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TICKERS: POR; POT

Analyst: Without Drilling a Hole, Explorer's New Acquisitions Have Increased in Value
Contributed Opinion

Source:

Peter Epstein Peter Epstein of Epstein Research digs into recent news from Portofino Resources, which now has prospects on four gold properties in Canada and two lithium brine assets in Argentina.

Note: Au = Gold, Ag = Silver, Cu = Copper, Zn = Zinc, Cu Eq. = Copper Equivalent at spot prices

It has been a busy six weeks for Portofino Resources Inc. (POR:TSX.V; POT:FSE). Six press releases have been issued. I will reiterate the key takeaways.

But first an update on Portofino's South of Otter (SOT) property in the Red Lake mining district of northwestern Ontario. Although SOT is a priority, all four properties will likely see exploration this year.

South of Otter: ~9 kilometers (~9 km) from Great Bear's Dixie project

The 5,207-hectare SOT project is 40 km southeast of Red Lake, Ontario, and about 9 km east of Great Bear Resources Ltd.'s (GBR:TSX.V; GTBDF:OTCQX) very high-grade Dixie project. In the past, SOT was the subject of large-scale geophysical surveys designed to target base metals. However, in 2001 Goldcorp completed a property-wide compilation and interpretation of prior ground and airborne magnetic data to assess the potential for gold. Due to a lack of outcropping rocks, minimal follow-up work was done.

Management just completed a field program of prospecting and geological mapping along strong conductors identified in the company's winter electromagnetic (EM) ground survey. A total of 32 samples were collected to test various styles of mineralization, lithologies and alteration.

The work program included prospecting, detailed structural mapping and outcrop channel sampling based on conductors found in the geophysical survey announced on May 14. A lack of detailed historical work enables Portofino to undertake meaningful programs, guided in part by the successes of neighboring exploration companies.

In addition to the collection of 32 samples, significant semi-massive to massive sulfide mineralization was discovered along a newly identified, 1.6-km-long fault zone. This zone is located ~500 meters (~500m) south of previously identified gold soil sample anomalies and EM conductors. A total of 12 samples were collected along this (deformation) zone to test for the presence of Au, Ag, Cu and Zn.

Notice in the image below that drill holes (DH)/historical resources include: DH: 1.5% Cu + 6.3% Zn (3.7% Cu Eq.) over 3.4 m; 110,000 tonnes @ 0.5% Cu + 12.5% Zn (4.9% Cu Eq.); DH: 1.4% Cu + 7.3% Zn (4.0% Cu Eq.) over 9.5 m; 100,000 tonnes @ 1.0% Cu + 10% Zn (4.5% Cu Eq.).

Further prospecting and geological mapping on the margins of this fault zone identified alteration in the volcanic wall rock. Many gold deposits in Ontario are either directly hosted in this type of mineralization or exist in close relationship to it and a fault zone. Other projects containing this signature, along similar deformation zones, include GBR's Dixie and the Uchi Lake gold mine. Once additional permits are received, Portofino will proceed to trenching / drilling.

Three new gold properties secured in past month

These are exciting times for Portofino. Management had an opportunity to pick up additional low-cost properties with gold showings, so they did. All three properties are located in historical and current mining districts with ample infrastructure and easy access. In addition to Red Lake, management expects activity in the Atikokan area to heat up this summer. A number of companies are increasing their exploration there.

Portofino began negotiating and planning to lock up gold properties in Ontario when gold was around US$1,400/ounce (oz). Today (June 24), August gold futures are at US$1,786/oz, a gain of ~28%. Therefore, without a single new drill hole on any of its four controlled properties, I argue that the value of the company's assets has meaningfully increased.

On June 11, Portofino announced the execution of a binding agreement to acquire six claims (869 hectares) in the Atikokan district, also in northwestern Ontario. The Melema West property is located 28 km northeast of Atikokan, and 5 km north of the Quetico Fault. Agnico Eagle Mines Ltd.'s (AEM:TSX; AEM:NYSE) Hammond Reef gold deposit is ~19 km northwest of Melema West. Hammond Reef hosts a large, near-surface Measured and Indicated resource of 4.5 million ounces of gold.

Grab samples taken in 2019 assayed as high as 10 g/t gold. The Young-Corrigan vein system ranges in width from 1 to 15m and was mapped over a strike length of at least 170m. Positive gold values demonstrate that an additional undocumented gold-bearing structure potentially exists on the Melema West property.

CEO David Tafel of Portofino commented on the Melema West property: "The gold-bearing structures in this area are extensive, well documented and traceable for >30 km. Recent land acquisitions by Agnico Eagle, contiguous to Melema West, supports the idea that Portofino is strategically well placed. The undocumented and unexplored Young-Corrigan Shear Zone is a compelling exploration target."

On May 27, Portofino executed a binding agreement to acquire three claims totaling 1,147 hectares. The Sapawe West property is 9 km northeast of Atikokan, just north of the Quetico Fault, and 2.5 km west along strike of the past-producing Sapawe Gold mine. Portofino has initiated the compilation and reinterpretation of all available historic data on the property and is proceeding to develop exploration targets for a summer field program.

Hammond Reef, located ~13 km north of the Sapawe West property, is in a structurally active portion of the Steep Rock Greenstone Belt. Similar to the structure associated with Hammond Reef, Sapawe West hosts a possible northeast trending splay from the Quetico Fault.

CEO Tafel commented on the Sapawe West property: "We are excited to acquire this strategically located property. The nearby past-producing Sapawe Gold mine, the visual results from Falcon Gold's drill program along the same geological corridor, and the lack of drilling on the property, makes for a compelling exploration target. We look forward to commencing initial field work."

This news came just a week after executing a binding option agreement for the right to acquire a 100% interest in the Gold Creek property. The block comprises three mining claims, is easily accessible by road, and covers ~1,010 hectares.

Historical activity at Gold Creek included:

From 1967 to 1973, prospecting, mechanical stripping/trenching and rock sampling of quartz vein occurrences in the district.
In 1983, geological mapping, magnetic and VLF-EM surveys further assessed the area.
In 1985, and from 1987 to 1989, Noranda Exploration conducted extensive work, [exploring] the area with an airborne magnetic and electromagnetic survey, ground magnetic and electromagnetic surveys, selective radiometric and gravity surveys, geochemical sampling, geological mapping/overburden stripping, and rock sampling.

Inco Gold conducted an exploration program in 198990, which consisted of grid line cutting, magnetic, VLF-EM and geological mapping surveys, trenching, rock sampling and two diamond drill holes. Two grab samples assayed 13.2 g/t and 64.2 g/t gold.

Significant gold mineralization has been traced along a 1.5 km strike length, with grab samples returning values up to 759 g/t = 24.4 ounces/tonne (from an OGS property visit), and diamond drill intersections in 2008 of up to 2.3 g/t over 8.3m.

CEO Tafel commented on the Gold Creek property: "This transaction allows us to continue to build our gold portfolio within the easily accessible, active and historic gold mining area of northwestern Ontario. Multiple visible gold occurrences reported by previous operators is very encouraging, and gives our technical crew a head start in planning initial exploration activities."

Gold Creek is characterized by geology similar to that documented in the Kirkland Lake area, where numerous gold showings occur in a broad range of lithologies. Visible gold sometimes occurs within the mineralized veins. Management has initiated the compilation and re-interpretation of all available historic geochemical and geophysical data at Gold Creek to develop exploration targets for summer field work.

Conclusion

Portofino is up +225% from its three-year low, but its market cap is only CA$3.2M. In addition to the four properties described above, the company has two lithium brine assets in Argentina that could be worth millions of dollars (Canadian) once energy metals regain popularity. If management could farm out one or more gold/lithium properties, it could reduce already low cash burn to virtually zero. Shareholders would have a free option on the remaining controlled properties.

In looking at peer Red Lake properties (and companies with nearby Atikokan area properties), the average gain from three-year lows is +1,640%. Even excluding GBR's staggering performance, the average gain is 2.5 times that of Portofino's. Perhaps not Great Bear, but others listed on the above chart could be interested in acquiring companies like Portofino to gain additional regional gold exposure.

Another thing to watch for is a potential takeout of Great Bear or Pure Gold Mining Inc. (PGM:TSX.V; PUR:LSE). That event would generate even more excitement in the region, shining a light on the dozen or fewer remaining juniors that have all, or substantially all, of their precious metals properties in northwestern Ontario. In British Columbia's Golden Triangle, there are three times as many names to choose from. Portofino Resources offers a compelling risk-reward proposition.

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.

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Epstein Research Disclosures/Disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Portofino Resources, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Portofino Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Portofino Resources was an advertiser on [ER] and Peter Epstein owned shares and warrants in the company.

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he's diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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Graphics provided by the author.




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