Thesis Gold delivers a strong 4.7M oz. #Gold Eq. resource estimate

It’s hard to believe the gold (“Au“) price has soared past $2,100, $2,200, $2,300, $2,400/oz., now sitting at ~$2,320/oz. Gold stock investors don’t quite believe it either. Newmont‘s & Barrick’s share prices remain 50%-55% below all-time highs.

Imagine what long-term gold bugs must be thinking –> $5,000/oz.? $10,000/oz.? Yet, there’s no reason to rely on them when Bank of America & Citigroup have straightforward bull case scenarios of $3,000/oz. and UBS says $4,000/oz. is possible in 2026 or 2027.

Sounds crazy, $3,000/oz., right? But is it? That’s only +25% above $2,400/oz. Wait, hold on, take a step back — anything above $2,100/oz. is icing on the junior mining cake.

For the first time in history, it’s reasonable to say that if the Au were to fall $200/oz., Au companies would still be in good shape. That’s a nice cushion and one that doesn’t seem like it will be tested with Chinese, Indian, and other Central Banks (“CBs“) buying hand-over-fist.

Will China slow its pace of accumulation? Doubtful. On a per capita basis, the U.S. FED owns ~15x as much Au as China’s CB. China, Russia, and other countries fear owning US$ assets for geopolitical & U.S. balance sheet reasons.

On the supply side, output from mines is growing, but modestly. Newmont & Barrick expect production growth of just 1%-2%/yr. through 2028. So, anemic growth and costs have been soaring. Newmont’s AISC was up at a 4-yr. +10.6% CAGR from 2020-2023.

Au producers are printing money and have the ability and clear incentives (elevated AISCs, low organic growth) to make acquisitions of attractive projects in safe jurisdictions.

Thesis Gold (TSX-v: TAU) / (OTC: THSGF) just reported a new resource at its combined, 100%-owned, Ranch & Lawyers projects, now called “Lawyers-Ranch.” Total Au Eq. ounces came in at 4.7M, grading 1.55 g/t. Importantly, 85% of those ounces are in the Measured & Indicated categories. See the new Corp. presentation.

At spot prices, silver (“Ag“) accounts for ~30% of the total in-situ metal value. That’s great news for those who believe that Ag could outpace Au in the coming years. Make no mistake, I think Au could go to $3,000/oz., but if/when it does, Ag could easily be $50+/oz. CEO Ewan Webster commented,

“We foresee this materializing in a significant underground potentially mineable Mineral Resource and secondly as you can see in the sensitivity table for Ranch, there is the opportunity to develop much higher-grade starter pits to jump-start production and reduce the pay-back period.“

Thesis has 92.3M ounces of Ag, already a larger resource than the majority of Ag explorers. Depending on recoveries, that impressive endowment could represent an attractive asset to one of over a dozen Royalty/Streaming companies.

Yes, 4.7M Au Eq. ounces is a lot, and at a solid grade, especially for a prime jurisdiction like B.C. Canada. Thesis is surrounded by; Teck Resources, BHP, Freeport McMoRan, Boliden AB, Kinross, Centerra Gold, Seabridge & Hecla Mining.

Among juniors in B.C., only Artemis Gold (0.8 g/t Au Eq.), Skeena Resources (3.5 g/t Au Eq.) & Tudor Gold (1.25 g/t Au Eq.) have more ounces. The MRE is underpinned by blockbuster intervals such as [4.1 m at 119.5 g/t Au], incl. 2.0 m at 231 g/t Au.

That’s a [gram x meter] figure of 484. Yet, 2021’s best intervals averaged a whopping 622 g-m! [34 m @ 19.6 g/t] AND [33.1 m @ 17.5 g/t].

Thesis is more advanced than peer Golden Triangle hopefuls; Dolly Varden, Tudor Gold, Doubleview Gold, Teuton Resources, American Eagle, Goliath Resources, Eskay Mining, American Creek Resources & Scottie Resources, none of whom have a PEA.

The Company is trading at just $25/Au Eq. oz. in the ground. In bull markets, M&A often gets done at 3x-6x that level (albeit for more advanced-stage projects). However, by the end of next year Thesis will be more advanced, and the Company will have completed a Pre-Feasibility Study on a larger resource.

In the comparison chart above I show Great Bear’s acquisition by Kinross, but I don’t include that $302/oz. valuation in the average of $86/oz. While Lawyers-Ranch might not be the next Great Bear, it should still be worth a lot more than $25/oz. in a bull market.

The map above shows that Newmont & Teck have assets west of Thesis, but Freeport (through an interest in Amarc Resources) & Centerra are much closer. Centerra was sitting on a massive C$842M cash war chest as of 12/31/23.

Might Thesis be a good fit for Agnico Eagle? Agnico does not have operations in B.C., but is a major Canadian Au producer. In February, Thesis returned blockbuster results from its Ranch Project, including 60.0 m @ 4.5 g/t Au Eq. Ranch is road-accessible, connecting a contiguous 495 sq. km land package.

A new PEA is coming out later this year incorporating the newly-combined resource. In 2022, a PEA on just Lawyers had an after-tax NPV(5%) of C$883M, using an Au price scenario of US$1,995/oz. (+15% above the base case assumption). See the new Corp. presentation.

An improved NPV will come from an increase in annual production, a higher Au price assumption, and higher-grade ounces mined earlier in the mine plan.

By my estimates, (not those of management), assuming an Au price of US$1,900/oz., the after-tax NPV could be C$1B, with a 25%+ IRR, and an AISC under US$1,100/oz. That AISC figure looms large for companies like Newmont, which reported an AISC of $1,485/oz. in the 4th qtr.

Others with elevated AISC levels include; OceanaGold Corp., IAMGOLD, AngloGold Ashanti & Argonaut Gold who reported 4th qtr. 2023 levels of $1,658, $1,735, $1,538, & $1,804/oz., respectively.

The addition of a low-risk, sizable, sub-$1,100/oz. AISC mine to those companies’ portfolios would move the needle. In the chart below from the Company’s Corp. Presentation, one can see that a goal of the new PEA will be to make production more consistent around 200k Au Eq. ounces/yr.

At 200k Au Eq. ounces/yr., I believe this is a Top-5 pre-construction Au project in N. America. As significant as 4.7M ounces is, that is just a stepping stone to potentially booking millions more ounces in the coming years — mostly from Ranch — which has > 20 high-quality targets that have never been drilled.

Thesis Gold (TSX-v: TAU) / (OTC: THSGF) has an existing PEA with an Au price assumption of $1,735/oz. By my estimate, Thesis is valued at just ~12% of its upcoming after-tax NPV, [$116M / $1B = ~12%]. While Thesis is years from production, it’s years ahead of pre-PEA juniors, many of whom are pre-MRE.

Existing producers, like the ones mentioned above, have very strong balance sheets, allowing them to pay a multiple of Thesis’ current $116M enterprise value and fund cap-ex to build a 200k Au Eq. oz./yr. mine. See the new Corp. presentation.

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