Mr. Derek Macpherson reports
NORVISTA CAPITAL ANNOUNCES NEW CORE INVESTMENT: GREAT BEAR ROYALTIES
Norvista Capital Corp. has made a new core investment in its portfolio, Great Bear Royalties Corp. Over the last three months, the company has accumulated a position of 79,467 shares (as at Aug. 31, 2021) at an average cost of $3.99 per share, representing approximately 3.5 per cent of Norvista's recently announced Aug. 31, 2021, net asset value (NAV) per share of 12.6 cents.
Samuel Pelaez, the company's president, chief executive officer, chief information officer and a director, stated, "We think Great Bear Royalties is worth approximately $14 per share based on our research of the deposit, comparable transactions and possible mine plans for the Dixie project." Mr. Pelaez continued: "The 2-per-cent NSR [net smelter return] it holds on the Dixie project, in our view, is a Tier 1 royalty, which is very scarce, and we believe the market is underestimating the scale and potential upside of the anticipated maiden resource at Dixie. We expect that the coming news flow over the medium term should act as the catalyst to rerate this stock."
Norvista believes that shares of Great Bear Royalities could be worth $14 per share assuming a 10-million-ounce-gold resource at Dixie and $1,800 (U.S.) per ounce gold. Although Norvista does not expect the maiden resource to surpass 10 million ounces, it expects the ultimate minable resource to exceed that number. Its estimates assume average annual production of 400,000 gold ounces per year starting in 2025, however, with a significant skew toward higher production in the early years exceeding 800,000 ounces per year.
Norvista's investment thesis on Great Bear Royalties
Royalties on Tier 1 assets are scarce -- suggest Great Bear Royalties should attract multiple suitors: In particular, royalties on Tier 1 assets in mining-friendly jurisdictions are even harder to find. There is no comparable listing comprising solely of a Tier 1 royalty in Canada or similarly good jurisdiction. Norvista's view is that this type of royalty has the potential to be a cornerstone asset of a royalty company and, as such, believes there is likely to be more potential buyers for Great Bear Royalties than for the Dixie project itself. Not only will the potential buyers of Great Bear Resources want to consolidate this asset with the royalty, but the mid-tier and major royalty companies are also likely to covet it.
Discounted valuation unjustified -- plus plenty of upside: By applying consensus estimates on the Dixie project to Great Bear Royalties, it suggests that it trades at a discount to royalty peers. The company believes this type of royalty should trade at a premium to peers due to its Tier 1 status, as noted above. Additionally, it anticipates the maiden resource is only going to cover 4.2 kilometres (km) of strike within an 18-kilometre trend and only to a depth of 300 metres (m). It is clear that there is potential upside beyond the maiden resource due out late this year, given gold intercepts at much greater depths and along strike have been reported.
Expected catalysts could come sooner allowing the market to fairly value Great Bear Royalties: The company believes the key value driver in the near term is going to be the Dixie resource update, followed by a preliminary economic assessment (PEA). In its view, this should allow the market to rerate Great Bear Royalties closer to where Norvista feels it should trade. While management is guiding for this resource update to occur in Q1 2022, with drilling of 440 holes completed and the reporting of 404 of those holes to date, the potential exits for this news to come much sooner than the market anticipates. Additionally, the potential exists for Great Bear Resources to be acquired in the short to medium term as large gold producers look to replenish development pipelines. Putting the Dixie project in the hands of a major should make the royalty more valuable as it derisks the financing and construction phases. The company expects this company to react favourably to the coming catalysts, in particular due to its very tight share structure and insider ownership.
The shares of Great Bear Royalties were purchased through the facilities of the TSX Venture. Norvista is arm's length to Great Bear Royalties. Norvista's assessment of Great Bear Royalties is based on information in the public domain and its own internal analysis. The holdings of securities of Great Bear Royalties by Norvista are for investment purposes only and Norvista could increase or decrease its investment in Great Bear Royalties at any time, without notice, or continue to maintain its current position, depending on market conditions or any other relevant factor. Norvista is not affiliated with Great Bear Royalties.
About Norvista Capital Corp.
Norvista is a resource-focused merchant bank and investment company with a portfolio of publicly listed securities issued by companies engaged in precious and base metal exploration and development. The company's core investments include Minera Alamos Inc., Rockcliff Metals Corp., Great Bear Royalties and Nevada Zinc Corp.
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