Renforth Resources Inc. (CSE: RFR / OTC: RFHRF) BUY · properties in Quebec and one in Ontario. Its...

July 14, 2020

Renforth Resources Inc. (CSE: RFR / OTC: RFHRF) Two Open-Pittable Gold Resources Next to Majors in Quebec - Initiating Coverage

BUY Current Price: C$0.055 Fair Value: C$0.12 Risk: 5

Sector / Industry: Junior Resource Click here for more research on the company and to share your views

YTD 12M

Ret. 57% 10%

CSE 7% -28%

52 Week Range C$0.025 - C$0.06

Shares O/S 213,836,539

Market Cap. C$11.76 million

Yield (forward) N/A

P/E (forward) N/A

P/B 1.4x

*See last page for important disclosures, rating and risk definitions. All figures in C$ unless otherwise specified.

Highlights ➢ Renforth Resources Inc. (“company”, “RFR”) holds five gold exploration properties

in Quebec and one in Ontario. Its flagship assets are two brownfield properties (New Alger and Parbec) in the prolific Cadillac Break in Quebec. They are close to well-known mines and deposits, with abundant toll milling opportunities in the region.

➢ Parbec is on strike and immediately northwest of Agnico Eagle (NYSE: AEM) and Yamana’s (TSX: YRI) Canadian Malartic open-pit gold mine; the largest operating gold mine in Canada. New Alger is immediately south of Agnico’s LaRonde underground mine.

➢ The two projects have a combined resource of 167 Koz indicated and 365 Koz inferred, most of which are near-surface open-pittable deposits. The average grade is 1.7 gpt gold, which we believe is attractive for a potential open-pit operation.

➢ Although the tonnage and contained ounces are not large enough yet to attract senior players, we believe the resource expansion potential of both New Alger and Parbec offer RFR the potential to position itself as an acquisition candidate in the future. Unlike most exploration stage projects, RFR also has an option to advance the projects to production if they are able to lock in attractive toll milling options.

➢ RFR’s shares are trading at just $32 per oz versus the comparables average of $70 per oz.

➢ One of the other four projects in RFR’s portfolio is optioned to O3 Mining Inc. (TSXV: OIII; a spin-off of Osisko Mining / TSX: OSK).

Risks ➢ The value of the company is highly dependent on gold prices. ➢ Exploration risks. ➢ Access to capital and potential share dilution. ➢ RFR needs to expand its resource estimates to enhance its marketability as an

acquisition target. ➢ None of the company’s projects have a completed economic study.

Sid Rajeev, B.Tech, CFA, MBA Head of Research

Price Performance (1-year)

Company Data

Equity Research Page 2 of 16

Five gold projects in Quebec and one in

Ontario

Quebec was ranked third, and Ontario

was ranked second in Canada in 2019

Overview Renforth Resources Inc. is an Ontario based gold exploration company with five properties in Quebec and one in Ontario. Its flagship assets are two brownfield properties - the New Alger property in the Cadillac gold camp, and the Parbec property in the Malartic gold camp – with a combined resource of 167 Koz indicated and 365 Koz inferred, most of which are near-surface open-pittable deposits. They are close to well-known mines and deposits, with abundant toll milling opportunities in the region (see image below). One of the other four assets is optioned to O3 Mining Inc.

Property Portfolio

Source: Company

Quebec has consistently ranked in the top three mining provinces in Canada in the past five years by the Fraser Institute.

Parbec Gold Property Ownership In 2015, RFR entered into an option agreement to acquire the Parbec property from a prospect generator, Globex Mining (TSX: GMX). RFR subsequently acquired the property by making $550k in cash payments, issuing 12 million shares, and completing exploration over four years. GMX retains a gross metal royalty of 3%. Location The 229 ha property, comprising 11 contiguous claims, is located in the Malartic township, and 30 km west of Val-d’Or in northwestern Québec. It is immediately northwest of, and on strike to, Agnico and Yamana’s Canadian Malartic open-pit gold mine – the largest operating gold mine in Canada, having produced 662 Koz in 2019, at a production cost of US$628 per oz. Canadian Malartic has a 4.8 Moz

Immediately northwest of the

largest operating Canadian gold mine

Good access

Extensively drilled

reserve at 1.11 gpt gold. This compares to New Alger’s grade of 1.66 gpt (open-pit). Parbec is on the prolific Larder Lake - Cadillac Deformation Zone, also known as the Cadillac Break. Between the Canadian Malartic gold mine. and Parbec, is the historic East Amphi mine, last mined in 2007. In addition, Agnico’s high grade Lapa mine (underground) is 10 km from Parbec; this mine produced for 10 years from 2009 to 2019. We believe the proximity to well known mines, and the availability of toll milling opportunities in the region, are among the project’s major benefits.

Property Location

Source: Company

Access to the Parbec property is good as the Trans-Canada Highway passes three km to the east. In addition, the CN Railway line runs through the northern part. Lakes, rivers, creeks and ponds in the region offer abundant water supply for a potential mining operation. The terrain is relatively flat. Geology, Mineralization and Historic Work The gold deposits on the Cadillac Break are categorized as lode-type, orogenic, mesothermal deposits. Gold is typically associated with sulphides, and mineralization is within quartz-carbonate veins and alteration halos around veins and shears. The property has a long history of exploration activities dating back to 1924. A total of 217 holes have been drilled. Historic drilling has returned high grade values over long intercepts. Some of the key results are shown below.

Attractive grades for a potential open-pit

operation

Source: Company

In May 2020, an updated resource estimate was completed, which returned 105 Koz (1.78 gpt) indicated and 177 Koz (1.77 gpt) inferred. The resource was based on 185 diamond drill holes and channels totalling 34,167 m. Drilling results prior to 2007 were not included in resource modelling.

2020 Resource Estimate - Parbec

• US$1,450 per oz gold and 95% recovery

Source: Company

Exploration target of 383 Koz to 520 Koz

at depth

We believe a major highlight of the resource estimate is that approximately 101 Koz indicated and 100 Koz inferred are open-pittable, with an attractive average grade of approximately 1.66 gpt.

Source: Company

The main mineralized vein systems on Parbec, used in the current resource estimate, were based on a strike length of 1,400 m, to a depth of 400 m. The resource study also estimated an additional exploration potential of 5.2 to 5.8 Mt at 2.3 to 2.8 gpt, for 383 Koz to 520 Koz of contained gold, primarily located at the depth of the current resource. In addition to the resource expansion potential at depth, the company recently discovered gold on surface in an area 200 m north of the current resource, named the Island Trench zone (see image below for location). Mineralization has been identified over a strike of 500 m, to a depth of 700 m. Another area of interest is the Diorite Splay zone (shown in the image below), located south of the Cadillac Break.

Source: Company

Immediately south of Agnico’s

underground mine

Metallurgical tests No metallurgical testing has been conducted. However, recovery rates are expected to be 90%+, as indicated by the recent resource study. Management’s next step is to conduct additional work on the Diorite Splay zone.

New Alger Gold Property Ownership In 2009, the company entered into an agreement to acquire the New Alger property from Cadillac Ventures Inc (TSXV: CDC). Subsequently, the property was acquired by making cash payments totalling $335k, issuing 13.50 million shares, and conducting exploration. The property is subject to a 3% NSR. Location The 5,202ha property, comprising 98 contiguous claims and one mining concession, is also located, like Parbec, on the Cadillac Break. It is in the Cadillac township in northwestern Québec, and 55 km west of Val-d’Or. The historic Thompson-Cadillac mine is located on the property. It is also immediately south of Agnico’s LaRonde underground mine, which has produced over 6 Moz of gold in the past 30 years. This mine produced 343 Koz gold in 2019, at a production cost of US$627 per oz. The remaining gold reserve is estimated to be 2.9 Moz at a high grade of 6.02 gpt. Another key property in the area is Radisson Mining Resources’ (TSXV: RDS) historic O’Brien mine, which is located immediately east and along strike of New Alger. Sources indicate that O’Brien ceased operations in 1957, after producing 587 Koz of gold at an average grade of 15.25 gpt.

New Alger Gold Property

Source: Company

Good access

Attractive open-pit

grades

Access to New Alger is good as Highway 117 runs through the project, close to the main known mineralized zones. The CN Railway line runs through the northern edge of the property. There are several power lines passing through the property, and the lakes, rives, creeks, and ponds in the region offer abundant water supply for a future operation. Geology, Mineralization and Historic Work Mining and exploration activities on the property date back to 1924. The historic Thompson-Cadillac mine had produced 22 Koz gold (4.2 gpt) from 1936 to 1939, with minor production in the 1920s and 1940s. Gold occurs primarily as native gold within quartz veins, surrounded by a halo of generally lower grade mineralization. The main mineralized vein systems, including those of the historic mine, have been traced over a strike length of 1,400 m, to a depth of 350 m. In addition, a recently discovered ‘Discovery Vein’ is located approximately 250 m south of the main zone. Over 250 holes have been drilled on the property, with the most recent being a four hole / 2,052 m winter 2020 program. In May 2020, the company completed a resource estimate on the property, which returned 63 Koz (1.88 gpt) indicated and 188 Koz (1.81 gpt) inferred. Of this, 62 Koz indicated and 123 Koz inferred are open-pittable, with an average resource of 1.73 gpt, which we consider to be attractive for a potential open-pit operation. The resource was based on 269 diamond drill holes and channels totalling 20,537 m. Drilling results prior to 2007 were not included in resource modelling.

2020 Resource Estimate – New Alger

• US$1,450/oz Au price and 95% recovery

Exploration target of 264 Koz to 355 Koz

at depth

Source: Company

The above resource estimate includes mineralization on the main mineralized zone in the historic mine area, as well the Discovery veins. Some of the key historical drill results are shown below. A key highlight of the Discovery veins is that approximately 275 m have been stripped, exposing gold on surface.

Source: Company

The resource study also indicated an additional exploration target of 3.3 to 3.7 Mt, at 2.5 gpt to 3 gpt, for 264 Koz to 355 Koz contained gold, located at depth of the current resource estimate. Recent deep drilling returned 1.46 gpt over 6.3 m from 490.7 m and 497 m within mine vein #3, the deepest intersection on the property to date. This hole, along with two others in the last program, were drilled after the cut-off date for the resource calculation.

Source: Company

Bulk sampling a recently discovered area approximately 250 m south of the

main zone

In June 2020, the company commenced an exploration program targeting the Discovery veins, including prospecting, sampling, geophysics, a mini-bulk sampling program for metallurgical studies, and infill/step-out drilling.

Target Areas

Source: Company

Metallurgy In May 2020, the company announced that it has retained SGS Lakefield for initial metallurgical tests using gravity separation and cyanide leaching. The historic mining operation in the 1930s had a recovery rate of 75%. Approximately 60% of the contained gold was free milling, implying easier and cheaper extraction. Management believes the recovery rate for a future operation can be higher (90+%) because of improvements in technology, and more importantly, the historic mine was not efficiently run, ownership had changed several times, and the processing plant was modified multiple times. We feel management’s estimate is realistic.

Other Properties The following table summarizes RFR’s other projects. One of them is optioned to O3 Mining (TSXV: OIII). Management has no immediate plans to joint venture the projects.

Management and directors own 8% of

the outstanding shares

Source: FRC / Company

Management and Board of Directors Management and board hold 8% of the outstanding shares.

Share Ownership

Source: Company

Brief biographies of the management team and board members, as provided by the company, follow:

Nicole Brewster - President, CEO and Director Ms. Brewster has a successful private corporation background in the mineral exploration industry, both as a property owner, an exploration contractor and a management consultant. In addition to certain technical abilities within this field, Ms. Brewster is a hands on business person comfortable operating and managing private companies within regulatory framework and requirements within the exploration industry, both private and public, including environmental and labour legislation, QA/QC and best practices for exploration, in conjunction with and to the benefit of affected local communities, in both Canada and other jurisdictions around the world. Ms. Brewster is the managing partner, in charge of the business affairs, of two exploration contracting companies, and maintains a role in other private companies. Ms. Brewster, has been a founder of, and initially involved in the operations of, private companies which have gone on to be public through take-over or merger transactions.

Kyle Appleby - CFO Since attaining his CA designation in 2001, Kyle has worked both the audit and the issuer side of the business, concentrating on providing, contract CFO services to a number of reporting issuers and private companies, active in the resource, agritech, technology and cannabis spaces with experience in take-overs and amalgamations. Wally Rudensky - Independent Director Renforth’s financial affairs are supervised by Wally Rudensky who, in addition to being an independent director for Renforth and the Chair of the Audit Committee, is also a Partner at MNP LLP who has been a chartered accountant since 1982. Mr. Rudensky specializes is in the areas of corporate finance and taxation in his practice and has been CFO and director for a number of public and private corporations in the energy sector. A graduate of Ryerson University, Mr. Rudensky has lectured on taxation to the Canadian institute of Chartered Accountants as well as various universities, business seminars and conferences. David Wahl - P.Eng, P.Geo, ICD.D – Independent Director David Wahl‘s career in the mineral exploration sector has spanned more than 45 years, 6 continents and 70 countries, assessing, exploring and advising on properties for government agencies, public and private mining and exploration companies, financial institutions and private individuals. Mr. Wahl, having graduated from the Colorado School of Mines as an “Engineer of Mines” is qualified as a Professional Engineer of Ontario, a Professional Geoscientist of Ontario and with the Institute of Corporate directors. Judi Wood - Independent Director Judi Wood brings to Renforth more than 35 years of banking experience in the United Kingdom and Canada, largely in the areas of merchant banking and corporate finance, attaining the role of Senior Vice President Treasury, Chairperson of the Asset/Liability Committee and a member of the Management Committee at Barclay’s Bank of Canada, prior to its’ merger with HSBC. Upon retirement from HSBC Ms. Wood held the role of Managing Director, Corporate and Institutional Banking. Ms. Wood is a founding and independent director of Renforth. John S. Webster - Independent Director John Webster (Camborne School of Mines) has an extensive background in mining and ore processing, having built and operated 15 world class mine developments in Australia, USA, Russia and FSU with emphasis on strategies, resourcing, consulting and operational management with BHP, Vostok Mining, Trafigura and Alexander Mining Plc. Kurt Breede, P.Eng. - Independent Director Kurt is senior geological engineer and marketing executive with over 20 years experience in the mineral resource industry. He is former Vice President of geological and mining consultancy Watts, Griffis and McOuat, and prior to that was

Independent board

in place

Senior Business Analyst with Gemcom Software (now Dassault Systèmes). He currently works as an independent Mineral Resource and Corporate Development Consultant, serving as Vice Chair of the CIM Toronto Branch Executive, and as a member of the CSA’s Mining Technical Advisory and Monitoring Committee. Our net rating on RFR’s management team is 3.2 out of 5.0 (see below).

Source: FRC

The company’s board has six members, of which, five are independent. The following table shows our analysis on the strength of RFR’s board.

Strength of Board

Source: FRC

Financials At the end of Q1-2020 (ended March 2020), the company had cash and working capital of $0.25 million and $0.20 million, respectively. We estimate the company had a burn rate (G&A) of $35k per month in 2019, which we believe is in the lower end of companies of similar size. The following table summarizes the company’s liquidity position:

Source: FRC / Company

Subsequent to the quarter-end, RFR completed a $238k equity financing. RFR currently has over $0.50 million in cash, which will take them through the summer exploration program and operating funds for the year. Stock Options and Warrants - RFR currently has 13.45 million options (weighted average exercise price of $0.06 per share) and 53.65 million warrants (weighted average exercise price of $0.10 per share) outstanding. Currently, 9.80 million options ($0.49 million) are ‘in-the-money’.

Valuation and Rating We are valuing RFR based on the Enterprise Value / Resource ratio of gold-focused juniors. As shown below, RFR’s shares are trading at approximately $32 per oz versus the comparables average of $70 per oz (100% of M&I + 50% of inferred).

Trading at just $32 per oz

Positive outlook on near-term gold

prices

Source: FRC

Overall, we believe the company has delineated two promising open-pitttable resource estimates in an active mining region. The tonnage and contained ounces are not large enough yet to attract senior players, but we belive the resource expansion potential of both New Alger and Parbec offer RFR the potential to position itself as an acquisition candidate in the future. Unlike most exploration stage preojcts, RFR also has an option to advance the projects to production if they are able to lock in attractive toll milling options.

We are initiating coverage on RFR with a BUY rating and a fair value estimate of $0.12 per share. We believe the market conditions are conducive for gold companies as we have a positive short-term outlook on gold prices. As shown below, four out of the six factors in our model support gold prices.

Risks We believe the company is exposed to the following key risks (not exhaustive):

➢ The value of the company is highly dependent on gold prices. ➢ Exploration risks. ➢ Access to capital and potential share dilution. ➢ RFR needs to expand its resource estimates to enhance its marketability as

an acquisition target. ➢ None of the company’s projects have a completed economic study.

As with most junior resource companies in exploration, we rate RFR’s shares a risk of 5 (Highly Speculative).

Fundamental Research Corp. Equity Rating Scale: Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues and may rely on external funding. These stocks are considered highly speculative. Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. Fundamental Research Corp. “FRC” and the Analyst do not own shares of the subject company, do not make a market or offer shares for sale of the subject company, and do not have any investment banking business with the subject company. Fees were paid by RFR to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, RFR has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The distribution of FRC’s ratings are as follows: BUY (67%), HOLD (7%), SELL / SUSPEND (26%). To subscribe for real-time access to research, visit https://www.researchfrc.com/website/subscribe/ for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward-looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

Renforth Resources Inc. (CSE: RFR / OTC: RFHRF) BUY · properties in Quebec and one in Ontario. Its...

Documents

· Web viewRFR# TRE RFR UCP TMS 2015 . ... responses, and documentation regarding this RFR must be in English, ... (when viewed using MS Word)

Rfr Az Fun Run Flyer3 8x11 SCHOOL

Request for Resume (RFR) CATS+ Master Contract All Master ...doit.maryland.gov/contracts/Documents/catsPlus...Request for Resume (RFR) CATS+ Master Contract ... Patterson Avenue in

rfr g5 placement test - mrrierdan.weebly.com

Se queensland residential communities rfr h2 2012

Metro Office RFR Second Half 2015

RfR Sale Lookbook_Jan 2014

Canberra residential communities rfr h2 2012

Dept Rfr Template

PRF69 SWC RFR - Engineering Center · 2020-05-08 · PRF69 SWC RFR Facilities Engineering 1The Procurement Team for the development of PRF69 RFR include Subject Matter experts from

Altivar 28 Telemecanique 2000 - gongkongdownload.gongkong.com/file/2007/8/5/SchneiderATV28... · Altivar 28 Telemecanique 2000. ... Motor frequency (code rFr) &' * 20 mA rFr Motor

Cell Phone Radiofrequency Radiation (RFR) Project

General Information RFR Number: N00B8400061 (Reference BPO

CBD Office RFR - Second Half 2013 Low Res

Rfr|s Corl r - Coal India

Retail RFR First Half 2015

RFR-MasterContract–060B2490023doit.maryland.gov/contracts/Documents/cats_torfp_status/RFR... · Request for Resume (RFR) CATS+ Master Contract –060B2490023-2016 All Master Contract

RFR Document

Request for Resume (RFR) for Project Manager (Senior ...doit.maryland.gov/contracts/Documents/catsPlus_torfp_status/E20P... · Request for Resume (RFR) for Project Manager ... quality

RFR: Child Care Resource and Referral Services RFR Number – 2013 EEC CCRRS 003 August 2012