Eric Sprott is a significant shareholder of Garibaldi Resources (CVE:GGI), which is developing its Nickel Mountain project in British Columbia
SmallCapPower | October 20, 2017: Garibaldi Resources (TSXV:GGI), a Canadian junior explorer, has seen its stock price soar nearly 20 fold over the past three months, and more than doubling during the last 30 days, on positive developments related to the Company’s flagship Nickel Mountain project and the successful raising of $16 million to fund the project’s development. Post the recent surge, Garibaldi Resources trades at a decent $350 million in market capitalization. Although the stock could move higher in the near term on further positive news, investors would be better off waiting for a correction before they jump into this junior explorer.
Investment thesis
- Huge potential in the Company’s flagship E&L Nickel Mountain project
- Raises $16 million in non-brokered placements to fund exploration
Flagship E&L Nickel Mountain project continues to report positive drill results
Garibaldi Resources has a powerful presence in the prolific Golden Triangle area of British Columbia with its 100%-owned flagship E&L project with nearly 200+ sq km at Nickel Mountain. The Company commenced drilling at the Nickel Mountain project in August 2017, and continues to report positive drill results. On September 1, 2017, Garibaldi Resources reported intersecting broad intervals of nickel-copper sulphide mineralization in the first drill hole at E&L and recently (October 13, 2017) the Company reported that it is building on this discovery with 11 additional holes returning broad sections of disseminated to blebby net textured sulphides, hosted in olivine gabbro, consistent with a much larger scale mineralizing event than ever previously suspected at Nickel Mountain. Initial results from drill core assay will be available during the second half of October.
So far, Garibaldi Resources has completed two drill rigs comprising 12 holes covering ~3,000 meters at Nickel Mountain. While the nickel-copper-rich system remains open in all directions at Nickel Mountain, the current drilling is focused on a new discovery area beginning approximately 100 meters east-southeast of the historic northwest zone highlighted by Silver Standard’s 37.8-meter intercept grading 1.3% nickel and 0.79% copper (DDH-04-1966) in a disseminated halo.
Dr. Peter Lightfoot, an internationally recognized nickel sulphide expert who joined Garibaldi team in March 2017, as technical advisor, said “the host rocks at Nickel Mountain comprise a differentiated sequence of variable-textured and orbicular-textured gabbros and olivine gabbro with abundant disseminated interstitial sulphide. The exceptional tenor of the sulphide is a compelling feature of Nickel Mountain.”
As Garibaldi Resources builds on the nickel discovery at the E&L project, investors’ interest will likely continue to increase with new drill results over the next few quarters. Following the Oct 13 news release, Garibaldi shares surged nearly 33% to $3.57.
Additional projects in Mexico shows future potential
In addition to the flagship E&L project, Garibaldi Resources owns several other projects including a portfolio of four high-grade gold and silver properties in Mexico where new programs will soon be launched. The Company has identified 11 high-grade targets in addition to Silver Eagle identified at Rodadero Ag-Au Project and plans to advance La Patilla Gold Property to extraction stage.
Successful $16 million financing to fund capex
To fund the development of the flagship E&L project as well as other projects within Canada and internationally, Garibaldi Resources has raised more than $16 million in financing over the past two months. On September 1, 2017, the Company raised gross proceeds of $6 million in a non-brokered private placement by issuing 2.6 million units at $0.82 per unit and 4.2 million flow-through units at $0.92 per unit. On October 16, 2017, Garibaldi Resources arranged another non-brokered private placement to raise gross proceeds of $10.0 million, issuing ~3.17 million units at $3.15 per unit to strategic investors. The proceeds will be used to further advance the Company’s E&L Nickel Mountain Project, other British Columbia properties, and gold and silver properties in Mexico.
The Company’s ability to close two non-brokered placements to raise $16 million shows the interest and confidence of strategic investors in its flagship and other projects.
Growing electric vehicles demand driving nickel prices
Production and use of electric vehicles is projected to increase to 9.4% of 102 million new vehicles in 2025, from 1.1% of 86.5 million in 2017, according to a recent report by Morgan Stanley. This large potential continues to drive cobalt as well as other metals, including nickel used in the batteries that power these electric vehicles. Consequently, nickel prices are currently hovering around the one-year high of US$5.5/lb, which bodes well for nickel explorers/ producers such as Garibaldi Resources.
Outlook
Garibaldi Resources is an exploration-stage company and, hence, does not presently generate any revenues and reported a net loss of $0.4 million for the six months ended July 31, 2017. In the foreseeable future, the Company will likely not be able to generate any revenues as the development of its flagship Nickel mountain project could take at least a few years to commence production. However its stock price could continue to move up on positive drill results at its Nickel mountain project that will flow in over the coming quarters. Long-term investors might be better served waiting for a correction before jumping into this junior explorer.
To read our full disclosure, please click on the button below:
