Integra Resources ($ITR.V | $IRRZF) with its DeLamar Gold project in Idaho is gearing up for what could potentially be an interesting summer and fall. On its recent investor deck, Integra states “DeLamar has what it takes to be a mine. The PEA has demonstrated an economically robust, low cost operation.” This is certainly valid and a nice determination of where they have been. What could potentially be uncovered and thus the future prospects of the project is where my excitement is focused on today.
Integra last year put out a robust PEA that envisages a project that will produce 124,000 ounces gold equivalent with a LOM AISC of $619 net of silver by-product with a 10 year mine life at a reasonable capital cost of US $161M. A very nice starting point. https://www.integraresources.com/site/assets/files/2678/19-09-09_integra_announces_maiden_pea.pdf.
Since the PEA was published, the price of Gold is up another $250 an ounce yet the stock price has remained flat. Here’s a snapshot of the sensitivity to the price of Gold and the associated leverage. At $1350 the project has an NPV5 of $357M US with an IRR of 43% and a 2.35 year payback. At $1500, the NPV increases nearly 30% and at $1700 it rises by nearly 70%.
Here’s the stock price over the past year, hovering near all time highs, looking for a catalyst, rising Gold price notwithstanding. Chart looks very constructive ahead of a very busy summer and fall drilling campaign.
All seems good so far. Which brings me to the upcoming exploration campaign, and where I see the potential for a re-rating if they can demonstrate success. The objective for the upcoming drilling program is two-fold: grow the higher grade milling contribution and the oxide component in order to potentially step up production creating additional shareholder value.
At Florida Mountain, the plan is to drill 5-7k meters in 20 holes beginning with the high grade targets (for the milling augmentation). Then the oxide targets focused on the large geochemical anomaly.
War Eagle RC drilling is scheduled to begin July 2020. 5k meters will be focused on high grade results adjacent to results reported in late 2019 https://www.integraresources.com/site/assets/files/2691/19-12-10_integra_intercepts_high_grade_at_we_and_fm_vf.pdf. There is a large anomaly 300m away that has never been tested before and that will be. https://www.integraresources.com/site/assets/files/2752/2020-05-07-nr-itr-y0nfau76v7vm.pdf
Ultimately, the high grade sulphide targets (Florida Mountain and War Eagle) could transform the economics of the mill project while at the same time working on improving the tonnage for the oxide portion thus potentially augmenting the already compelling project profile.
The result if executed is a pathway to expand throughput, increase production, improve the grade and extend the mine life. The optionality to resource growth potential acts as a meaningful catalyst while when combined with a rising Gold price tailwind, can balance the risk reward since the project is already solid as it stands. Optimization of DeLamar is where the next re-rating can begin.
Aside from being in a favorable jurisdiction, you also get comfort with their treasury position, which at around $28M, comfortably fully funds their 2020 objectives. I am sure they have been contacted by the banks to raise some cash in this current financing market, so very nice to be in a position of strength.
Furthermore, the capital structure is very tight. Only 120M shares out and no warrants. Top shareholders are Franklin Resources with 6%; ASA Gold and Precious Metals Fund at 5.6%; JPM Asset Management at 5.3%, Ruffer at 4.5% and George Salamis, President and CEO at 3%.
DeLamar is a project you can get comfortable standing behind. You get a scarcity factor to go with a proven management team that realized significant value creation from the sale of Integra Gold https://www.reuters.com/article/us-eldorado-gold-m-a-integra-gold-idUSKCN18B0NS. You inherent a project that has a documented path to production underpinned by catalysts such as resource upside, project optimization improvements and efficiencies, mine life extensions with improved economics, all with a favorable Gold price environment backdrop. This year’s drilling campaign is lining up to be a potential catalyst and the stock chart may be showing this. Perhaps what the market is waiting for to re-rate. I will be watching, holding, and potentially adding in suspense.
All the best.
Disclaimer and Disclosures:
I own a relatively small position in the stock. Therefore, I have an inherent bias. I am looking to add to my position and will do so in the coming months especially if the drilling success continues.
I am not a certified investment professional nor a GEOLOGIST. Assume everything I say herein is WRONG. In fact, I am WRONG more often than right. Please perform your own due diligence and consult with your own investment advisor and do not rely on anything stated here. Do not buy or sell on anything contained in this write up. Nothing contained herein is a recommendation or solicitation to buy or sell.
I did not receive any compensation for this blog post. I did not receive any compensation from the company mentioned. I did not perform a site visit. My conflict is my ownership bias.
The content contained herein is strictly my opinion only. I do not warrant to the accuracy of the content or whether this is a suitable investment and disclaim any responsibility.