South Dakota Gold Co. Reports Positive Drill Results

Source: Peter Bell 06/21/2024

Dakota Gold Corp. (DC:NYSE American) recently reported positive drill results at its Maitland Gold Project, according to a Canaccord Genuity research note.

Canaccord Genuity Corp. analyst Peter Bell, in a research report published on June 20, 2024, provided an update on Dakota Gold Corp. (DC:NYSE American) following the company’s announcement of drill results from eight additional holes targeting the JB Gold Zone at its Maitland Gold Project in South Dakota. The analyst maintained a Speculative Buy rating and a target price of US$5.75 on the stock.

“This morning, Dakota announced the results of eight additional drill holes targeting the JB Gold Zone at its Maitland Gold Project in South Dakota,” Bell noted. “Drilling in the JB Gold Zone is testing for Homestake Mine-Style gold mineralization and is one of three ongoing programs being advanced by the Company – the other two being Tertiary epithermal gold mineralization in the Unionville Zone at Maitland and the infill and step-out drilling at the Richmond Hill Gold Project to update to the S-K 1300 resource estimate.”

Highlighted drill results include:
• Hole MA24C-050: 9.46 grams per tonne gold (g/t Au) over 6.4m from 506.2m
• Hole MA23C-024: 3.84 g/t Au over 5.5m from 956.2m, including 4.70 g/t Au over 2.0m from 906.1m
• Hole MA23C-031: 4.45 g/t Au over 3.6m from 361.7m, including 5.25 g/t Au over 2.50m from 362.7m

Bell views these results as neutral, stating, “Dakota continues to extend and better understand the high-grade mineralization at Maitland. Having identified three distinct ledges within the JB Zone the company continues to drill within tighter spacings in order to further delineate the mineralization within these ledges.”

The analyst believes that the results are in line with expectations for the JB Zone, demonstrating “the prospectivity for a substantial Homestake-style deposit and underscore the continuity of mineralization at JB.” Bell added, “In our view, the continued advancement of Homestake-style targets adds excitement and optionality to the Richmond Hill deposit located to the west.”

Dakota Gold’s strategic focus on advancing three concurrent drilling programs demonstrates the company’s commitment to exploring and developing its South Dakota gold assets. The ongoing drill results are identified as a potential near-term catalyst for the stock.

Canaccord Genuity’s valuation methodology for Dakota Gold is based on a multiple of the company’s forward curve-derived operating net asset value (NAV). “Our target is predicated on a 1.0x multiple applied to our forward curve-derived operating NAV less net debt and other corporate adjustments,” Bell explained.

Dakota Gold was given a Speculative Buy rating and a target price of US$5.75, representing a significant potential upside from the price at the time of the report of US$2.30.

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Disclosures for Canaccord Genuity Corp., Dakota Gold Corp., June 20, 2024

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Commodity price risk: As a precious metals exploration and development company, Dakota’s future revenue is dependent on the price of gold. Mining risk: Dakota faces the typical risks inherent to mining companies relating to operating and capital costs, availability of capital, permitting requirements and timelines, technical and operating parameters, reserve and resource models, social license and community relations, taxation and royalty regimes, and regulatory and political risks. Development risk: Dakota Gold has various properties in South Dakota, USA, and is engaging in exploration activities to possibly advance them to a producing mine in the future. The company faces risks associated with developing the project, including capital and operating cost risk, financing, project permitting and timelines, and technical risks to achieve the planned operating rates. Exploration risk: Our model assumes continued exploration success in the Homestake District, as it assumes completed drill results will be brought into a NI 43-101 / S-K 1300 compliant mineral resource/reserve estimate and eventually converted into a producing mine. If the company does not find additional success with the drill bit, there is material downside to our base case valuation. Permitting risk: The properties in the Homestake District are in a very early stage, and, as such, has yet to engage in permitting outside of those required for exploration. As such, the company may not be able to proceed with the project as it is currently envisaged if the required permits to mine on the property are not received. Financing risk: As a pre-cash-flow development company, Dakota is reliant on the capital markets to remain a going concern. At present, the company has a cash position of US$35M (as of June 30, 2022), which positions it well in the near term to continue to advance its portfolio of exploration-stage projects. We note that there is no guarantee that Dakota will be able to access capital markets in the future, as the result of potential changes in market sentiment/pricing and/or concerns involving project feasibility. As such, there is no guarantee that the company will be able to secure the required funds to advance its projects in the Homestake District, including but not limited to debt/equity financing and/or a strategic investment. Delineation of gold resources: We currently model a conceptual resource, which is not considered economic as defined by 43-101 / S-K 1300. Conversion of drill hole intercepts into mineral resources and subsequently to reserves is largely a product of drill density as well as the applied economic parameters, which include commodity price and cut-off grades applied to the resource. Should the company not be able to find the conceptual resource we project, or not be able to convert the resources to reserves, this would decrease our life of mine and therefore economics for the project, all else equal. With such a preliminary conceptual mine plan, we caution investors that risk is high. Dakota has yet to achieve even a maiden resource for this project and has only performed a limited amount of drilling. Based on our industry experience coupled with historic drill results, and the drilling performed to date, we have utilized a volume-weighted average mass-based tabulation of available data (grade multiplied by width). This is a crude resource calculation method and presents considerable risk to our base case. We do not have access to all drill hole intercepts and do not employ 3D modelling software such as DataMine or LeapFrog.

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