Big River Gold Ltd

Petra Capital - Research Note

Petra Capital has issued a research note titled "Big River Gold Ltd (BRV) - A Brazilian Karlawinda."

Big River Gold (BRV) is an ASX-listed gold developer which owns 100% of the Borborema gold project in Northern Brazil. An updated DFS in July 2020 outlined a simple 2.0Mtpa open pit gold project, with annual production of 73koz and a US$380m (A$520m) post-tax NPV at US$1,800/oz gold. Borborema is a very similar project to CMM’s flagship Karlawinda deposit, with a consistent, thick, tabular orebody making for simple, low-cost mining. However, BRV trades at a significant discount to CMM and just 30% of its spot valuation. The market has not recognised this and the value gap is too wide. We see a material re-rating as funding is secured, construction begins and first gold draws near. Further, the current mine plan extracts just 50% of reserves, leaving significant upside & optionality to be investigated once in production. We maintain our BUY with an increased price target of A$0.15/sh (A$0.13/sh), following changes to gold price forecasts.

BRV & CMM - Similar ore bodies, simple execution

• The Borborema deposit (BRV) has drill intercepts 35-50m wide grading 1.2-2.0g/t (Figure 1)
• The Karlawinda deposit (CMM) has drill intercepts 40-56m wide grading 1.0-1.6g/t (Figure 2)
• Both projects are single open pits with similar strip ratios & mining costs with conventional CIL processing
• BRV has grades of 1.2g/t vs. CMM at 0.9g/t, although CMM has higher production driven by a larger plant

BRV trading at a material discount

• Investors can buy BRV at a materially lower price per ounce and receive higher margins per ounce
• BRV trades on a fully diluted EV/oz production of A$157/oz vs. CMM at A$462/oz - a huge 66% discount
• BRV has better AISC of A$1,019/oz vs. A$1,165/oz for CMM. Simply put, BRV delivers more cash per ounce
• CMM should trade at a modest premium given it is based in WA, has higher production and is fully funded – however the discount appears too large for us

CMM added value through expansion – BRV will too

• The deposit geometry for both projects are amenable to cutbacks to access deeper resources, with CMM re-rating post the announcement of its plant expansion and higher annual production target
• Over half of BRV’s Reserves sit outside the Stage 1 pit at Borborema, with a plant expansion to be investigated post commissioning
• We see BRV re-rating as development funding is secured and construction begins in 2021

Further highlighted details

Quarterly Activities Report: Click Here (30th October, 2020)

Quarterly Cashflow Report: Click Here (30th October, 2020)

Mica Testwork Progress Report: Click Here (22nd September, 2020)

Enquiries:

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