Probe Metals has potential to attract ‘acquisition interest’, BMO says

BMO Capital Markets has initiated coverage of Probe Metals (TSXV: PRB; US-OTC: PROBF) with an outperform rating and a $2.00 target price — double its current share price of 98¢.

The junior explorer’s wholly owned Val d’Or East project “is one of the higher quality Canadian gold exploration properties, with good prospectivity for resource growth and the potential to transition towards a development stage project,” BMO mining analyst Andre Mikitchook writes in an April 23 research report.

“Val d’Or East has the prospectivity, jurisdiction and management team to potentially attract acquisition interest, as it is advanced,” he continues. “The geological success and property consolidation is reminiscent of other successful names, including Osisko, Integra, Marathon, Atlantic Gold and Gold Standard Ventures.”

Probe released assays in March from its 24,000-metre winter drill program at the Val d’Or East property, where its geologists have focused on an area around the former Beliveau, Bussiere and Monique gold mines.

The work program discovered a new parallel gold trend on the Courvan property, a largely unexplored area 1.5 km west of the New Beliveau deposit. Results from the Courvan area drill program include drill hole 73 that cut 3.9 grams gold per tonne over 30 metres starting 144 metres downhole in the Southwest Zone. Drill hole 78 in Courvan’s Creek Zone returned a 4-metre intercept grading 16.7 grams gold from 113 metres downhole, including 57.8 grams over 1 metre.

Probe expects to fold the results of its winter drill program into an updated resource scheduled for release in the fall of 2019.

According to its February 2018 estimate, Val d’Or East contains indicated resources for open-pit and underground of 9.04 million tonnes grading 2.35 grams gold per tonne for 682,400 oz. gold and inferred of 9.30 million tonnes averaging 2.41 grams gold for 722,100 oz. gold.

“The current resource stands at 1.4 million oz., and the resource update in H2/19 will expand the resource and reflect the discovery of a second mineralized trend,” Mikitchook writes. “For our valuation, we assume a further 0.75 million oz. is defined to show visibility on 2-3+ million oz. with development potential.”

Mikitchook also points to Probe’s other advantages: a proven management team and a strong treasury.

“Probe has a track record of shareholder value creation, having attracted a takeover of Probe Mines in 2015,” he comments. “This management track record is reflected in their ability to attract financing, with our estimate of the treasury at $25 million, which is sufficient for two years of exploration.”

The Courvan property is largely unexplored, the company says. The land package includes the historic Bussiere mine, which produced 42,000 oz. gold at an average grade of 5.8 grams gold until 1942, when it was destroyed by forest fires.

Probe’s shares have traded in a 52-week range of 91¢ to $1.49. The company has 94 million common shares for a $92-million market capitalization.


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