Scottie Resources; if gold’s the place to be in 23, invest in Scottie

Since hitting a three-month high of $1,960/oz. on January 29th, the price of gold has fallen off a cliff. Not only has it collapsed, it plummeted, like a falling knife. Oh, the humanity!!

gold price since January 29th…

Wait, no — my bad, gold is actually down just ~5%, after having rallied +21%. A decline from a very strong $1,960/oz. to a strong $1,867/oz. is nothing to lose sleep over. Yet loss of sleep is exactly what some investors are experiencing.

One of my favorite pure-play, high-grade gold (“Au“) juniors is down 17%. Scottie Resources (TSX-v: SCOT) / (OTC: SCTSF) has executed well over the past several years, I believe it deserves more respect!

On March 2nd management delivered impressive drill results incl. 17.4 g/t Au over 6.6 m — a high-grade interval [114 gram-meters] that most of the world’s Au projects will never see. As solid as 114 g-m is, in January the Company delivered 4x that figure in a 466 g-m monster intercept.

Below are the best intervals at the Blueberry, Scottie Gold Mine (“SGM”) & Georgia zones to date. Many companies boast about 100+ g-m hits, but often only a handful that are just a few meters long.

By contrast, since 2019 Scottie has delivered twenty-nine 100+ g-m intercepts with interval lengths averaging 17.2 m. Scottie is killing it on the exploration front yet the share price is 58.5% below its $0.53 high.

Big players in B.C. and across Canada are looking for acquisitions. How do I know? Last month Newmont offered to acquire Newcrest (owner of the Brucejack mine ~30 km north of Scottie). Other mid-tiers & Majors will surely follow.

Scottie’s projects are in the southern part of the world famous Golden Triangle (“GT“) in northwestern B.C. Unlike some of the more northern/remote projects in the GT, there’s ample access to power, roads, an airport, a deep-water port, labor & services.

Based on known dimensions, I’m giving management credit for 2.0M high-grade ounces at the Blueberry zone alone. However, in the chart below notice the figure could be twice that, depending on the ultimate depth, grade & mineralized strike length.

The deposit remains open from 400 m depth and to the east beyond the current 1,550 m. VP Exploration Thomas Mumford, PhD points out that the strike extends 2,200 meters before hitting Newcrest’s property.

The questions are; 1) how many of the remaining 650 meters are mineralized, and 2) to what depth?

No one can say Blueberry hosts > 3M ounces, but it can’t be ruled out…

As exciting as Blueberry is, it’s a small fraction of Scottie’s overall 60,000+ ha portfolio. Please see Scottie’s latest corporate presentation

In my view, any suitor looking at Ascot and the surrounding area will want to acquire Scottie as well. If Newmont is successful in obtaining Newcrest, it would be crazy not to also roll up Ascot/Scottie.

A combined Ascot/Scottie would be attractive to players like Newcrest & Newmont, but also Barrick, BHP, Teck Resources & Agnico Eagle. All these companies are active in B.C., except Agnico, but Agnico is partnering with Pan American Silver to acquire Yamana (who owns 7% of Scottie & 4% of Ascot).

There are good reasons for Newmont to continue expanding in the GT to capture synergies & economies of scale. It already has major assets in Ontario & Quebec, the GT is the next logical step in its Canadian game plan.

Teck is an interesting possible acquirer after announcing the spinout of its coking coal assets. Will Teck transition to a giant Cu/Au company? It owns 50% of Galore Creek and 75% of the C$2B, PEA-stage Cu-Au Schaft Creek project. Both are world-class assets in the heart of the GT.

Why might mid-tiers & Majors care about Ascot/Scottie? It’s clear they need M&A to offset anemic production growth. Consider Newmont’s new 5-yr. production guidance — rising at an unimpressive 1.5%/yr. from 2023 to 2027.

If Ascot/Scottie could add +300k ounces/yr. in 2027, it would increase Newmont’s growth rate 64% from 1.5% to 2.4%/yr. That prospective 300k ounces/yr. would significantly boost the trajectory of any Canadian Au company.

I’m not talking about growth for growth’s sake. Economies of scale are required to control spiraling costs. Newmont & Barrick suffered 14.0% & 19.1% increases in All-in Sustaining Cost (“AISC“) last year.

Newcrest, Ascot & Scottie are a match made in heaven. Imagine the operating flexibility & economies of scale those combined players would enjoy. It would become the 2nd largest high-grade complex in N. America after the Nevada Gold Mines [Barrick/Newmont] JV.

How integral is Scottie to an Ascot/Scottie combination? Look at the map! — Scottie’s land package at 60,000+ ha is more than twice the size of Ascot’s 25,258 ha, and its Blueberry zone is closer to Ascot’s mill than Ascot’s Red Mountain project, (28% of Ascot’s Au resources).

If the Blueberry zone hosts 2M ounces, that would be 2.3x the number of ounces Red Mountain has booked. Moreover, to access Red Mountain, Ascot needs to build a road through Scottie’s property to its mill.

The Blueberry deposit is also close to Newcrest’s Brucejack mill. No matter where one looks, Blueberry & the SMG zones are right in the middle of this reemerging world-class gold camp, making them must-have properties.

Despite my breathless commentary on Scottie being acquired, there’s no rush. The Company is cashed up for a robust drill program. Management just raised $6.5M in gross proceeds at a weighted avg. price of $0.292/shr. (with a modest number of broker warrants), a true vote of confidence in Scottie’s prospects.

Notice the past-performing SGM on the map above is ~2 km east of the prospective Domino target, and ~2 km southwest of the Blueberry zone. Imagine the potential if some degree of continuity can be established between Blueberry & the SMG, or across all three zones.

If those zones are well mineralized to depth at reasonably high-grade, then (in my view) 4-6M ounces could ultimately be possible within 30 km of BOTH Newcrest’s & Ascot’s mills.

This season’s drill program will be quite impactful at 20,000+ m — as much as the 2021 & 2022 drill programs combined. Readers are reminded that Blueberry is right off the road, so drilling costs are low and logistics easy.

CEO Rourke & VP Exploration Thomas Mumford have done an excellent job advancing the Blueberry zone & raising exploration dollars. As the team continues to prudently explore, a lot more investors and companies will be watching the results.

The longer Scottie remains independent, the higher the price tag to acquire it. In the meantime, there will be more M&A in Canada, perhaps even in the GT, especially if/when the Au price rises.

As I write this on Sunday afternoon, March 12th, there’s concern over the U.S. regional banking system due to the disorderly collapse of a large west coast bank heavily focused on tech clients & startups. Growth, technology & financial stocks could be under pressure in the coming weeks/months.

Now’s the time to be looking at commodities, especially precious metal juniors. Will the Au price move meaningfully higher due to last week’s news? It certainly might! Scottie Resources (TSX-v: SCOT) / (OTC: SCTSF) is cashed up and ready for another exciting drill campaign.

Please take one last look at Scottie’s twenty-nine 100+ g-m intercepts AND the maps above. It seems clear that the Blueberry & SGM zones will be exploited, the only question is by whom.

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 Scottie Resources, 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 Scottie Resources 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 investment decisions.

At the time this article was posted, Scottie Resources was an advertiser on [ER] and Peter Epstein owned shares 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.