MTH: More gold and silver hits as gold price runs again - just at the first target of many
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,405,000 MTH Shares and 2,177,000 MTH Options at the time of publishing this article. The Company has been engaged by MTH to share our commentary on the progress of our Investment in MTH over time.
Our high grade gold-silver exploration Investment Mithril Gold & Silver (ASX:MTH) just announced more gold and silver intercepts in the first target area around its existing resource in Mexico.
One of the holes hit 7.37m @ 4.16 g/t gold, 69.5 g/t silver
These results are part of a plan to double its current 529k gold equivalent JORC resource by the end of this quarter... in just this ONE target area.
It’s one of many target areas MTH is plans to drill to try and deliver a multi million ounce gold equivalent deposit:
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A further 35,000m of drilling is planned for 2025.
AND MTH has ~$17M cash (as of November 2024) in the bank to do it.
The gold price is running again over the last few weeks and closing in on new all time highs again after a breather for a couple of months.
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Silver is following.
Gold and silver 10 year charts add some context:
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Strong gold and silver prices are obviously very good for MTH, especially if they can keep delivering strong gold and silver drill hits, with the occasional monster hit peppered in there too hopefully.
Zooming in to just Target Area 1, where the MTH’s 529k gold equivalent JORC resource sits AND the drilling to double it is continuing right now:
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MTH keeps hitting more silver and gold in extensional drillholes - which adds to the company’s overall resource.
MTH is still drilling here looking to double its existing JORC resource by Q1 this year.
After that the plan is to start drilling “target area 2” where we are hoping MTH can make a whole new giant discovery.
Clearly, this project is not short of juicy targets.
And in a market that seems to have taken a big shine to precious metals, analysts and market commentators have an array of views on why gold and silver prices are moving up.
Is it central bank buying?
Is it household demand in China or India?
Maybe it’s the new US President?
We think if we were to package up all these potential reasons for the gold and silver prices going up, it’s best explained by our big macro theme for the year: global uncertainty.
It feels like this theme is driving an inexorable rise for the gold price, and pushing the more rambunctious silver aggressively back up again.
So we think that 2025 will be another strong year for precious metals.
That’s good news for MTH, which is looking to double the size of its gold & silver resource in the first quarter of this year.
MTH has a “district scale” project.
70km2 of ground in Durango Mexico where there is evidence of hundreds of artisanal gold and silver mines and workings.
Within this giant area is MTH’s JORC resource, with 11Moz of silver and 373Koz of gold at grades of 141 g/t silver and 4.8 g/t gold.
(equivalent to 529,000 ounces of gold)
To get an idea of the size of MTH’s project we have highlighted where the gold and silver resource sits and highlighted in thick red lines MTH’s next targets:
MTH has spent the last 12 months drilling out its first target and says it will complete the drilling for the resource upgrade/update by the end of this quarter.
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So far the results are looking good, and MTH is expecting to drill until the end of this quarter before it looks to publish a JORC resource update.
MTH has 35,000 more metres of drilling remaining for the year, and will look to prove out more gold and silver mineralisation across its project.
MTH will spend the next 12-months drilling out other targets across an area where it believes there is a deeper “10km vein system of gold and silver” that is the source of all of these gold intrusions:
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To fund this drilling, MTH completed a $12.5M capital raise at 50c and in total held $17.6M cash at November last year.
(December cash position should be coming in the next week)
$12.5M is a big raise for any small cap exploration company (particularly in a market where the pursestrings are tight).
So, we think that MTH made the most of the pre-Christmas capital raising window last year, securing the funds to accelerate its drilling plans.
MTH's biggest shareholder, Jupiter Gold and Silver fund invested in this round a further $1.5M, and now holds 16.1% of MTH.
The Jupiter Gold & Silver Fund has over $1BN in funds under management and amongst a number of big investments, were once substantial holders in De Grey Mining.
De Grey went from a $15M microcap explorer to receiving a $5BN takeover offer from Northern Star - in under 5 years...
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The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance
Jupiter knows a good project when they see it, and it now holds 15.89% of MTH, after running their own due diligence on MTH’s assets.
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We think that a big part of the story for MTH (and maybe why Jupiter is so interested in supporting the company) is the connection to Bolnisi Gold.
A project acquired for under $500,000 and five years later sold for $1.1 billion to a major mining company, Bolnisi was the company that MTH’s CEO John Skeet helped to build.
Reminder: The Bolnisi story - can MTH’s MD John Skeet do it again?
In 2002, Bolnisi acquired the Palmarejo Project in Mexico.
Between 2003 and 2007, Bolnisi and its joint venture partner drilled out the project, uncovering strong gold and silver hits.
In the ~18 months of drilling the company got to 3 million ounce inferred resource.
On the back of this, the company raised tens of millions of dollars.
In the next ~18 months of drilling the company moved most of that into the indicated and measured category.
Then the next 18 months the company continued to drill and secure all of the permits for the construction phase.
It was at this time that Bolnisi was taken out by Coer Mining for $1.1 billion.
In just a few years, Bolnisi share price went up from ~A$0.16 to ~A$3.27.
A 20x return in just three years.
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Past performance should not be used as a measure of future performance. Just because the Bolnisi Gold share price appreciated over this time there is no guarantee that MTH will.
The General Manager of Projects at the time was MTH’s CEO John Skeet.
In a recent interview with The Oregon Group, he talks about his experience at Bolnisi and why he thinks that MTH could be even better.
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We are betting that Skeet, with his success in Mexico and experience with these types of projects he will develop MTH to a point where it becomes an attractive takeover target for a larger company looking to develop in the region.
This brings us to our big bet for the company...
Our MTH Big Bet
“MTH re-rates to a $150M market cap by expanding its Mexican gold-silver resource with new ultra high-grade silver (and gold) drill hits, taking the project into development and/or attracting a takeover bid at multiples of our Initial Entry Price”
NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our MTH Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.
MTH consults with former CEO of Ivanhoe Mines
A few weeks ago MTH announced that it had hired technical consultants Daniel Kunz & Associates (DKA) to help with all of the work for this year.
DKA as part of the engagement will also be receiving 735,000 unlisted options exercisable at 70c with a two year expiry (a nice vote of confidence given the hurdle rate).
Usually consultant appointments aren't all that interesting to us, but the background of Daniel Kunz definitely piqued our interest.
Daniel held senior executive roles at Ivanhoe Mines including three years as the companies CEO - during his time as CEO Ivanhoe discovered Oyu Tolgoi, one of the world’s largest copper-gold deposits.
For the 7 year period he was at Ivanhoe, the company's market cap went from US$400M to US$4.4BN.
Ivanhoe Mines is now capped at ~US$16BN...
More recently, he was co-founder and CEO of Prime Mining Corp which managed to take its Mexican asset (Los Reyes) onto the Toronto Stock Exchange.
We see this as a strong addition to the MTH team, ahead of a year that we think could be transformational for the company.
MTH is going into the new year with ~$17.6M cash in the bank (Nov 2024) so there is plenty of room for the company to deliver some strong newsflow without having to tap capital markets again.
(Fingers crossed we get a little bit of exploration luck).
What is next for MTH?
🔄 Additional assays - MTH is currently drilling in and around its existing JORC resource in target area 1, we are looking forward to more assays from ‘target area 1’ over the coming weeks.
🔲 Double JORC resource (Q1 2025) - this would enhance the scale of MTH’s project and make it more attractive as an investment for larger funds and increase its standing among precious metals projects around the world.
🔲 Drill out other targets - MTH has 35,000m of drilling planned for this year. Once all of the drilling is complete over Target 1 it will move to drill out other targets in the district.
Risks to MTH’s share price in the short-term:
With drilling currently underway and more assay results to be published over the coming months, we think the key risk in the short term for MTH is “Exploration Risk”.
It’s possible that MTH is unable to find enough significant economic mineralisation, which we would expect to impact MTH’s share price negatively.
Exploration risk
There is no guarantee that MTH’s upcoming drill programs in Mexico are successful and MTH may fail to find economic silver-gold deposits.
Source: “What could go wrong” - MTH Investment Memo 22 May 2024
The other major risk to MTH is “commodity price risk”.
Any material degradation in the gold or silver price may negatively affect MTH’s share price.
We list more risks to our MTH Investment Thesis in our Investment Memo here.
Our MTH Investment Memo
You can read our MTH Investment Memo in the link below. We use this memo to track the progress of all our Investments over time.
Our MTH Investment Memo covers:
- What does MTH do?
- The macro theme for MTH
- Our MTH Big Bet
- What we want to see MTH achieve
- Why we are Invested in MTH
- The key risks to our Investment Thesis
- Our Investment Plan
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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
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