Golden Tag Resources Ltd. (TSXV:GOG)
A junior exploration company explores for high-grade silver deposits. The Company holds a 100% interest, subject to a 2% NSR, in the San Diego property in Durango State, Mexico.
Golden Tag Resources Ltd. (TSXV:GOG) was covered in March by German Mining Networks, who provided a rating of 3.5 on the company based on its San Diego silver-zinc exploration project based in Mexico and the status of its drill program.
“We rate Golden Tag a 3.5 (out of 5), taking into account the large size of the project, new management team, recent expansion potential shown by infill sampling, sufficient cash, moderately attractive district, our expectation for a continued robust silver price, and a relatively low valuation versus comparables. Upcoming catalysts will include the results of the ongoing drill program, any further gains in the silver price and a possible rerating versus the comps group.”
There are a group of reasonably close comparables for Golden Tag, all with major silver projects in Mexico, mineral resource estimates available (Figure 11) and a similar range of market cap (Figure 12), including; 1) Southern Silver, exploring in Faja de Plata, 2) Kootenay Silver, exploring several projects in Sierra Madre 3) Golden Minerals, with four projects, three in Durango and 4) GR Silver, with two projects in Sinaloa. Golden Tag and Kootenay have the largest silver resources currently, at 115mn oz and 116mn oz, respectively, compared to 87mn oz for Golden Minerals and 83mn oz for Southern Silver. However, looking at silver equivalent ounces, with most of these projects also having substantial zinc, lead and other resources, Southern Silver is the largest, with 272mn oz, with Golden Tag second at 211 mn oz.
The company has a reasonably tight share structure versus the comparables group, with 166mn shares, with Kootenay especially having a reasonably high number of shares (Figure 13). Golden Tag trades at reasonably low valuations versus the group, with a Price/NAV of 7.30x, the lowest of the five, and on an EV/Resource of 0.51x, the second lowest of the group (Figures 14, 15). These valuations remain low even after the company’s impressive share price performance, surging 975% over the past 12 months, and up 1500% at its peak on January 21, 2021, which seems to demonstrate how the market had largely been disregarding the company prior to the entrance of the new management team, but has highly renewed interest since (Figure 16).
This peak price also shows where the valuation could potentially move to even short term from an upward move in the silver price alone, apart from direct operational catalysts. Golden Tag’s discount to its peers remains partly it has a much higher proportion of inferred resources than the comps, even though its total silver resource is higher, which likely contributes to the discount. However, this could be viewed as another area where the company has the potential to boost the valuation, especially with the potential outlined above for grade improvement and resource expansion.
Potential to be unlocked, silver price likely to be supportive
We rate Golden Tag Resources 3.5 out of 5.0. This scale; 1) is relative to junior miners based on potential risk and reward and 2) considers the macro outlook for the specific metal being explored. The company has a large project in a reasonably favourable district, a new management team clearly supported by the market and the first drill program since 2012 ongoing and it is fully funded for 2021. While management has a clear strategy for resource expansion, proof of its hypotheses will still need to be delivered over the next few months to drive up the rating. On the macro side, we expect a pick-up in silver, driven by a both its monetary and industrial factors, will further support upside for Golden Tag. The main immediate drivers, will be drill results from the near-completed 4,500 m program at San Diego, announcements of further drilling programs, and a rise in the silver price.
The company has over 50% longer-term shareholders, with institutions holding 18%, Eric Sprott, 18.6%, high net worth individuals 10% and insiders 5%, with retail holding 48.4% (Figure 8).
Eric Sprott is a Canadian billionaire businessman. He is a precious metals fanatic and invested in several major mining projects and companies like New Age Metals and Karora Resources Inc. He was also the founder of Sprott Inc., an early champion of precious metals investing.
For the full report, please click the following link: GOG_GMN Research March 2021