19, 2022
FPX Nickel Corp (FPX-V) Bottom-Fish Spec Value Dec 6, 2021 $231,875 371,000 $0.650 $0.600 $0.620 ($0.030) Jan 10, 2022
Galway Metals Inc (GWM-V) Fair Spec Value Dec 31, 2021 $16,193 25,500 $0.660 $0.610 $0.610 ($0.070) Dec 7, 2021
Northwest Copper Corp (NWST-V) Bottom-Fish Spec Value Dec 14, 2021 $117,368 172,600 $0.700 $0.660 $0.670 ($0.020) Jan 14, 2022
P2 Gold Inc (PGLD-V) Fair Spec Value Dec 14, 2021 $14,070 21,000 $0.690 $0.650 $0.650 ($0.020) Jan 17, 2022
Perpetua Gold Corp (PPTA-T) Good Spec Value Dec 31, 2021 $246,000 49,200 $5.160 $4.840 $4.840 ($0.280) Nov 15, 2021
Verde Agritech Plc (NPK-T) Good Spec Value Dec 31, 2020 $364,056 92,400 $4.080 $3.800 $3.870 ($0.330) Jan 10, 2022

KRO Favorites News Releases for January 16, 2022 to January 22, 2022
Aurion Resources Ltd (AU-V) RSWeb SiteTreeForumSEDARQuoteFREE
Jan 19, 2022$1.28Aurion B2Gold JV Extend Gold Mineralization at Helmi
Jan 17, 2022$1.28Expands Gold Mineralized Envelopes at Aamurusko, Further Results from Helmi Discovery (B2Gold JV) imminent
Eskay Mining Corp (ESK-V) RSWeb SiteTreeForumSEDARQuoteFREE
Jan 19, 2022$3.04Receives Long High Grade Assay Results from TV
P2 Gold Inc (PGLD-V) RSWeb SiteTreeForumSEDARQuoteFREE
Jan 17, 2022$0.65Private Placement Non Brokered

Daily KRO Favorites Comments
Galway Metals Inc (GWM-V: $0.610)

Tracker - January 19, 2022: What's Next for Galway Metals Inc?

Galway Metals Inc is a Fair Spec Value rated Favorite effective December 31, 2021 at a price of $0.64 based on the multi-million ounce district scale gold potential of the 100% owned Clarence Stream project in New Brunswick, and the potential for the 100% owned Estrades polymetallic VMS system in Quebec for significant resource expansion at depth and the potential for an entirely new VMS discovery at the Newiska target about 10 km to the east. After numerous delays Galway finally bit the bullet and declared data cutoff at the end of 2021 for the Clarence Stream project where it has drilled over 100,000 m delineating the Adrian-GMZ-Richard-Jubilee high grade gold zones discovered 3-7 km southwest of the North-South Zone in late 2017. Calculation of an updated resource for the North-South zones and a maiden resource for the Adrian cluster is now in the hands of third party consultants. The resource estimate is expected by the end of Q1 of 2022. Drilling is continuing at Clarence Stream and will pause for a one month spring thaw break in April-May. The goal is to drill 75,000 m in 2022 with 6 rigs split between further delineation and infill drilling of the Adrian cluster, and wildcat testing of the various gold in soil or till anomalies that property wide sampling generated during the past couple years. Some of these anomalies such as the one hosted by the gabbroic intrusive complex south of the Adrian cluster are stronger than those associated with known zones but the company has been largely focused on delineating the Adrian cluster. The problem with this intrusion related gold system type of mineralization is that it is difficult for the market to see tonnage taking shape so it gets tired of the endless parade of high grade gold intersections. But if wildcat testing of new gold anomalies delivers strong intersections the market will pay attention, especially if this occurs on several targets in 2022 which would support Galway's goal of proving Clarence Stream is a 10 million plus ounce gold district. We hope to see a global resource in the 1.5-2.0 million ounce range, but will settle for 1.0-1.5 million ounces. With only $12 million working capital left at the end of 2021 another milestone will be a major financing by middle of 2022, ideally at a better price than the level at the end of 2021. While market interest in Clarence Stream will track the gold price trend, discovery focused speculators will be watching the Estrades VMS play in Quebec where Galway plans to drill 25,000 m in 2022 to test deep Titan geophysical anomalies interpreted to be conductive massive sulphides. Estrades is a gold-silver rich VMS system but its tonnage is small. The zones have been chased to depths of 750 m, but these Archean VMS deposits tilted on their sides can be several kilometres deep. Galway thinks that the smoke encountered by existing deep holes coupled with the deeper Titan anomalies may indicate proximity to a deeper vent. Estrades can be drilled year round so the focus in Q1 of 2022 will be the Newiska target 10 km to the east which sits in a parallel but thicker rhyolite unit. Drilling done in 2018 without the benefit of the Titan survey appears to have been too shallow. Newiska can only be drilled during winter and hole 14B was stopped short of the target due to an early thaw in 2021. The same rhyolite unit also features a Titan anomaly south of the Estrades zones called Estrades South though it is not clear when Galway will test this target.

FPX Nickel Corp (FPX-V: $0.620)

Tracker - January 18, 2022: Spec Value Rating for FPX Nickel Corp

FPX Nickel Corp is a Good Spec Value rated Favorite at $0.50 as of December 31, 2021 based on the economic implications of a PEA completed in September 2020 which proposes to open pit mine the Baptiste deposit on the 100% owned Decar property in central British Columbia at a rate of 120,000 tpd for a 35 year mine life to produce an average 99 million lbs of nickel annually in the form of a 60%-65% ferro-nickel concentrate shipped directly to stainless steel makers. CapEx and life of mine sustaining capital were estimated at USD $1.67 billion and $1.1 billion with AISC of $3.12 per lb nickel. At a base case price of USD $7.75/lb nickel and 8% discount rate the PEA indicated an after-tax NPV of USD $1.72 billion, clearing the development hurdle where NPV should match or exceed CapEx, and an after-tax IRR of 18.3% which is sufficient for such a long-lived mine. Based on 231.6 million shares fully diluted, 100% net interest and a CAD:USD exchange rate of 1.25 this NPV translates into a future price target of $9.28. In April 2021 FPX raised sufficient capital to fund delivery of a PFS by mid 2023. The reason the stock price represents Good Speculative Value is because no nickel deposit consisting of 1.5 billion tonnes at an average grade of 0.122% nickel has ever been put into production. FPX Nickel Corp is a fabulous opportunity for any speculator who can understand why the Decar project is very different from every other nickel mine.

The secret is in the nature of the grade, which is based on the Davis Tube Recovery assaying method which measures only the portion of a rock's nickel content that is recoverable through magnetic separation at a specified minimum grind size. At Decar the host rock is an ultramafic ophiolite body that has been serpentinized in a manner where nickel has alloyed with iron to form grains of natural stainless steel called awaruite. The flow-sheet is a simple three step process involving grinding, magnetic separation, and flotation of the concentrate to yield a ferro-nickel concentrate whose nickel content is 60%-65% with the rest iron and a minor 1% cobalt credit.

There are no sulphides present and the concentrate can be fed directly into a stainless steel mill with the nickel content payable at 98% of the LME price though the iron and cobalt are not payable. The PEA assumes an 85% recovery but metallurgical studies done in 2021 indicate 90% recovery is achievable. Because flotation pulls off the magnetite as a by-product there is a potential market for it though the PEA assumes it will be part of the tailings which will represent no acid drainage problems. Market studies may enable FPX to include the magnetite waste product as a payable by-product in the PFS.

The high magnesium content of the finely ground tailings offer an opportunity for carbon sequestration. Studies are underway to see if physical handling such as agitation can enhance the natural sequestration rate achieved by undisturbed tailings. Not only would Decar have a significantly lower carbon footprint than nickel derived from sulphide or laterite ores as a result of its simple flowsheet, but the Decar project has the potential to be carbon neutral which would make the ferro-nickel concentrate with its verifiably clean path of interest to stainless steel users seeking ESG credentials for their product inputs.

FPX was able in early 2020 to demonstrate the conceptual possibility of making nickel and cobalt sulphate from the concentrate for the battery market and has a metallurgical study underway to determine if making battery grade sulphates is competitive with other methods of reprocessing refined nickel or extending the laterite flow-sheet. The outcome is expected in early Q3 of 2022; if viable the resulting verifiably clean nickel and cobalt sulphate supply becomes of interest to electric vehicles makers such as Tesla and Volkswagen among others. At this point it is not clear to what extent nickel and cobalt will be part of the EV battery configuration that becomes mainstream in 2030 and beyond, which is about when one might expect the Decar project to come on stream as a mine. This uncertainty may be a blessing for FPX Nickel.

The high CapEx means that a major, not a junior, will develop the mine, but if the battery optionality becomes reality, FPX Nickel will be able to raise transitional capital from ESG focused funds or end users so that it can push the project beyond PFS into the feasibility and permitting stage to set up an auction for a buyout. The speculative question is when a mining giant like Rio Tinto or BHP with minimal exposure to nickel would make a pre-emptive move to buy out FPX Nickel. Or when an established nickel producer like Vale with battery grade sulphate ambitions might add Decar to its roster of Canadian nickel mines.

The Baptiste deposit became the delineation focus in 2009 when Cliffs had Decar under option because outcrop was available and the area had already been logged. In 2021 FPX Nickel finally had a chance to mount a 9 hole 2,688 m drill program on the Van target 6 km from Baptiste higher up the mountain. The results yielded a 400-750 m wide by 750 m long by 225 m deep (vertical) tonnage footprint whose upper 70-100 m ran 0.14%-0.16% DTR nickel, better than for the Baptiste deposit. The higher grade portion of this slab represents 100-150 million tonnes.

The zone is open to the west and south. During 2022 FPX will mount another 10 hole core drilling program to extend and infill the Van system on 200 m spacing to support a resource estimate. Since the Baptiste mining schedule only has a few early years averaging 0.13%-0.14% ore it is possible that the eventual mining plan starts with the Van deposit whose metallurgy can be fast-tracked using the Baptiste studies as a guide. The stock price was not rewarded in 2021 by this accomplishment which potentially boosts the economic value and definitely boosts the long term strategic value as a future supply of clean, possibly carbon neutral nickel. 2021 was a year when the FPX story kept getting better without price appreciation, a bummer for existing shareholders but a boon for newcomers. Part of the problem was that the April financing attracted a generalist US fund which became FPX's third largest shareholder but after a couple months got the willies and spent the rest of the year liquidating its position.

FPX Nickel Inc is a Good Spec Value rated Favorite because at $7.75 base case nickel the PEA indicates a target price of $4.82 using a 10% discount rate and $13.62 using a 5% rate. At the $10.26/lb nickel price in mid January 2022 these numbers jump to $12.20 and $26.67. And if you dare to assume a long term $15/lb nickel price, the target prices jump to staggering levels of $26.12 and $51.30 per share. If you substitute the 0.14% Van grade as the LOM average the target prices at $10.26 per lb are $15.62 and $33.49. This is before any potential value add from making nickel and cobalt sulphate is included, or finding a market for the magnetite waste product.

Now obviously the indicated after-tax NPV is not the proper value for a project whose economics are based on the 30%-35% uncertainty associated with a PEA. A project that is at a fully funded PFS stage according to the uncertainty ladder of the rational speculation model deserves a value of 25% to 50% of the ultimate NPV outcome which would knock our $12.20-$26.67 price targets at $10.26/lb nickel based on the PEA scenario down to a range of $3.00-$6.00 per share at a 10% discount rate and $6-$13 per share at a 5% discount rate. That implies FPX Nickel should be trading 500% higher than the $0.50 stock price at the end of 2021 where FPX Nickel Corp was a made a 2022 Favorite. The junior is executing all the tedious steps of a PFS such as metallurgical studies and geotechnical drilling, and given the homogenous nature of the Baptiste deposit, we should not expect any unpleasant technical surprises. The biggest risk is probably the anti-mining lobby which opposes any large scale mining operation and will not hesitate to mobilize local First Nations groups to oppose the permitting process. But given the dirty alternatives for nickel supply, the Decar project might end up being supported by thoughtful environmentalists and the First Nations in this infrastructurally good location who already are involved logging activities might like a long lived mine in their backyard..

*JK owns shares in FPX Nickel Corp
Galway Metals Inc (GWM-V: $0.610)

Tracker - January 18, 2022: Spec Value Rating for Galway Metals Inc

Galway Metals Inc is a Fair Spec Value rated Favorite as of December 31, 2021 based on its efforts since 2016 to demonstrate the multi-million ounce district scale gold potential of the 100% owned Clarence Stream project in New Brunswick, and to show that the Estrades polymetallic VMS system in Quebec has significant resource expansion potential at depth and that the 31 km long property can yield an entirely new VMS discovery at the Newiska target about 10 km to the east. Tracker Feb 18, 2020 describes Galway's origin as a spinout from CEO Robert Hinchcliffe's Galway Resources Ltd which was bought out in 2012 for its property near Ventana's La Bodega gold discovery in Colombia and provides background for the Clarence Stream project. Tracker Aug 23, 2021 provides an overview of Galway's recent objectives for the Clarence Stream and Estrades projects.

The 60,000 ha Clarence Stream project straddles 65 km of the Appalachian Gold Trend which stretches from the Carolinas through Newfoundland and Ireland into Scandinavia. The key structural feature at Clarence Stream is the east-west oriented Sawyer Brook Fault which cuts through Ordovician and Silurian metasediments that have been intruded by various stocks that served as the heat engines for creating quartz vein hosted stockwork and disseminated gold mineralization of the intrusion related gold system style. Since 2016 Galway has drilled about 130,000 m on top of the 60,000 m drilled by previous owners, most of it focused on the cluster of new zones discovered in late 2017 about 7 km southwest of the existing North and South zones for which 9,586,000 tonnes of 2.17 g/t gold OP and UG mineable (667,000 oz) was estimated in 2017 (M+I+I).

Galway established a data cutoff at the end of 2021 for the purpose of delivering an initial resource estimate for the Adrian-GMZ-Richard-Jubilee zones in Q1 of 2022. An updated resource will also be calculated for the North-South Zones. This will be an important milestone which the market hopes will tally in the 1.5-2.0 million ounce range, though given the 8-12 week turnaround time for assays one should be happy with 1.0-1.5 million ounces and wait for more in a future update.

Galway plans to drill 75,000 m in 2022 split between further expansion and infill drilling of the Adrian etc zones and wildcat drilling on the various soil and till gold anomalies established through property wide sampling during the past few years as part of Galway's goal to show Clarence Stream has 10 million plus ounce district scale gold potential. The Oak Bay-Tower Hill targets will receive attention, as well as the 3 km by 7 km soil anomaly that sits on top of a gabbroic intrusive complex to the south of the Adrian-Jubilee zone cluster.

Galway will also earmark 25,000 m drilling for its Estrades VMS project where Titan geophysical surveys that can see 2,000 m deep suggest down-plunge potential beneath the existing Estrades resource (2018 I+I 3,696,000 tonnes 5.7% Zn, 1.03% Cu, 0.42% Pb, 93 g/t Ag, 2.59 g/t Au) as well as a potential major new VMS system at the Newiska target within a parallel rhyolite unit about 10 km to the southeast.

Galway's 2021 effort to test Newiska, which can only be drilled in winter, failed to reach target depth before a warm winter shut down drilling. Galway will drill Newiska in Q1 of 2022 and test the main Estrades target later due to year round access. The IRGS nature of the Clarence Stream project is unlikely to deliver a discovery hole that moves the market unless it is for a brand new zone, but the VMS nature of the Estrades and Newiska targets could yield intersections with big discovery implications, especially in the case of Newiska which sits in the middle of a 31 km land package straddling the Casa Berard-Douay trend which has potential for both polymetallic and gold deposits.

At the end of 2021 Galway Metals Inc had about $12 million working capital left, insufficient to fund its 2022 drilling plan, so additional financing will be needed by mid 2022. Galway had 178.7 million issued and 197.0 million fully diluted with no worrisome warrant overhang at the end of 2021. Insiders, including the chief geologist Mike Sutton who is key to sorting out the Clarence Stream zones, own just under 14% of the issued stock. In terms of management Galway is a well-rounded junior that knows how to promote, fund and execute its story.


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