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Is Marvel Discovery Corp. the Fastest Growing Newfoundland Gold Claims Holder?

Source: Peter Epstein for Streetwise Reports   08/12/2021

Peter Epstein of Epstein Research delves into the company’s exploration plans at…

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This article was originally published by The Gold Report

Source: Peter Epstein for Streetwise Reports   08/12/2021

Peter Epstein of Epstein Research delves into the company's exploration plans at its many Canadian gold projects.

Last week, Marvel Discovery Corp. (MARV:TSX.V; MARVF:OTCQB) provided an update on its Blackfly gold project in the Atikokan mining camp of northwestern Ontario. Drilling commenced there on June 24, and nine diamond drill holes [1,116 meters in all] have been completed.

Management is waiting for assays (expected in October) before drilling seven more holes. The program has focused on the historical shaft area, with four holes done at the Blackfly Northeast zone, where hole #BF19-21 encountered several specks of Visible Gold (VG) at the 39.3 m mark.

VG was also noted in hole #BF21-15 at a downhole depth of eight meters. This hole targeted the newly discovered Mosquito zone, 100 meters southwest of the main Blackfly zone.

Mr. Karim Rayani, president and CEO commented, "VG is always a very good indicator, especially when found in multiple holes. The geological team reports that all completed holes look visually encouraging with quartz-veining, mineralization, alteration and shearing. Our first hole into mineralization discovered during our 2021 sampling and mapping program also reported VG. To date, we now have four sub-parallel gold mineralization trends that have been confirmed by drilling."

456 samples have been submitted to the lab. Hole #BF21-20 was drilled at the Blackfly Northeast zone where TerraX Minerals intersected 11 grams per tonne (g/t) Au over two meters in 2011. Blackfly is ~13.6 km southwest along strike of Agnico Eagle's 5M+ oz, 32k hectare, Hammond Reef project.

92,000 reasons to be excited about Marvel's Newfoundland gold property portfolio

As exciting as the Blackfly news is, even bigger things are coming from Marvel's Newfoundland gold portfolio, where the company has locked up a land package covering ~92,000 hectares. Importantly, management is not rapidly expanding merely for growth's sake, they're only pursuing well-located properties that are near, or host, regional structures of interest.

The top eight Newfoundland-focused gold juniors have announced nearly 500,000 meters of drilling in 2021 alone (in varying stages of completion). Two hundred thousand meters is being done by New Found Gold Corp. (NFG). Imagine how many exciting press releases all of this drilling will produce in coming months.

Yesterday, Marvel announced that through staking and two low-cost option agreements it has secured an additional 29,525 hectares, located along the Baie Verte Brompton Line (BVBL) in the hugely prospective Central Newfoundland Belt.

All of Newfoundland's current gold production is from Anaconda Mining's Point Rousse mine and Rambler Metals & Mining's operations on the Baie Verte Peninsula.

Marvel

These two mines, and past producers such as Terra Nova, are close to the BVBL. Management reports that there are >100 gold prospects and zones related to major splays and second-order structures linked to the BVBL. Marvel just obtained ground covering 70 km along this key line.

Management continues to cost-effectively build its portfolio. Other properties include the Hope Brook parcel, contiguous to First Mining Gold (FM) and a Sokoman Minerals/Benton Resources JV. FM has delineated 954k ounces (Indicated + Inferred) at a healthy weighted average grade of 4.7 g/t gold at the past-producing, 26,650 hectare Hope Brook project.

This project is a great comparison for Marvel's property of the same name. FM recently farmed out (up to) 80% of its project to Big Ridge Gold. The farm-out terms offer a glimpse of what Marvel's similar-sized [19,075 ha] Hope Brook property could be worth after a few years of drilling.

CEO Rayani continues to stake and option valuable properties in Newfoundland, on great terms!

To earn an 80% interest, Big Ridge has to pay FM a total of US$10.5 million (in shares + cash) over three years + invest US$20 million on exploration/development. FM retains a 1.5% NSR, and is free-carried through delivery of a Feasibility Study. Twenty million US$ will buy a lot of drilling!

Marvel

Marvel's Hope Brook property is also near Australia-listed Matador Mining's growing 840k oz, very high-grade (for an open-pit scenario) resource. Matador's Cape Ray project has a preliminary economic assessment on it. Both Big Ridge and Matador are spending considerable sums on drilling this year and next, all within tens of kilometers of Marvel's property.

Marvel's 10,650 hectare Victoria Lake gold project lies within Newfoundland's Exploits Subzone, which is rapidly becoming a district-scale camp. Historical work indicates that the project shares similar structural settings to Marathon Gold's Valentine Lake project, billed as the soon to be "largest gold mine in Atlantic Canada."

Preliminary work on the project generated grab samples ranging from about 15 to 25 g/t gold + (up to) 140 g/t silver.

Valentine has 4.1M oz. (Measured+Indicated+Inferred) gold, and a Feasibility Study supporting its grand opening in late 2023. The near-term start of operations ensures that regional infrastructure (roads, rail, power, water) and a skilled workforce will be readily available if/when Victoria Lake enters more advanced-stage development.

Is Marvel's property in Newfoundland worth >C$7 million?

Marvel's 11,875 hectare Gander North property is ~25 km east of the Queensway project and contiguous to Sassy Resources' Gander North project. Northeast trending structural lineaments, first recognized by Sassy, are interpreted to continue onto Marvel's property.

Marvel

Marvel's 10,250 hectare Gander South property is proximal to the boundary between the Exploits Subzone and the Gander Zone of Newfoundland, ~10 km east of the highly prospective, northeast-trending Dog Bay-Appleton-Grub Line fault system. Note: All three of Marvel's Gander properties are near this critical fault system.

The Dog Bay-Appleton-Grub Line fault system hosts NFG's world-famous Queensway project and is thought to contribute to the above mentioned mineralization at Marathon Gold's project. Readers are strongly encouraged to look at the map! Only a handful of gold juniors have meaningful properties close to NFG's holdings. Note: Map does not show Victoria Lake or yesterday's newly acquired/staked properties.

Each of Marvel's Gander East and North properties are larger in size than Labrador's high-grade, more advanced 7,700 hectare Kingsway project in purple on the map. And, all three Gander properties are larger than Sokoman's 2,450 hectare Moosehead project. Yet, Labrador's and Sokoman's projects command a lot of value in the market as they've delivered high-grade assays (both pre-maiden resource).

The 6,850 hectare Gander East property is contiguous to the Queensway project. All three Gander properties would be highly sought after in today's market. Combined, the nearly 29,000 hectare land package enjoys one of the hottest gold exploration addresses in North America!

Small Newfoundland projects (NFG, Sokoman, Labrador Gold) can host large high-grade deposits!

Like the main projects held by NFG, Labrador, Sokoman, Exploits and Sassy—Marvel's three properties benefit from promising geological structures and fault systems running through and/or around them. And, as mentioned, all three will see substantial nearby drilling by those much higher valued neighbors.

The 3,700 hectare Slip Gold project is also in the Exploits Subzone and hosts known mineralization, sampling up to 44.5 g/t gold on surface. The project is ~18 km northwest of Queensway. A detailed, systematic exploration program is underway to better understand the setting and to generate compelling drill targets for next year.

Marvel Discovery Corp. (TSXV: MARV) (Frankfurt: O4T1) OTCQB: MARVF) suffers from having too large a number of prospective properties/projects in one investment vehicle.

Assuming its Newfoundland portfolio of nearly 92,000 hectares is worth half the company's enterprise value, that's roughly C$7 million or C$72/hectare. Compare that to the chart below. The average of peers (with earlier-stage, similar market caps, not the larger players) is C$665/hectare.

Granted, if Marvel was sitting on below-average properties across the Island, then its C$72/ha valuation might be warranted. However, again I urge readers—look at the map. Note: The map does not show Victoria Lake or yesterday's newly acquired/staked properties.

Marvel

Clearly, management has picked up some very attractive locations, no?

Some good or very good footprints, and we know from NFG, Sokoman and Labrador that it needn't take a lot of surface area to (potentially) pack in large, high-grade deposits. Hell, even NFG's absolute monster of a deposit is (so far) hosted on just several thousand hectares.

There are multiple ways to win here, and probably (in my opinion only) fairly minimal downside to today's valuation of ~C$14 million. If CEO Karim Rayani were to run out of cash, I'm confident other juniors would gladly step in.

The company has ten assets across Canada it could farm out, including six gold properties in Newfoundland/92,000 hectares. The future looks bright, especially if/when the gold price picks up again.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.

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Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Marvel Discovery, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Marvel Discovery are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Marvel Discovery was an advertiser on [ER] and Peter Epstein owned shares & warrants in the Company.

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he's diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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( Companies Mentioned: MARV:TSX.V; MARVF:OTCQB, )

Economics

Just How Big Is China’s Property Sector, And Two Key Questions On Policy And Tail Risks

Just How Big Is China’s Property Sector, And Two Key Questions On Policy And Tail Risks

While the broader US stock market was giddily melting…

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Just How Big Is China's Property Sector, And Two Key Questions On Policy And Tail Risks

While the broader US stock market was giddily melting up in the past week, things in China were going from bad to worse with Evergrande set to officially be in default on Oct 23 when the grace period on its first nonpayment ends, and with contagion rocking the local property market - which as we explained last week just saw the most "catastrophic" property sales numbers since the global financial crisis - sending dollar-denominated Chinese junk bonds to all time high yields.

So even though it is now conventional wisdom that China's property crisis is contained (just as its concurrent energy crisis is also somehow contained), we beg to differ, and suggest that the crisis hitting the world's largest asset class is only just starting and is about to drag China into a "hard landing", with the world set to follow.

And yes, with a total asset value of $62 trillion representing 62% of household wealth, the Chinese real estate sector is not only 30 times bigger than the market cap of all cryptos and also bigger than both the US bond and stock market, but is the key "asset" that backstops China's entire financial system whose deposits at last check were more than double those of the US. In other words, if China's property sector wobbles, the world is facing a guaranteed depression.

So given the escalating weakness in China’s property sector, which has been in focus given intense regulatory pressure on developers’ leverage and banks’ mortgage exposure, and consequent contraction in sales and construction activity, it is natural to ask how significant a hit this could pose to both China's and the global economy. To help people get a sense of scale, below we excerpts some of the key findings from a recent note from Goldman showing just how big China's property sector is.

  1. A wide range of estimates for the scale of China’s property sector — up to about 30% of GDP — have been reported in the media and by other analysts. Different definitions of the scope of the sector largely account for the disparity.
  2. The most important distinctions are what types of building are included (residential, nonresidential, or all construction including infrastructure), what economic activity is included (only the construction itself, or all the value-added embedded in the finished residence e.g. domestically produced materials), and whether related real estate services are also included.
  3. A narrow definition of “residential construction activity as a share of GDP” could be as low as 3.6% of GDP. Expanding this to include all related domestic activities - e.g. materials like metals, wood, and stone produced domestically and used in housing construction, as well as services like financial activities and business services used directly or indirectly by the housing sector - would account for 12.4% of GDP. Adding nonresidential building construction and its associated activity would take it to 17.7%. Finally, including real estate services—which show a high correlation with broader property trends—would take the number to 23.3%. (All these numbers are based on detailed 2018 data, and exclude infrastructure spending not directly related to residential and nonresidential buildings.)
  4. The property sector’s share of the Chinese economy has grown fairly steadily over the past decade, after surging in the stimulus-fueled recovery just after the 2008 financial crisis.

Digging into the definition of the “property sector”, there are three main questions that need to be kept in mind:

1. What types of construction? One important difference is in what types of construction activities are included. Construction broadly consists of three categories: residential housing, nonresidential buildings, and infrastructure-related construction. In China, residential construction appears to be about half of total construction—the rest is either non-residential building construction or civil engineering works, plus a small amount of installation/decoration activity. Specifically, residential and nonresidential buildings represent around 70% of total construction, and residential floor space under construction is typically about 70% of total floor space under construction.

Note that this ~50% share for residential share of total construction is not unusual in international perspective. For example, the residential share is similar in the United States—though it reached into the 60-70% range during the peak years of the housing bubble—and has been about 40-50% in South Korea for some time.

2. What types of economic activity (only construction, or everything necessary to complete the finished building)? An even more important distinction is what types of activities one counts. Strictly speaking, the construction industry itself represents about 7% of China’s GDP. This represents wages, profits, and taxes from the construction sector (regardless of what type of construction or what end users). This is the value added of the construction sector itself, or the narrowly defined activity of building things.

However, the construction industry uses a lot of output from other sectors – both materials (cement, wood, steel, etc.) and services (transportation of materials, financial services) to create finished buildings. Put another way, there are a lot of “backward linkages” from the construction sector: a home purchase requires not just the value added from construction industry, but also the value added from the “upstream” industries that provided the materials and were otherwise involved in the completion of the finished product.

To gain some intuition for this, in the chart below, Goldman shows how much of each industry’s domestic value added ultimately goes into “final demand” of the construction industry (purchases of property by consumers or investment in property by businesses). For example, about one-third of value added in “wood products” goes into construction, about one-half of basic metals value added goes into construction, and essentially all of construction’s value added goes into construction final demand. (Note that this includes direct and indirect requirements—for example, basic metal output that is sold to firms in the metal fabrication industry that then sell to the construction sector would be counted as part of final demand for construction.)

The next chart shows what fraction of the final demand for construction is provided by each sector. Roughly speaking, if we think about this as “the total domestic value added embedded in an apartment”, almost 30% of this is provided by construction activity, 8% from nonmetallic mineral products, etc.

From the perspective of total domestic value added from all industries embedded in the final demand of the construction industry, the overall construction industry’s final demand accounts for roughly one-quarter of China’s GDP. This estimate is based on China’s most recent (2018) “input-output” table—which indicates the final output of each industry, as well as how much input is used from every other.

3. Should real estate services be included. Some analysts focus on property construction only, while others add the “real estate services” sector e.g. the leasing and maintenance of buildings when estimating the impact of the housing sector of the economy. These activities contribute roughly 6-7% of GDP in China. In many countries, real estate services are somewhat less volatile than housing construction. The likely reason is that real estate services relate in part to the stock of existing buildings than the flow of new building construction. Even if there were a housing crash and building construction stopped, most real estate services could theoretically continue.  As evidence of this, in the US housing crash, construction sector GDP fell by ~30% peak to trough but real estate services never declined. That said, in China the “real estate services” sector has been significantly more volatile, almost as volatile as the construction sector itself.

Contributions by type of demand and activity

Taking these three factors into consideration, Goldman next shows estimated shares of China’s activity in the next chart, and breaks down construction into its main components while showing the share attributable to real estate services. The “sector activity” column shows the share of GDP accounted for directly by activities of that sector. In other words, companies and workers engaged in all types of construction activity accounted for 7.1% of China’s GDP in 2018. The “final demand” column shows the share of GDP accounted for by all the domestic economic activities embodied in final demand for that sector. In other words, the demand for buildings and other construction also generates demand for materials and other types of services — and adding the value added in construction and all of these “upstream” sectors together gives the numbers in the right column

Putting the above together, the size of China’s property sector therefore depends on the question we want to answer:

  • What share of Chinese economic activity do workers/companies involved in residential construction represent? Here, one should look at domestic value-added (the left column). This is 7.1% for overall construction and just 3.6% for residential construction only.
  • How much economic activity is driven by demand for residential property construction? Residential property demand drives 12.4% of GDP (right column, second row in table), because in addition to the construction activity it creates demand for all the materials and other services involved in building construction.
  • What about the impact of total demand for property construction? Including non-residental buildings as well as residential, and the total upstream requirements of both, we want to look at the “domestic value added in final demand” of construction of residential + nonresidential buildings. This is 17.7% of GDP (12.4%+5.3%).
  • How much of the economy is at risk from a property downturn? Here, we could potentially add end demand for real estate services to the above calculation. This would be another 5.6% of GDP, suggesting 23.3% of the economy—nearly a quarter—would be affected.

Finally, if one adds all construction and all real estate and all their associated activities, we get just over 30% of the economy (24.5%+5.6%), although it is worth caveating that this may be an overly broad definition for the property sector, as it includes infrastructure-related activity, which if anything is likely to be ramped up by policymakers in the event of severe property sector weakness.

* * *

Yet even a nice big, round 30% estimate for how much China's property sector contributes to GDP, does not encompass all the potential spillovers from a construction sector downturn. There are at least three others:

  1. Second-round effects. A shock to construction (or any other sector) implies a drop in wages and company profits in that sector. This in turn implies lower income for the household and business sectors — and incrementally lower consumption and investment respectively. Such “second-round” or “multiplier” effects aren’t included in the estimates above.
  2. Fiscal spillovers. Land sales represent an important part of local government revenues in China (roughly 1/3 in gross revenue terms). Governments acquire land usage rights from rural occupants and sell them at a premium via auctions to developers. If land sales revenues fall because of a housing downturn (through some combination of fewer successful auctions and/or lower land prices), budgets will be squeezed, which could limit local governments’ spending and investment.
  3. Spillovers abroad via imports. As the world’s largest trading nation, China does not get all of its construction materials and other intermediate inputs domestically. In addition to the estimates above, which focus on domestic value-added, about 11% of the total value added embedded in China’s construction final demand is from foreign sources. (This is about 3% of China’s GDP, although it makes more sense to look at each trading partner’s exposure relative to the size of its own economy.) So, if we wanted to look at the total size of China’s construction sector in terms of driving economic activity, regardless of where that economic activity occurs (perhaps to compare China’s construction sector to other countries with different levels of import intensity) the figure in the top right cell in Exhibit 3 would be 3% larger.

Putting it all together, and China's property sector emerges as the mother of all ticking financial time bombs.

* * *

Which brings us to what is Beijing's latest policy action (if any) to prevent this potential financial nuke from going off, and what are any additional tail risks to be considered.

Well, as noted above, China's property sector began the week with sharp price falls across the board, with China's junk bonds cratering to near all time lows and with signs that the concerns are spilling over to the broader China credit market with spreads widening across the board. Some key updates:

  • Recent news suggest China property stresses are building up. A number of China property HY developers have made announcements over recent weeks regarding their upcoming bond maturities.
  • On 11 Oct, Modern Land launched a consent solicitation to extend the maturity on its USD 250mn bond due on 25 Oct by 3 months
  • Xinyuan Real Estate announced on 14 Oct that the majority of holders of its USD 229mn bond due on 15 Oct have agreed to an exchange offer. Note that Fitch considers both transactions to be distressed exchanges.
  • Furthermore, Sinic announced on 11 Oct that they are not expecting to make the principal and interest payments on its USD 250mn bond due on 18 Oct. These indicate that stresses amongst developers are building.

Meanwhile, the grace period on Evergrande's missed coupon payments is ending soon. Evergrande missed coupon payments of USD 148MM on 11 Oct. This came after missing an earlier coupon payment on 23 Sep. The earlier missed coupon has a 30-day grace period, which ends on 23 Oct, and should that not be remedied in the coming week, the company will be in default on this bond. With Evergrande USD bonds priced at around 20, a potential default is unlikely to have large market impact, though if the company is able to remedy the earlier default, this could provide a positive surprise for the market.

Despite these mounting risks, the market staged a sharp rebound at the end of the week, with news emerging that policymakers are seeking to speed up mortgage approvals (if not followed by much more aggressive easing, this step will do nothing but delay the inevitable by a few days).

And while Goldman's China credit strateigst Kenneth Ho writes overnight that valuation is cheap across the lower rated segments within China property HY, market direction hinges on whether they will be able to refinance and avoid defaults. In particular, he notes that with $6.2bn of China property HY bonds maturing in Jan 2022, policy direction in the coming two months will be key. And since Goldman remains in the dark as to what Beijing will do next, as it remains "difficult to foresee how policy developments will play out in the coming weeks", Goldman prefers to wait for clearer signs of policy turn before shifting lower down the credit spectrum.

* * *

This brings us to what Goldman calls two key questions on China property - policy and tail risks, which will dictate the direction of the China property HY market.

As discussed in depth in recent days, Beijing's tight regulatory stance is increasingly affecting a broader set of developers, as slowing activity levels are adding to worries across China property HY. For the period from early August to the first week of October, the volume of land transactions cratered by 42.5% compared with the same period last year, and for property transaction volume, this fell by 27.0%.

Difficult credit conditions and weak presales add pressure to developers’ cash flows, and these factors are what led to the pick up in defaults and stresses in China property HY. Therefore, unless there are clear signs of an easing in policy direction, Goldman warns that tail risks concerns are unlikely to subside, and these will dictate the direction of China property HY market. As noted by Goldman's China economics team, credit supply holds the key to China’s housing outlook in the near term, emphasizing the need for policy adjustments in order to stabilize the housing market. Incidentally, the latest monthly Chinese credit creation numbers showed a modest miss to expectations, as total TSF flows came in at 2.928TN, just below the 3.050TN consensus, and up 10.1% Y/Y, lower than the 10.3% in August (the silver lining is that M2 rose 8.3%, up from 8.2% in August and above the 8.2% consensus).

That said, given the sharp slowdown in residential property activity levels over the past two months, policy stance appears to have relaxed over the past two weeks if somewhat more slowly than most had expected. The table below summarizes a number of policy announcements and news reports that suggest some easing of policies are taking place.

That said, the announcements and policymakers’ statements do not signal a large shift in overall policy direction yet. For example, the more concrete measures such as home buyer subsidies and the reduction in home loan interest rates are conducted at a city, and not national, level. And whilst Bloomberg reported that the financial regulators have informed a number of major banks to accelerate mortgage approvals, the precise details are lacking. The recent actions are therefore mostly in line with the overall policy stance. On one hand, policymakers remain focused on the medium term goal of deleveraging, and will want to avoid over-stimulating and reflating the property sector; on the other hand, policymakers have stated that they want a stable property market and to avoid systemic risks from emerging, suggesting that they would seek to avoid over-tightening. The problem is that they can't have both, and one will eventually have to crack.

Goldman is somewhat more optimistic and writes that finding a balance will take time, adding that "given the need to balance the competing policy objectives, further measures could continue to emerge piecemeal, and visibility on the timing and the type of policy actions are limited." Furthermore, there may need to be further downside risk towards the property sector before we see a more decisive change in direction in the policy stance. This means that tail risks concerns are unlikely to subside, despite signs that policy direction is gradually shifting.

* * *

Assuming help does not come on time, the next key question is how fat is the tail as large amounts of bonds trading at stressed levels. Currently, the China property market is pricing in elevated levels of stress. Their price distribution is shown below indicating that 38% of bonds (by notional outstanding and excluding defaulted bonds) are trading at a price below 70, and 49% of bonds are below a price of 80.

Are market prices overly bearish on tail risk, or are they accurately reflecting the stresses amongst property developers? With policymakers likely to maintain their medium term goal to delever the property sector, it is unlikely that tail risk concerns for higher levered developers will not subside. However, how “fat” the tail is will depend on the policy stance over the next two months.

A big challenge going forward is that there are sizeable bond maturities in the next year, which will heavily influence tail risk. As noted above, a number of developers have conducted or are seeking to complete distressed buybacks, and defaults rates amongst China property HY companies are soaring. As such, the policy stance in the next two months will be critical.

As shown in Exhibit 2, China property HY bond maturities are relatively light for the remainder of 2021, but pick up substantially in 2022, with USD 6.3bn of bonds maturing in January alone!

A full list of bond maturities from now to February 2022, is shown below.

It goes without saying, that should policy easing over the next two months be insufficient to ease the financial conditions amongst developers, there could potentially be a meaningful pick up in credit stresses at the start of 2022 just as the Fed launches its taper and just as a cold winter sends energy costs to unprecedented levels.

Finally, for any investors seeking some exposure to China's HY market assuming that the worst is now over, Goldman agrees that while valuation is cheap across the lower rated segments within China property HY, the key determinant on market direction won't be valuation, but rather hinges on whether developers will be able to refinance and avoid defaults - i.e., can the Ponzi scheme continue.

Tyler Durden Sat, 10/16/2021 - 18:00
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Precious Metals

Eagle Plains Resources releases Donna drill results, provides Knife Lake update

 
Eagle Plains Resources (EPL.V) has released the assay results from the 12 hole drill program completed at the Donna project in British Columbia. The…

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Eagle Plains Resources (EPL.V) has released the assay results from the 12 hole drill program completed at the Donna project in British Columbia. The drill program was completed in the first few weeks of the summer period but the labs are still slow so it took a while for the company to see the assay results. As a reminder, the summer drill program was directly following up on the exploration activities in 2020 when the Donna activities had to be suspended due to bad weather.

The summary of the more important drill holes can be found above. The best interval was actually hole DO19001 which encountered 1.5 meters of 9.41 g/t gold. That hole was the deepening of a previous drill hole that was completed in 2019. Hole DO21002 was drilled from the same drill pad and targeted the hanging wall and footwall ones. Some gold was detected (with 0.77 meters containing 4.46 g/t gold and 2 meters of 1.33 g/t gold as main features) but the other intervals were less intriguing. Holes 3 to 12 were all drilled at and around the past producing Morgan mine area and while the holes intersected limestone and metavolcanics, and we hope the data from the drill core will help the Eagle Plains geologists to further refine and re-define the exploration targets on the property.

Also keep in mind the surface exploration activities at Donna just continued throughout 2021 and the company’s field team collected in excess of 1,200 soil samples, 84 silt samples and 92 rock samples from the main zones of importance at Donna. All the data from the drill program and field exploration program is being analyzed and the results will be used to put together a 2022 exploration program.

Eagle Plains also provided an update on the Knife Lake project in Saskatchewan,  where partner Rockridge Resources (ROCK.V) has just completed its geophysical program. That summer program included an airborne electromagnetic survey, conducted over 610 line kilometers over the Gilbert Lake area, where no modern exploration activities have taken place.


Disclosure: The author has a long position in Eagle Plains Resources. Eagle Plains is not a sponsor of the website, but related company Taiga Gold is. Please read our disclaimer.

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Precious Metals

Mountain Boy Minerals awaits assay results on seven holes drilled at American Creek, surface sampling returns high grades

2021.10.16
Drilling at Mountain Boy Minerals Ltd.’s (TSXV: MTB) (OTCQB: MBYMF) (Frankfurt: M9U) flagship American Creek property in British Columbia…

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2021.10.16

Drilling at Mountain Boy Minerals Ltd.’s (TSXV: MTB) (OTCQB: MBYMF) (Frankfurt: M9U) flagship American Creek property in British Columbia is progressing well so far, with a total of seven holes completed from two drill pads.

Five of the holes were completed in the High-Grade zone, with the remaining two on the High-Grade extension. Core samples have been shipped to the lab, with assays pending.

The drill has since been mobilized to the third pad at the Maybee zone, where drilling is currently underway.

Results from surface sampling of the property earlier this season have also been received, with assays of up to 3,444 ppm Ag (Maybee zone), 6.166% Cu (High-Grade zone), 15.26% Pb (Mann zone) and 17.57% Zn (High-Grade zone).

The recent work by MTB included mapping and sampling along the cliffs north of the old mine, an area that had not previously been examined due to the difficult access.

Geologists skilled in rock climbing traced the structure hosting the High-Grade mineralization approximately 400 m to the north, identifying an area now referred to as the High-Grade extension, where the initial two holes were completed.

Geological work is continuing, focusing on the area between the High-Grade zone and the Maybee zone, a 2 km long corridor within the 33 sqkm property. Multiple veins in that area remain underexplored to this day.

The intent of the current program is to improve the geological context with the intent of identifying further drill targets.

“Silver and base metal mineralization has been identified over multiple kilometers and includes some exceptional grades. We are working systematically toward an understanding of this extensive and robust mineralizing system which we firmly believe has the potential to host the kind of deposit for which the Golden Triangle is renowned,” Mountain Boy CEO Lawrence Roulston commented in a news release dated August 16.

American Creek Overview

The American Creek project is centered on the past-producing Mountain Boy silver mine, located 20 km north of Stewart in BC’s Golden Triangle.

The property has favourable host stratigraphy, including rocks from the Lower to Middle Jurassic Mount Dilworth formation and Lower Jurassic Hazelton Group. Recent geochronology also confirmed the presence of Early Jurassic intrusions on the property.

Geology of American Creek

There is abundant evidence pointing to large, continuous regional and property scale faults, folds and shear zones, which are often related to mineralization in the region. Significant alteration and mineralization have already been observed along these structures forming the American Creek corridor.

Therefore, Mountain Boy Minerals considers the area to have “real potential to host one or more deposits.” While it holds a significant land package, with a variety of targets identified, much of the project area remains underexplored.

Mapping and prospecting on the project so far have already led to multiple discoveries, including a new area of gold-silver-base metal mineralization on Bear River Ridge, a silver and base metal intermediate epithermal system along an approximate 2 km trend, and — more importantly — an Early Jurassic latite porphyry intrusion below the epithermal system.

This previously unrecognized intrusion is similar in age to the many Jurassic Intrusions that are related to several deposits in the area, including the Premier porphyry, which is directly related to what was once considered North America’s largest gold mine.

Ascot Resources is currently focused on restarting the historic Premier mine, which has produced over 2 million ounces of gold and 45 million ounces of silver.

The Stewart mining camp — where American Creek and many other MTB projects are found — is part of the larger Stikinia Golden Triangle and is known to contain well over 200 mineral occurrences.

“The presence of numerous nearby past producers, an evolving understanding of the geology and encouraging results and discoveries in the region all support the highly prospective nature of the area,” the company commented on its flagship asset.

2021 Exploration Program

For this year’s program, detailed structural mapping has concentrated around the many mineralized showings on the American Creek project, including the High-Grade zone.

Results from this mapping suggest that the High-Grade zone mineralization is related to an interpreted shallow westward dipping thrust fault and east-west steeply dipping cross-cutting structures.

It is postulated that the best mineralization occurs at the intersection of these two structures, and this year’s drilling will test this hypothesis.

Geologists have been working with a mountain guide mapping the cliffs around the historic silver mine. This has resulted in the discovery of several new mineralized showings to the north. The mineralization appears to be within the same stratigraphic horizon as the High-Grade zone and is cut by similar steeply dipping cross structures.

Drilling last year demonstrated that the shallow structures intersected in drill holes are rich in base metals and likely represent one of several mineralizing pulses in the epithermal system.

Guided by additional mapping results, the company has turned to steeper cross structures and localized ore shoots during this season’s drilling.

The 2021 drill program is specifically targeting four areas: the High-Grade zone, the newly discovered extension of the High-Grade zone, the Four Bees zone and the Maybee zone to the north.

Drilling of the High-Grade zone occurs at a different azimuth with the intent of testing the intersection of the shallow westward dipping thrust fault and the east-west cutting cross structures.

In 1999-2000, 51.6 tonnes of material were extracted from the High-Grade vein and sent to the Cominco smelter in Trail, BC. The documented grades of 13.6 tonnes of this material were 18.854 kg/t Ag, 1.1% Zn and 2.5% Pb.

These exceptional grades demonstrated why this is still such a compelling target to drill.

BA Project Update

Elsewhere in the Golden Triangle, Mountain Boy is also moving forward with a drill program on the BA silver-lead-zinc VMS project, located 18 km northeast of Stewart.

The 10,658-hectare BA property was acquired by Mountain Boy in 2006 following the discovery of the Barbara zone, where initial sampling yielded assays of 5.24% Zn, 0.66% Pb and 55.2 g/t Ag over 1.7 m, and 2.17% Zn, 0.41% Pb and 13.5 g/t Ag over 1.2 m.

Drilling continued at the Barbara zone over a three-year period, with a total of 13,570 m in 93 holes completed from 55 different drill pads. Significant silver, lead and zinc mineralization was encountered both in drilling and on surface.

A joint venture was later formed with Great Bear Resources to conduct an aggressive exploration program of the Barbara zone and its surroundings, which brought the total drill count to 178 holes (28,484 m).

A preliminary resource (2016) of the Barbara zone on all the drilling (excluding surface trenching was) showed 8.93 million tonnes of ore at 0.96% Zn, 0.017% Cu, 0.30% Pb and 36.77 g/t Ag, for a total of 188.6 million pounds of zinc equivalent (1.96% zinc equivalent).

The current drill program is designed to target the northern extension of the mineralized horizon at the Barbara discovery that was drilled between 2007 and 2010.

The historic drilling delineated substantial near-surface silver-lead-zinc mineralization extending over 610 m, striking north-northeast. Since then, receding glaciers at the northern end of the zone have exposed further mineralization at surface.

This mineralization has subsequently been sampled in three channel sampling campaigns extending the zone of mineralization to at least 700 m. Assays of up to 601 g/t Ag, 1.98 g/t Au, 3.31% Pb and 9.96% Zn have been returned from these programs.

Silver Rebound

Mountain Boy’s drilling of two highly prospective silver properties comes just as the precious market is experiencing a rebound due to re-emerging inflation concerns around the global economy.

For the month of September, the US consumer price index rose by more than forecast, which underscored the mounting inflation pressures in the world’s #1 economy. This in turn has driven up investor demand for assets that serve as inflation hedges such as gold and silver.

Source: Kitco

Coming off a record year, silver prices have somewhat pulled back in recent months, but the latest economic indicators are suggesting another rally is in the works, especially with the US Federal Reserve looking to tighten its stimulus measures very soon.

Daniel Briesemann, an analyst at Commerzbank AG, wrote in a Bloomberg note that he expects the tapering to be announced at the next meeting early in November, he said.

“The market is now seeing a major pivot here as far as how inflation is showing more signs of being persistent than transitory, and that’s likely to force the Fed’s hand to deliver a rate hike well in advance of what people were anticipating,” Oanda’s senior market analyst Edward Moya told Reuters this week.

The anticipated Fed tapering has so far led to a retreat in 10-year Treasuries and the greenback, both of which are traditionally investment alternatives to safe-haven metals.

In silver’s case, the outlook is particularly bright given its strong industrial demand on top of the monetary driver. In fact, much of silver’s value is derived from industrial demand and supply fundamentals. It’s estimated around 60% of the metal is utilized in industrial applications such as solar panels and electronics, leaving only 40% for investing.

A report by BMO Capital Markets shows that silver consumption by the solar industry alone could grow by 85% to about 185 million ounces within a decade.

In addition, silver demand for “printed and flexible electronics” is forecast to increase 54% over the next nine years, rising from 48Moz in 2021 to 74Moz in 2030.

Then there are the automotive and 5G sectors, which are likely to become even bigger demand drivers in the future. A comprehensive report by Sprott titled ‘Silver’s Clean Energy Future’ found that three areas of growing demand for silver — solar, automotive and 5G — potentially account for more than 125 million ounces in 10 years.

The question is whether the world will have enough supply of the metal by then.

According to the 2021 World Silver Survey, global demand for silver in 2021 is expected to outpace supply by 7% (+8% supply vs +15% demand), at which rate a significant market deficit will begin to surface.

Conclusion

In an article earlier this year, we showed the world has already reached peak mined silver. At the moment, there are simply not enough projects in development to generate the kind of production to match an accelerating demand.

When it comes to mining precious metals, the prolific Golden Triangle of British Columbia has never disappointed. Having consolidated a large property position within the region and integrated a wealth of exploration results, Mountain Boy Minerals could be well on its way to making an important silver discovery.

At American Creek, which is centered on a past-producing high-grade silver mine, work to date has supported the hypothesis of a large mineralized system capable of hosting deposits of the same scale as many others in the Triangle.

This year’s drilling at American Creek will test the true extent of this geological system, which, by the end of the program, could be demonstrated to extend over a 2 km length, containing several areas of silver-rich mineralization.

The fact that MTB compares this geological setting to the Premier camp, an important historic gold-silver producer, is also encouraging.

Mountain Boy Minerals Ltd. (TSXV: MTB) (OTCQB: MBYMF) (FSE: M9UA)
Cdn$0.16, 2021.10.14
Shares Outstanding 54m
Market cap Cdn$8.64m
MTB website

Richard (Rick) Mills
aheadoftheherd.com
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