Garibaldi and Metallis—The Big Score Part Deux?
Garibaldi Resources
So you want some action? Ok, we’re going to give you some action! Myself and GIL elite/premium investors have already been seeing quite a bit of action as we have been following the Garibaldi Resources (GGI/GGIFF) E&L Nickel Mountain situation since August. Amazingly, less than 90 days ago, GGI was trading for 17 cents per share and had been basing between pennies and 20 cents for 2 years! On Friday, it closed at $3.89 up over 20 FOLD in less than 30 months. The kicker here is that it is still very likely going much higher despite this massive short term run.Here is what we know from Garibaldi’s last press release:Highlights:
All 11 additional holes completed since EL-17-01 (see Sept. 1, 2017, news release) have returned broad sections of disseminated to blebby net-textured sulphides (pyrrhotite-pentlandite-chalcopyrite), hosted in olivine gabbro, consistent with a much larger-scale mineralizing event than ever previously suspected at Nickel Mountain.
X-ray fluorescence analysis of drill core supports the very high tenor of the sulphide at Nickel Mountain as previously disclosed by the company (photos of representative sulphide-bearing core from the new discovery zone are available for viewing at the company's website).
Assaying of drill core is being carried out by SGS in Vancouver and Garibaldi eagerly anticipates reporting initial results as they become available during the second half of this month.
Dr. Peter Lightfoot, an internationally recognized nickel sulphide expert and a technical adviser for Garibaldi, commented: "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. “"When viewed in a global context," Dr. Lightfoot continued, "Nickel Mountain is a classic example of an intrusion produced by open system emplacement of silicate and sulphide magma through a dynamic magma tube within a differentiated gabbroic complex. This intrusion represents an open system magma highway along which successive batches of silicate and sulphide magma were emplaced."What does this all mean to us non geologists? That this nickel-copper sulphide rich ore body is rare, valuable, and likely massive! This whole situation is very reminiscent of the well documented unfolding of the Voisey Bay nickel discovery in the 1990’s by a small company called Diamond Fields. It is a straight up sin for any resource investor to not have read The Big Score by Jacquie McNish.In fact, those of us that have absorbed how Voisey Bay played out have realized that it probably isn’t wise to let go of our paper in GGI (or their neighbor Metallis Resources (MTS/MTLFF)-which I will focus on next) easily. The fact is that we have enough information already in my view to know that this is a special discovery. Most people wait for assays, 43-101’s, and more information to be released first but by then GGI will be higher and likely much higher than it is now. Speed is key in these situations and we are already seeing some big money taking swift action to secure stakes in GGI and Metallis (MTS/MTLFF).Falconbridge moved very fast to take a 10% stake in Diamond Fields/Voisey Bay early on, paying $108MM (over a billion dollar valuation) with zero 43-101 resource. Things moved so quickly that Diamond Fields stock went from pennies to $172 per share within 18 months before it was acquired by Inco for $4.5 Billion. When the ore body is real, and it is big, and it is rich, there is not necessarily a cap on how high it can go. There are already credible people that believe Garibaldi’s Nickel Mountain is bigger than Voisey Bay. Are they right? We’ll find out soon!
Sprott Takes Down a Stake
I met Eric Sprott last Friday at the Palisade Hard Asset Conference in Jekyll Island, Georgia. I greatly respect Eric primarily due to the fact that although “retired”, he is actively helping others in this business succeed. He is a valuable source of capital to junior resource companies with his personal cash, backing entrepreneurs dreams. Additionally, he spoke at the Palisade conference to support a couple of up and coming guys in this business. It’s very encouraging that Eric is still sharing his time and knowledge with younger guys like us that will be the next generation of junior mining financiers.I bring up ES because not only is he one of the most connected and successful investors that exist in this sector, but because he has been all over this discovery early and heavily. Plus, he is STILL BUYING shares of GGI and MTS in the open market. That is in addition to a seven figure private placement at 82 cents on GGI AND another $5 million he just put in at $3.15 in a $10MM financing (his piece just closed on Friday). He also just bought 400,000 shares in the open market at $3.75 on October 13th so for everyone that thinks you already missed this one, have you?!Keep in mind that the run thus far hasn’t even included assays on the most recent 12 holes, which are due this coming week. I expect GGI to confirm very high grade massive sulphide intersections as the photos of core on their website show:
http://www.garibaldiresources.com/s/Photo_Gallery.asp?ReportID=768260
Two drill rigs are still turning in the Golden Triangle camp, despite the onset of winter which can be brutal in this area. However, the company has a tiger by the tail here and seem to have the resolve to push through and continue drilling. At $4 per share, Garibaldi has a $330M market capitalization but if this is even half the value/scope of Voisey Bay, the price would have to hit $28 per share on a 50% of the $4.5B buyout comparison. We do not know if this is the case or not, nobody does yet. But it is good to realize now that this deal could have some serious legs. In fact, I am forecasting $7-8 per share by the end of November/early December as a next target , which is why I decided to write this up now to everyone.If correct, you can buy in, sell half at a double, and see what happens risk free after that. Eric made two key points about GGI/MTS at last week’s conference. First, that Nickel Mountain rocks are showing some similarities to Norilsk, not necessarily just Voisey Bay. Remember, Norilsk is/was even more valuable than Voisey Bay! If that’s the case, this could become one of the most valuable nickel-copper deposits in the world and is a once in a generation discovery. It seems that the rocks are showing a unique blend of similarities to both of these examples and some of its own unique properties as well.
Metallis Resources (MTS/MTLFF)
Dr Peter Lighfoot is a world renown expert on nickel sulphide deposits and is advising Garibaldi on this world class discovery. It seems his theory is that the ore body is actually a string of deposits, a “pearl necklace” of sorts. This part of Garibaldi’s last press release on drilling is telling to me: “While the nickel-copper-rich system remains open in all directions at Nickel Mountain, at least two kilometres of prospective ground exist to the east-southeast while a northeast trend of geophysical anomalies and surface mineralization continues for at least six km.”
This is important for those of us heavily invested in Metallis Resources whose Kirkham property borders Garibaldi just over 4 KM to the “southeast”. Essentially, GGI just confirmed that we are half way there, to the border at Kirkham. If the multiple deposit theory proves true and extends to Kirkham, Metallis shareholders could become very rich. I have 90% of my exposure to this play in Metallis, not Garibaldi, which I recommended to premium GIL readers initially at 25 cents in early August. Despite selling off a ¼ of my position around $1 to remove any principal risk, last week I bought all of those shares back and extra around $1.40 per share. I realized that this could be an opportunity of a lifetime and plunged back in last Thursday/Friday.Eric Sprott financed Metallis at $1.10 for 2 million shares just a couple of weeks ago. He has been buying in the open market regularly as high as $1.88 for 400,000 shares on October 13th (the stock closed at $1.45 on Friday). A hugely compelling fact is the tight and tiny share structure in Metallis which barely has a $30MM CDN market cap at $1.45 per share! The leverage here could be enormous and I believe that there is a pretty good chance that MTS can outperform GGI between now and the end of the year. How can that scenario happen?Metallis moved drill rigs to “Thunder North and Thunder South” a few weeks ago, which is near the border of Garibaldi. It is important to note that initially the company drilled a completely different part of their property testing a gold/copper prospect. Those drill results will be out first, perhaps in the next 2 weeks. But if drilling at Thunder North intersects massive nickel/copper sulphides similar to Nickel Mountain, MTS will fly. For example, if Metallis has one third of the resource along the same trend as Garibaldi, their market cap would almost quadruple from $30MM to $110M if Garibaldi stayed at these levels (again, GGI is currently trading at a $330 ish million market capitalization)Now, I believe GGI will run to $7-8 into/after their next batch of assays are released. MTS should hit $2.50-$3 just following GGI so that’s lmost a double as well. But if Metallis confirms high grade nickel/copper sulphides in November, their share price could trade to $5 easily, which would still only be a $100MM market cap. Metallis’ extremely attractive share structure just means that there is very little stock available in the float! Buyers will likely have to pay up, probably WAY up, in the coming months.For what it is worth I only asked Eric Sprott one question last Friday. “Do you believe the Nickel Mountain ore body extends into Kirkham?” His reply was “yes I do”. This is obvious just from his actions in the market but it was nice to hear it as well.
Risks To be crystal clear, there is still a lot of risk in both of these stocks. Even if Metallis is destined for $20 per share, there will be violent pull backs along the way and whip lash like volatility. That said, some circumstances warrant rolling the dice. I’m in a great position because I plan to sell the ¼ I bought back at $3 which will have given me a profit on what I put in as a total initially. Then, I’ll hold ¾ plus of my stake for free versus those of you that might just get in now around $1.50 on MTS. You may want to sell half at a double and let the rest roll if this thing plays out like I think it will. That way, you simply don’t have to sweat the gyrations and can give things time to unfold into 2018.There is a lot of smoke at Kirkham near the fire than is Nickel Mountain so there is better than a 50/50 chance that Metallis has some of this rich ore body on its property. However, the odds are likely less than 50/50 that they hit some of it with the first few drill holes! These are big properties so some patience may be needed and one thing that may slow this train down is old man winter.Just remember, it is new discoveries that drive junior resource share prices more than any other factor. Being early in a big discovery can make investors wealthy and that is why we play in this risky and cyclical arena. GGI and MTS guarantee ACTION in the coming days, weeks, and months. I do not think it’s too late to get involved but would encourage adding soon, at least entry sized positions then on any pullbacks. I would suggest adding MTS up to $1.75 and GGI to $4.50. If the gap around $1.21 gets filled on the MTS chart it would be time to back up the truck.Lastly, I would like to acknowledge the guys at Bull Market Run. They were definitely on top of this situation before anyone else and are the reason that I was tipped off early on. They do great work and have gone the extra mile in keeping investors updated!Make sure that you are signed up to our free list for updates on these stocks and other special situations…
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