VSA Morning Miner, 08/01/21
Prime Mining (CVE:PRYM)
Prime Mining (CVE:PRYM), which we highlighted as a top pick in the development and exploration space for 2021 has provided an update for the year ahead and summary of progress made in 2020.
PRYM commenced the first systematic and widespread exploration campaign on the Los Reyes project in Sinaloa, Mexico. The early results led to a resource upgrade in April 2020 taking the project to over 1mnoz AuEq which in our view is simply a starting point. Field mapping, logging, trench work and rock alteration analysis has identified a large number of prospective drill targets in the same host geology as the current resource. Furthermore, alteration analysis suggest that clay kaolinization provides a possible pathfinder for gold mineralisation making future early stage work easier. A 15,000m drill programme commenced late in 2020, to be completed in H1 2021, will strive to achieve three broad aims; upgrade existing resource confidence, expand known mineralisation and test new undrilled areas of mineralisation.
PRYM has outlined some additional specific aims to those above for 2021 in its update; adding another drill to speed up work, silver assay data will likely demonstrate improved recoveries enabling current resources to be quickly upgraded, deeper drilling to intersect higher grade material (grade often increases with depth at similar styles of deposit globally) which could lead to underground development potential.
To carry out this work, PRYM raised C$10m, and the company has subsequently disclosed that Pierre Lassonde was a leading investor in this round of funding. The announcement shows a current balance of C$7m. Furthermore, PRYM strengthened its management team giving the company full cycle experience across all aspects; technical, construction, project finance, M&A and operating in Mexico. Finally, on the corporate side PRYM cleaned up the sale structure from the vendor; cancelling back-in rights and royalty payments following expedited cash payments and an additional one off sum.
The platform for 2021 is therefore set and although the share price, supported by gold price tailwinds, was up 540% through 2020 and 135% since our initiation we see substantial further upside as the resources grow and the scale of the project becomes clear. Our target price of C$3.20/sh. is based on a peer valuation of the current resources alone although we believe that the coming exploration programmes will demonstrate whether 3-5mnoz is viable.
Underpinning all of the exciting exploration work are strong community relations and PRYM last year agreed a fifteen year agreement for access rights with the local ejido, an unusually long term commitment providing stability. Community engagement will remain a key part of PRYM’s social license to operate.
We reiterate our Buy recommendation and C$3.20/sh. target price.
VSA Capital Limited, New Liverpool House, 15-17 Eldon Street, London EC2M 7LD | www.vsacapital.com
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