Tracker - August 23, 2021: What's Next for Galway Metals Inc
Galway Metals Inc was made a Bottom-Fish Spec Value rated 2020 Favorite at $0.34 on December 31, 2019, upgraded to a Fair Spec Value rated 2020 Favorite at $0.34 on February 18, 2020 (see Tracker Feb 18, 2020), and continued as a Fair Spec Value rated 2021 Favorite at $1.14 on December 31, 2020 based on the emergence of Clarence stream in New Brunswick as a major gold district and continuing efforts to discover additional mineralization at the gold-rich VMS Estrades project in Quebec. The sharp rise of the price of gold in Q2 of 2020 enabled Galway to raise $17.3 million at $0.44-$0.63 in a no warrant private placement to fund a 100,000 m drill program at Clarence Stream to support an updated resource estimate now expected in late Q3 of 2021. The stock peaked at $2.09 on August 6, 2020 right around when gold peaked above $2,000, but Galway managed to raise another $15 million in flow-thru funds at $1.05-$1.84 in March 2021. As of late August 2021 Galway had about $18 million working capital left and at the planned spending rate was projected to have about $12 million working capital left at the end of 2021. On the speculation that Galway will deliver a new resource in the 1.5-2.0 million ounce range for both open-pit and underground mineable zones, up from 667,000 ounces reported in October 2017, Galway Metals Inc is upgraded at $0.63 to a Good Spec Value rated 2021 Favorite effective August 23, 2021.
The Clarence Stream project consists of two blocks between the former Mount Pleasant tungsten-tin mine in New Brunswick that straddle 70 km of the northern flank of the St George Batholith. The land position also straddles the Sawyer Brook Fault System which is a crustal scale boundary between the Avalon and Gander terranes also known as the Appalachian Gold Trend which stretches several thousand km from North Carolina (Haile, Ridgeway) through Newfoundland where New Found Gold Corp has achieved a peak valuation in excess of $2 billion based on a tiny high grade Bendigo-style system found decades ago now being spun as another Fosterville district.
In contrast the gold at Clarence Stream is an intrusion-related gold system discovered in 1999 by Freewest, eventually acquired by Wolfden from Cliffs after it acquired Freewest in 2010, and purchased by Galway in 1916 for $3,250,000 based on the North and South zones. Galway believes Clarence Stream is an emerging gold district with 10 million plus ounce potential, but the task at hand is to stitch together 4 zones to the southwest called Jubilee-Richard-George Murphy-Adrian first discovered in late 2017. Gold occurs in veins and stockworks hosted by Ordovician and Silurian metasediments in proximity to Devonian intrusions. Bismuth, arsenic, antimony and tungsten are key pathfinder elements. Mike Sutton is the geologist responsible for delineating these zones and creating domain models.
Since financing in mid 2020 Galway has undertaken a 100,000 m drill program involving 6 rigs of which 5 are delineating this zone while a sixth is testing gold-in-till anomalies of which the current focus is the Oak Bay target associated with the Tower Hill intrusion. The stock sagged during the summer of 2021 as investors grew impatient with gold's sideways price trend and bored with waiting for a resource update that puts Clarence Stream beyond 1 million ounces. Although there were no warrants to clip, the end of the 2021 private placement hold period in July contributed to Galway's downtrend. The updated resource estimate will be an important milestone for two reasons. The first will be to allow Galway to boast over 1 million ounces split between the earlier North-South Zones, which are open down-plunge, and the Jubilee etc Zone (they do need to invent a collective name for these sub-zones). This will allow institutional investors to treat Galway as a gold optionality play. The second reason is that once the resource is updated Galway can reallocate its rigs to "wildcat" drilling new targets in pursuit of establishing additional new zones through which the district resource can eventually be marched into the 5-10 million ounce range where Clarence Stream becomes a target for gold producers.
This will attract two audience types to Galway: 1) institutional investors who provide the funding to allow newly discovered zones to be delineated, and, 2) individual investors who will respond to qualitative evidence of new discoveries showing that the existing resource is being replicated. Clarence Stream is not about growing an existing gold zone bigger such as what happens when one latches onto a new Carlin-type system, or finding new splays off a fertile fault such as Great Bear is doing with its 18 km of the LP Fault south of the Red Lake district. At Clarence Stream soil sampling is used to identify hotspots associated with an intrusion such as Oak Bay southeast of the Tower Hill intrusion which via a magnetic feature is structurally linked to the Tower Hill gold in soil anomaly 6 km to the northeast. Then there are two very strong gold in soil anomalies 8 km south and southeast of the Jubilee etc Zone parked over gabbroic and granitic intrusions that have not seen any drill holes. Once the new resource is published the market will want to see Galway hit these other targets to prove that there are multiple locations where the 5-10 million ounce district potential can be delineated through brute force drilling.
With 189.3 million shares fully diluted Galway should achieve a $1.00-$1.50 price range if it delivers a 1 million plus ounce resource while keeping the district exploration potential alive. But that does not include any value for the gold rich VMS Estrades project in Quebec acquired by Galway in August 2016 for $1,550,000 in cash and stock. Estrades is a former underground mine developed in 1990 by Breakwater which trucked ore to the Mattagami mill before stopping in 1991 due to weak metal prices and high tolling costs. Estrades is located about 25 km east of the Casa Berardi gold mine now operated by Hecla and straddles over 40 km of the Casa Berardi Deformation Zone.
Galway drilled 20,000 m in 2017-2018 on top of 90,000 m of historical drilling to support a new expanded indicated and inferred resource of 3,696,000 tonnes of 5.7% zinc, 1.03% copper, 0.42% lead, 93 g/t silver and 2.59 g/t gold in September 2018. The property has also seen 90,000 m of exploration drilling aimed at the gold-prospective horizon know as the Casa Berardi Break which parallels to the north the Estrades and Newiska horizons.
The company has completed Titan geophysical surveys over the Estrades deposit that can see to a depth of 2,000 m which have generated new hope that this VMS system blossoms at depth. Galway undertook a 10,000 m drill program in Q1 of 2021 - much of the property can only be cheaply drilled in winter - but the warm 2021 winter cut the frozen ground drilling short. The Newiska Titan target will be tackled again in Q1 of 2022. Drilling continued during the summer on the Estrades VMS and Casa Berardi Break gold targets with what is expected to be 15,000 m of drilling for 2021. As of late August 2021 assays for only 2 of the shallower holes on the Estrades zone were reported and while these were good holes they did not inspire the market because they were of an infill nature. At least a dozen holes into the Estrades system, several the deepest ever, remain to be reported. Galway isn't putting the spotlight on Estrades so it remains to be seen to what extent the 2021 drilling expands the down plunge scope of the Estrades Zone. What makes Estrades interesting is that it is a gold-silver enriched zinc dominant VMS system and its seafloor vents where copper would dominate have not yet been encountered. The Estrades project has potential to surprise and steal the limelight from Clarence Stream, though should that begin to happen a spinout is the likely course of action.
Galway Metals Inc has been upgraded to a Good Spec Value rating at $0.63 because the company scores high on people (the CEO Robert Hinchcliffe , the chief geologist Mike Sutton and the marketing face of the company, Larry Strauss, own 9.5% of the stock), capital (a proven track record of raising money on good terms when the timing is right - $32 million during the past year with $12 million left at the end of 2021), story fundamentals (Estrades and Clarence Stream are hybrid optionality-discovery plays covering both base and precious metals), and a cheap valuation caused by timeline fatigue that should end when the new Clarence Stream gold resource is reported in late September or early October 2021.