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Marc Davis, CMM
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A high-grade precious metals discovery can be worth hundreds of millions of dollars – sometimes even more. The stakes are so high and the rewards can be so lucrative that every gold exploration/development company knows that it must do everything in its power to gain a meaningful competitive edge.

Prime Mining is a fascinating example of a high-flying Canadian precious metals explorer/developer that has found a way to do exactly that, thereby dramatically boosting the odds of turning Los Reyes into a much larger world-class gold-silver discovery. 

How so? Truth be told, the company’s strategy for success is the time-honoured business maxim that success breeds success. To this end, Prime has built a so-called dream team to manage the company’s lustrous fortunes at its significantly under-developed, high-grade flagship Los Reyes gold/silver discovery in Sinaloa State, Mexico.   

Assembling Prime’s High-Octane Dream Team 

It is indeed the tantalizing opportunity to be integrally involved in unlocking the big picture value of Los Reyes that has attracted some illustrious names from the precious metals mining business, as well as from North America’s capital markets.

Canadian investment industry statesman Murray John is among them. He now serves as a director and chairperson of Prime’s board largely due to his extensive capital markets experience as an investment banker and portfolio manager.

However, John is also very hands-on in the mining business too. He originally began his career as a mining engineer. Notably, he now serves as chairperson of Discovery Metals, which is developing a silver mine in Chihuahua, Mexico – a project to which the capital markets have assigned a current valuation well in excess of CDN $600 million. He is also a director of industry-leading Osisko Gold Royalties, which has a market capitalization of around US $2 billion.

His talents are complemented by another industry standout, Dan Kunz, who serves as CEO of Prime. With an accomplished background as a mining engineer, he has also distinguished himself over the span of several decades with his mine-finding and mine-building expertise. This includes working for many years in Mexico on comparable gold-silver projects to Los Reyes.

Among his accomplishments, he was instrumental in building and operating the Castle Mountain gold mine in California – which bears geological similarities to Los Reyes. The mine’s owner, Equinox Gold, now boasts a market capitalization of nearly US $2 billion. Additionally, Kunz’s notable past positions include being CEO of Ivanhoe Mines, which has a market capitalization in excess of US $9 billion.

The team’s geological prowess is further strengthened by the addition of Kerry Sparkes as a technical advisor to the board of directors. He brings to Prime invaluable expertise that was cultivated over 30 years as both an exploration geologist and a mining executive. As evidence of this, Sparkes recently retired after seven years as vice president of geology for Franco-Nevada Corporation – a mining industry powerhouse with an eye-watering market capitalization of about US $26 billion.

Among Sparks’ other career highlights, he was Senior Geologist with Voisey’s Bay Nickel Co. – helping to develop a world-class, multi-billion-dollar nickel mine in Newfoundland. More recently, he was a co-founder and director of high-flying Orla Mining, which now boasts over 11 million ounces of gold reserves and resources (combined) at its in-development, world-class Camino Roja mine in Zacatecas, Mexico.   

The catalyst behind Prime’s ascendant story is Prime’s founder, Andy Bowering, who acquired Los Reyes in August, 2019. Now serving as an executive vice president and director of Prime, he is a very successful venture capitalist with over 30 years of experience owning and operating drilling and mineral exploration/development companies.

They include both Millennial Lithium and American Lithium – two high-flyers that are developing world-class lithium deposits in the US and Argentina, respectively. In this regard, his business vision has proved particularly prescient in identifying under-developed and undervalued mineral assets – ones with enough upside potential to create considerable wealth for forward-thinking investors.

As for his latest gold start-up, Prime Mining, Bowering has already generated returns of as much as 900% for investors who bought his company’s shares one year ago.

Other board members of note include Marc Prefontaine. A seasoned and distinguished geologist, he was formerly CEO of Grayd Resources, which discovered and developed the La India gold/silver deposit in Sonora, Mexico. It was subsequently acquired by Agnico Eagle for US $275 million and has been a producing mine since 2013.

He was also a co-founder and a former CEO of Orla Mining, during which time Orla’s market capitalization increased from CDN $5 million to $280 million. The company is now worth close to $1.0 billion.

For the sake of brevity, this article will only mention one more key player on Prime leadership team. This is Paul Sweeney, who has extensive experience in mining and renewable energy. Among his current credits, he serves as a director of OceanaGold Corporation, a TSX-listed international gold producer. Among his past accomplishments, he was CFO for silver developer Tahoe Resources, which was purchased by Pan American Silver for US $1.1 billion in 2018. This was similarly the case for Canico Resource, which was acquired by Brazilian mining heavyweight Vale for US $865 in 2006.

He was also a management figure for Sutton Resources, which was purchased by mining titan Barrick Gold for CDN $513 in 1999. 

En masse, this accomplished team of mine finders benefits from extensive experience at unlocking the value of numerous mineral discoveries, especially precious metals deposits. This has resulted in the creation of billions of dollars of wealth for investors, especially risk-tolerant ones who want to optimize their upside returns by investing in a mining company’s formative phases.  

A Best-in-Class Investment Following

Perhaps Prime’s most renowned shareholder is Pierre Lassonde – who the company refers to as a “cornerstone” investor due to his personal endorsement of this still-emerging mineral discovery. He has personally accumulated about a 12% stake in Prime.

He joins Trinity Capital Partners Corp. as a strategic investor in Prime. Notably, Trinity is a successful investment firm that he co-founded in 2007, and which now provides Prime with capital, advisory and technical guidance.

Investors should take note that Trinity has also been integral to creating considerable home-run returns for many of Orla’s shareholders, having played a similar strategic role to this standout success story in the making.

In spite of a recent slump in gold stocks, Orla still has a valuation of close to CDN $1.0 billion and has seen its market capitalization rise as high as nearly CDN $1.7 billion as recently as January. Hence, Trinity clearly recognizes an undervalued asset when it sees one in Los Reyes.

Furthermore, Lassonde recently told the Northern Miner that Prime is his second favourite gold mining stock.

He knows what he is talking about when betting on an up-and-comer. Besides Orla, his past successes include Franco-Nevada Corporation, which he co-founded in 1982. As the world’s first publicly-traded gold royalty company, it has been a roaring success, and has been valued as high as US $25 billion. Lassonde has also served as a past president of Newmont Mining Corp – one of the world largest gold producers.

So too has Lassonde enjoyed considerable success as an explorationist. With Metallica Resources, he was integral to the discovery of the world-class El Morro gold deposit in Chile and the Cerro San Pedro gold mine in Mexico.

It bears repeating that he has also been integral to the success of Orla Mining, where Kerry Sparkes and Marc Prefontaine also distinguished themselves, becoming key players in Orla’s still-emerging extraordinary success. For them, the allure of Prime is that it could become the next Orla. Their transference of deep intellectual capital to Prime bodes particularly well for the company’s growth prospects.  

Following Lassonde’s lead are a handful of some of North America’s best-known and most successful gold mining funds. They include Franklin Templeton, RBC Investment Management, Commodity Capital, Merk Asset Management, and Terra Capital.

The Big Picture Comes into Focus 

Presently, the Los Reyes project is one of the highest-grade oxide deposits in Mexico, with an initial combined resource of 1.1 million ounces of 1.28 g/t gold equivalent (AuEq). In fact, Los Reyes is amongst the top-five oxide deposits by grade, globally.

The entire Los Reyes property consists of 37 contiguous concessions covering an expansive 63 square kilometres. It is a low-sulphidation, open pittable epithermal deposit located 43 kilometres southeast of the mining town of Cosala, Sinaloa, and within several hours drive from the resort town of Mazatlan

It is significant that this is the first time that such a large historic patchwork quilt of claims has been amalgamated to form one large land package – offering Prime district-scale discovery opportunities for more than just one major discovery.

This project also benefits from excellent regional infrastructure with good access, power, abundant water and ready access to skilled labour. It is also at the heart of a mining-friendly region where a handful of gold/silver mines already operate.

What promises to make 2021 so exciting for Prime shareholders is the prospect of seeing considerable value creation via the drill bit.  The upcoming 15,000-metre drill program has a three-pronged approach: upgrading inferred resources, expanding current resource areas, and testing new targets, both at depth and laterally.

Much of this drilling that is designed to outline additional ounces within the known parameters of the Los Reyes deposit (which consists of eight discovery zones) is targeting an upsizing of the current resource base by about 200% to three million ounces of gold equivalent.

Additionally, the drill testing of a cluster of high-priority regional targets could also go a long way towards significantly boosting the targeted resource expansion even further.

The overall near-term prospects for considerable resource expansion are summed up very well by mining analyst Varun Arora of Clarus Securities, who said in a January, 2021 research report the following:

“We believe the exploration upside at Los Reyes remains highly compelling with multiple levers for resource growth supported by along strike and vertical extensions of the current resource as well as from the regional targets along the 17.5-kilometre strike length of the mineralized structural corridors that is largely untested.”

In fact, Los Reyes initial gold resource model suggests that Prime is just scratching the surface of the project’s still-emerging, high-grade deposit. It bears repeating that this is a key reason why each member of Prime’s dream team has thrown their weight behind the push to make Prime a standout success story.

Interestingly, Los Reyes has not been drilled since 2015. However, historic work from previous operators has seen US $20 million spent on 46,000 metres (493 holes) of legacy drill data, giving a very good insight into the size and scope of a known initial resource that exceeds one million ounces of gold equivalent.

However, Prime will not only begin drilling at shallow depths to expand current resources, but also at depths of greater than 350 metres – which is expected to reveal the presence of additional high-grade resources that have never been detected before. In fact, even though the property has historically been extensively drilled, very little has been done below depths of 150–200 metres.

Another key takeaway is that only 40% of the known 17.5-kilometre strike length of the mineralized system on the property has been tested by drilling, trenching, or surface sampling to date.

Why Analysts are Bullish on Prime’s Share Price Trajectory

As previously mentioned, mining analyst Varon Arona is bullish on the potential for Los Reyes to become a much richer asset, boasting both high grades and prolific tonnage.   

“We see strong potential for a re-rating as the company continues to advance the Los Reyes project. This year’s exploration program should pave the path toward a potential multi-million-ounce deposit as resources are expanded on surface as well as underground,” he said in the previously mentioned research report,” he said in his report.  

He added, “Even on the current resources, Prime trades at a discount to peers and we see potential for a rerate towards CDN $230 million to $1.0 billion… In our opinion, Prime is now extremely well positioned, both technically and from a capital markets perspective, to take the Los Reyes project forward to either an eventual build or sale scenario.”

Desjardins Securities mining analyst David Stewart has an equally buoyant view of Prime. He said in a 2020 research report the following: “The shares are not pricing in the true exploration potential to significantly grow the resource and make new discoveries…As Prime tests just how big the deposit could get and progresses toward production in future years, we believe it should outperform its peer group.”

VSA Capital, a UK-based investment research firm, believes that the upcoming 15,000-metre drill program will be a key value driver going forward. The company also sees considerable intrinsic value in Prime’s dynamic management team, board of directors, and advisors.

In a 2020 research report, the company said that, “this wealth of experience gives the company significant optionality as progress is achieved and should give investors significant confidence.”

Investment Summary

In summary, 2021 promises to be a breakout year for Prime Mining. Under the leadership and guidance of some of the smartest and most successful wealth creators in the mining and investment businesses, the odds are very much in the company’s favour.

In spite of a currently turbulent market for bullion prices, Prime’s pathway to success should be unimpacted by such volatility. Here’s why. First, there is the likelihood of significantly upsizing Los Reyes’ known resource base within an existing open pit footprint via the upcoming 15,000-metre drill program. This alone promises to significantly de-risk the project and add considerable additional value to the asset. Remember Los Reyes is already one of the world’s highest-grade oxide gold-silver deposits.  

Next, the prospect of finding new satellite deposits within this district-scale property adds the real sizzle to the steak. This is where around 10 kilometres of the mineralized strike length has yet to be tested by drilling, including at least four large high-priority geophysical targets that overprint large, corroborative geochemical (gold-in-soil) anomalies.  

Any of these large new target areas could yet transform Los Reyes into the next Great Bear Resources – a storied discovery that boasts high grades, a prolific overall size, and a share price that has experienced a parabolic rise.

Stay tuned. Prime Mining’s inspiring story is only just beginning to heat up. 

ABOUT THE AUTHOR: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, The Times (UK), Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post, AOL, City A.M. (London), Bloomberg, WallStreetOnline.de (Germany) and the Independent (UK). He has also appeared in business interviews on the BBC, CBC, and SKY TV.

Marc Davis advises that this article is not a solicitation for investors to buy shares in Prime Mining or any of the other companies mentioned.

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