Treasury Metals "attractive to investors", says Jennings Capital

Jennings Capital this afternoon took a closer look at Treasury Metals (TSE:TML) after the gold explorer announced results from 22 drill holes at its C zone - part of the Goliath project in Ontario.

The analysts said an intercept of note is hole TL12-295, with 27 metres of 1.9 grams per tonne (g/t) gold from 52 metres depth. 

The C zone runs 30 to 50 metres adjacent to the main zone and has the potential to lower the strip ratio particularly in the eastern pit, Treasury said.  

Twelve holes remain to be released from the zone, all of which are near surface, and evenly spaced along the trend. 

A preliminary economic assessment from last July considered a 2,500 tonne per day plant and capex of $92 million. Goliath should produce 80,000 ounces per year at $700/oz cash costs over a 10-year mine life. Recoveries are good, the Jennings analysts said, at 95%, and 70% coming from gravity. 

An environmental impact statement is expected to be submitted in May of this year. 

"We highlight Treasury Metals for its manageable resource located near good infrastructure in Ontario, one of the best mining jurisdictions, in our opinion. We view the capex of $92 million as manageable for a junior with an attractive production profile of 80 koz/yr," the report noted. 

In terms of impact, the Jennings analysts expect this news will be received positively, as delineating the C zone could lead to increased ounces, as well as a lower strip ratio and "better project economics" going forward.

Currently, Goliath holds 810,000 ounces at 2.75 g/t gold equivalent in the indicated category, and 900,000 ounces at 1.76 g/t gold in the inferred category. 

According to the latest PEA report, the mill feed grade should be roughly 3.3 g/t after stockpiling for the first five years of operation. Treasury is hoping to lower the strip ratio on the order of 6:1 if "a well-defined C zone" is incorporated into the mine plan, the Jennings note said. 

"We view an open pit grade of >3 g/t, combined with a strip ratio on the order of 6:1, would be attractive to investors," the capital markets firm concluded. 

Upcoming catalysts for Treasury include the environmental baseline study in the second quarter, the feasibility study in the fourth quarter of next year, and ongoing exploration and infill drilling results. 

Drilling will continue to infill the drilling pattern on the project's C zone, which covers an area measuring roughly 1.2 km in strike length and to a depth of 200 metres.