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Discovery Metals Corp
Symbol DSV
Shares Issued 302,475,651
Close 2020-11-25 C$ 1.63
Recent Sedar Documents

Discovery Metals has cash of $84.21-million at Q3 end

2020-11-25 19:31 ET - News Release

Mr. Taj Singh reports

DISCOVERY REPORTS Q3 2020 FINANCIAL RESULTS & UPDATE

Discovery Metals Corp. has released its financial results for the three months ended Sept. 30, 2020, and has provided a summary of key events for the quarter and subsequent to quarter-end.

Discovery's flagship project is the 100-per-cent-owned Cordero project, located in Chihuahua state, Mexico. The company is aggressively advancing the project through a 55,000-metre phase 1 drill program focused on delineating a high-margin silver project with size and scaleability.

Corporate highlights

On Aug. 7, 2020, the company closed a $35-million private placement that included a $15-million investment from Eric Sprott. The placement consisted of 25.9 million units at a price of $1.35 per unit. Each unit was composed of one common share of Discovery and one-half of one common share purchase warrant, with each full warrant exercisable at $1.75 until Aug. 7, 2022 (refer to the press release dated Aug. 11, 2020, for further details).

As at Sept. 30, 2020, and following the completion of this financing, the company had a cash balance of $84-million to drive value through aggressive exploration, resource growth and future development.

Exploration highlights

The company has now completed 43,640 metres (111 holes) as part of its expanded 55,000-metre phase 1 drill program. There are currently four drill rigs operational on site. Additional drill rigs may be added when the company is confident that the health and safety risks related to COVID-19 can be managed effectively. Based on the current level of activity, the company anticipates completing the expanded phase 1 drill program by the end of first quarter 2021.

Drilling is focused on two key concepts: (1) targeting of bulk-tonnage mineralization within and to the east and northeast of both mineralized corridors; and (2) testing of the width, grade and continuity of extensive high-grade vein systems that transect the deposit.

Bulk-tonnage targets

At the company's bulk-tonnage targets, the recent focus has shifted to the South Corridor, an area of the deposit that has seen significantly less drilling than the North Corridor. As the drill results from the South Corridor indicate, the company has been successful in intercepting broad zones of mineralization in areas where there were significant gaps in previous drilling, which indicates potential for the conversion of waste to ore in this part of the deposit.

Drill highlights during third quarter 2020 and subsequent to quarter-end from the bulk-tonnage targets include:

  • 401.7 metres averaging 134 grams per tonne silver equivalent (1) in hole C20-343 from 66.9 m (49 g/t silver, 0.07 g/t gold, 1.0 per cent lead and 1.1 per cent zinc), including:
    • 30.3 m averaging 182 g/t AgEq (1) (57 g/t Ag, 0.10 g/t Au, 0.8 per cent Pb and 2.2 per cent Zn);
    • 112.3 m averaging 247 g/t AgEq (1) (96 g/t Ag, 0.08 g/t Au, 2.0 per cent Pb and 1.8 per cent Zn);
    • 44.2 m averaging 241 g/t AgEq (1) (84 g/t Ag, 0.10 g/t Au, 1.8 per cent Pb and 2.0 per cent Zn);
  • 139.1 m averaging 138 g/t AgEq (1) in hole C20-348 from 196.2 m (47 g/t Ag, 0.07 g/t Au, 0.6 per cent Pb and 1.6 per cent Zn), including:
    • 19.0 m averaging 357 g/t AgEq (1) (112 g/t Ag, 0.17 g/t Au, 1.8 per cent Pb and 4.0 per cent Zn);
  • 120.4 m averaging 114 g/t AgEq (1) in hole C20-333 from 206.8 m (30 g/t Ag, 0.11 g/t Au, 0.4 per cent Pb and 1.5 per cent Zn);
  • 26.6 m averaging 108 g/t AgEq (1) in hole C20-353 from 99.5 m (56 g/t Ag, 0.09 g/t Au, 0.4 per cent Pb and 0.7 per cent Zn) and 29.6 m averaging 119 g/t AgEq (1) from 278.1 m (52 g/t Ag, 0.07 g/t Au, 0.8 per cent Pb and 0.8 per cent Zn).

High-grade vein targets

The company continued to advance high-grade sulphide veins as a separate exploration target. At the Todos Santos vein trend, the company has now demonstrated a minimum strike extent of 1.5 kilometres based on historic underground workings and recent drilling while at the Parcionera vein trend, it has now confirmed a minimum strike extent of 350 m. These vein trends, along with other known vein trends at the project, are a new and exciting component of the story that the company looks forward to drill testing for the rest of the year and through 2021. Drill highlights during Q3 2020 and subsequent to quarter-end from the vein targets include:

  • Todos Santos vein:
    • 1.4 m averaging 1,907 g/t AgEq (1) in hole C20-342 from 147.0 m (700 g/t Ag, 0.74 g/t Au, 16.1 per cent Pb and 14.0 per cent Zn);
    • 1.9 m averaging 2,007 g/t AgEq (1) in hole C20-344 from 171.1 m (1,035 g/t Ag, 0.06 g/t Au, 20.0 per cent Pb and 6.4 per cent Zn);
    • 3.4 m averaging 1,150 g/t AgEq (1) in hole C20-349 from 145.6 m (412 g/t Ag, 0.42 g/t Au, 8.0 per cent Pb and 10.0 per cent Zn) within a 5.0-metre interval averaging 962 g/t AgEq (1) (331 g/t Ag, 0.35 g/t Au, 6.3 per cent Pb and 9.2 per cent Zn);
    • 2.0 m averaging 1,207 g/t AgEq (1) in hole C20-351 from 224.8 m (532 g/t Ag, 0.38 g/t Au, 8.8 per cent Pb and 8.1 per cent Zn);
  • Parcionera vein:
    • 1.5 m averaging 1,119 g/t AgEq (1) in hole C20-338 from 149.8 m (489 g/t Ag, 0.82 g/t Au, 2.9 per cent Pb and 11.1 per cent Zn);
    • 1.3 m averaging 1,073 g/t AgEq (1) in hole C20-340 from 69.6 m (587 g/t Ag, 0.67 g/t Au, 9.4 per cent Pb and 2.4 per cent Zn).

For all drill results, refer to press releases dated July 20, Aug. 19, Sept. 14, Oct. 14 and Nov. 12, 2020, for further details.

COVID-19 update

As with much of Mexico this past fall, Chihuahua state saw a significant increase in the community spread of COVID-19. During the month of October, the company isolated and quarantined several employees and contractors who had tested positive for COVID-19 during routine testing at site. These tests were followed up with subsequent PCR testing with anyone testing positive being isolated immediately. The company is continually enhancing its testing protocols, social distancing measures and travel restrictions, and saw a noticeable reduction in positive cases during the month of November.

The company continues to be pro-active regarding COVID-19, continually monitors employees and contractors, and remains committed to being engaged with local stakeholders during this uncertain period. The company will continue to closely monitor the directives of all levels of government in both Mexico and Canada, as well as the relevant health authorities.

Q3 2020 financial highlights

Selected financial data are summarized from the company's unaudited interim condensed consolidated financial statements and related notes thereto for the three months ended Sept. 30, 2020. A copy of the financial statements and MD&A is available on the company's website or on SEDAR.

                           NET LOSS

                                         Q3 2020            Q3 2019

Total                                ($5,127,665)       ($3,876,582)
Basic and diluted per share                (0.02)             (0.03)
Net (loss) and total
comprehensive (loss)                  (4,914,927)        (4,017,681)

Net loss for Q3 2020 includes non-cash share-based compensation 
expense of $232,528 (Q3 2019: $1,614,616) and a 100-per-cent 
provision for IVA receivable additions of $581,405 (Q3 2019: 
$1,000,710).

                            FINANCIAL HIGHLIGHTS
 
                                                 Sept. 30, 2020    Dec. 31, 2019

Cash, cash equivalents and
short-term investments                              $84,210,491      $23,950,737
Total assets                                        112,664,894       53,518,599
Total current liabilities                             1,825,541          716,596
Total liabilities                                     1,878,499          804,466
Total Shareholders' equity                          110,786,396       52,714,133

Restricted share unit and deferred share unit plans

Discovery also announces that its shareholders and its board of directors have approved the implementation of a restricted share unit plan and a deferred share unit plan.

The RSU plan and the DSU plan have been implemented to further align the interests of the company's senior management, consultants and directors with those of Discovery's shareholders. Both plans were approved by Discovery's board of directors on May 12, 2020, and by the company's shareholders at the company's annual general meeting on June 26, 2020. The company has received conditional approval of the TSX Venture Exchange for both the RSU plan and the DSU plan.

To date, no restricted share units or deferred share units have been granted by Discovery under the respective plan. Discovery's board of directors (or the compensation committee, as delegated by the board) will determine the grant of RSUs and DSUs to any eligible persons, and will determine the terms of any vesting conditions for RSUs or DSUs granted.

Participation in the RSU plan is restricted to Discovery's employees, officers and consultants. Upon vesting, RSUs entitle their holders to receive either the number of common shares of the company equal to the number of RSUs vested, or a cash payment equal to the value of such shares, or a combination of cash and shares, in each case at the company's option.

Participation in the DSU plan is restricted to Discovery's non-employee directors or other directors otherwise designated by the company's board of directors to be eligible for participation in the DSU plan. DSUs vest upon the date that their holder ceases to be a director of the company, and is not otherwise an employee or officer of the company. Upon vesting, each DSU entitles the holder to receive, on a deferred payment basis and subject to adjustment, either a share or a cash payment equal to the fair market value of a share, at the company's option.

Neither RSUs nor DSUs may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the vesting period. The maximum number of shares available for issuance upon the vesting of RSUs and DSUs, in the aggregate, is the lower of seven million shares or 5 per cent of the issued and outstanding shares at the time of grant. In combination with all security-based compensation arrangements of the company, including the company's stock option plan, the number of RSUs and DSUs issuable may not exceed 10 per cent of the issued and outstanding shares.

Further details regarding the RSU plan and the DSU plan are set out in the management information circular of the company dated May 12, 2020, available under Discovery's profile on SEDAR.

Looking ahead

Firstly, the company would like to take this opportunity to thank all of its local employees and contractors for their diligent efforts and hard work through the course of 2020 under what are unprecedented and challenging circumstances as a result of the COVID-19 pandemic. As the company heads into 2021, it is very excited for what it expects will be a transformative year for the company. Since acquiring Cordero in mid-2019, it has been aggressive, yet disciplined, in how it has deployed capital at the project. It is now coming to the tail end of its phase 1 drill program, which has yielded exceptional results on a consistent basis across a large number of different targets. This drill program, along with metallurgical testwork that recently commenced, will culminate in a brand new resource estimate and completely revamped preliminary economic assessment (PEA) in the second half of 2021. The company is confident that its original thesis at the time of acquisition, that Cordero is one of the rare deposits in the silver space that offers the combination of margin, size and scalability, will come to fruition through these major milestones.

In addition to this work, the company will continue to drive value and derisk the project across other areas. The systematic assessment of the extensive vein trends flanking the Cordero deposit will continue along with the advancement and initial drill testing of other large interpreted intrusive centres on the company's sizable land package. The company has recently commenced socio-economic and environmental baseline studies at Cordero. This work will be continuing through 2021 and will form a critical part of the feasibility-level studies the company envisages it will pursue following the completion of the PEA.

The company looks forward to providing further details on these work items, all of which are underpinned by an exceptionally strong balance sheet with a current cash balance of more than $80-million, through the rest of the year and on a continuing basis through 2021.

About Discovery Metals Corp.

Discovery's flagship project is the 100-per-cent-owned Cordero silver project in Chihuahua state, Mexico. Drill results to date show that Cordero is developing all the attributes of a Tier 1 project: grade, scale, significant organic growth opportunities and well located in one of Mexico's premier mining belts. The project is supported by an industry-leading balance sheet with over $80-million of cash allocated for aggressive exploration, resource expansion and future development.

Technical notes and references

(1) All results in this news release are rounded. Assays are uncut and undiluted. Widths are drilled widths, not true widths, as a full interpretation of the actual orientation of mineralization is not complete. Intervals were chosen based on a 20-gram-per-tonne-silver-equivalent cut-off with no more than 10 metres of dilution. AgEq calculations are used as the basis for total metal content calculations given Ag is the dominant metal constituent as a percentage of AgEq value in approximately 70 per cent of the company's mineralized intercepts. AgEq calculations for reported drill results are based on $16.50 (U.S.) per ounce silver, $1,350 (U.S.) per ounce gold, 85 U.S. cents per pound lead and $1 (U.S.) per pound zinc. The calculations assume 100-per-cent metallurgical recovery and are indicative of gross in situ metal value at the indicated metal prices. Refer to notes for metallurgical recoveries assumed in the 2018 PEA completed on Cordero.

The most recent technical report for the Cordero project is the 2018 preliminary economic assessment completed by M3 Engineering and Technology Corp., and includes the most recent resource estimate, completed by Independent Mining Consultants Inc. It is available on Discovery's website and on SEDAR under Levon Resources Ltd., a wholly owned subsidiary of Discovery. The PEA assumes metallurgical recoveries of 89 per cent for Ag, 84 per cent for Pb, 72 per cent for Zn and 40 per cent for Au.

Sample analysis and quality assurance/quality control program: True widths of reported drill intercepts have not been determined. Assays are uncut except where indicated. All core assays are from HQ drill core unless stated otherwise. Drill core is logged and sampled in a secure core storage facility located at the project site 40 kilometres north of the city of Parral. Core samples from the program are cut in half, using a diamond cutting saw, and are sent to ALS Geochemistry, Mexico, for preparation in Chihuahua City, Mexico, and subsequently, pulps are sent to ALS Vancouver, Canada, which is an accredited mineral analysis laboratory, for analysis. All samples are prepared using a method whereby the entire sample is crushed to 70 per cent passing minus two millimetres, and a split of 250 grams is taken and pulverized to better than 85 per cent passing 75 microns. Samples are analyzed for gold using standard fire assay AAS techniques (Au-AA24) from a 50-gram pulp. Overlimits are analyzed by fire assay and gravimetric finish. Samples are also analyzed using 33-element inductively coupled plasma method (ME-ICP61). Overlimit sample values are reassayed for: (1) values of zinc greater than 1 per cent; (2) values of lead greater than 1 per cent; and (3) values of silver greater than 100 g/t. Samples are reassayed using the ME-OG62 (high-grade material ICP-AES) analytical package. For values of silver greater than 1,500 g/t, samples are reassayed using the Ag-CON01 analytical method, a standard 30-gram fire assay with gravimetric finish. Certified standards and blanks are routinely inserted into all sample shipments to ensure integrity of the assay process. Selected samples are chosen for duplicate assay from the coarse reject and pulps of the original sample. No QA/QC issues were noted with the results reported herein.

Qualified person: Gernot Wober, PGeo, vice-president, exploration, Discovery Metals, is the company's designated qualified person for this news release within the meaning of National Instrument 43-101 (Standards of Disclosure for Mineral Projects), and has reviewed and validated that the information contained in this news release is accurate.

We seek Safe Harbor.

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