Melkior Resources Inc.’s (TSXV:MKR) $110 million option agreement infers a basement value for Carscallen of between $20 million and perhaps $50 million, writes Bob Moriarty
Bob Moriarty | November 25, 2020 | SmallCapPower: We just picked up an advertiser that just did a deal with Kirkland Lake that is simply the greatest option a junior has done in many years. Melkior Resources Inc. (TSXV:MKR) granted an option to Kirkland Lake Gold worth $110 million where KL may earn 75% of Melkior’s Carscallen project located in Timmins, Ontario.
(The following is an article originally published on 321gold.com on November 9, 2020)
Terms include KL spending $10 million in exploration over a five-year period to earn an initial 50% of the project. KL can earn an additional 25% by spending an additional $100 million in exploration. Kirkland Lake has also subscribed for 1.25 million units of Melkior for $1 million. Each unit is a share and a full warrant at $1.20 for two years.
Kirkland Lake CEO Tony Makuch is hardly buying a pig in a poke with this deal no matter how big the numbers. The project shares a 9 km border with West Timmins that Makuch ran when it was called Lakeshore Gold. Back on May 7, 2020 Melkior reported assay results from Carscallen of 25.7 g/t Au over 6.0 meters including 102 g/t Au over 1.5 meters and 8.7% copper with 33.9 g/t Ag over 0.5 meters. Two weeks later the company reported 5.6 g/t Au with 6.4 g/t Ag over 9.5 meters including 67.9 g/t Au with 79.8 g/t Ag and 0.62% copper and 0.27% zinc. The geology between West Timmins and Carscallen is similar so KL’s technical team already feel they know the project.
Kirkland Lake has hit the ground running with a 3,800-meter drill program already in progress at Carscallen with first results hoped to be released in December. Kirkland Lake is quite familiar with the geology, their technical team built the West Timmins Gold Mine right next door.
The $110 million deal infers a basement value for Carscallen between $20 million and perhaps $50 million for Melkior. Melkior has an agreement with KL that all drill results will be released when provided by the assay labs. Many times a junior doing a deal with a major is hamstrung by a lack of news flow being allowed by the major.
Carscallen is not Melkior’s only pony in the stable. They have another gold project, this located near Val d’Or named by pure chance, the Val Dor gold project. A summer till sample program revealed four primary targets. An initial drill program at Val Dor will begin in January 2021. The company is well cashed up with completion of a small raise in August and the placement with Kirkland Lake in September. They have just over $2 million on hand. With a tiny number of shares outstanding at about 20 million, the company is pretty cheap at about $19 million market cap.
Melkior is an advertiser and I am biased. I have not yet bought any shares but would be a buyer on a pull back. Do your own due diligence.
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