Hawkish Fed and Omicron Vs Inflation December 6, 2021

Analysts' Ideas of the Week Hawkish Fed and Omicron Vs Inflation

December 6, 2021

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©2021 Fundamental Research Corp. “18+ Years of Bringing Undiscovered Investment Opportunities to the Forefront”

Click here to view FRC’s complete list of top picks

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

FRC Top Picks The following table shows last week’s top five performers among our Top Picks, including four junior resource companies (two copper, one gold, and one lithium), and one cannabis company. The top performer, Hot Chili Limited (ASX: HCH), was up 15.9%. We had initiated coverage last month. Our report can be viewed here.

Source: FRC

Companies in our Top Picks list were up 40.9% since we initiated coverage vs 0.8% for the benchmark (TSXV).


https://www.researchfrc.com/website/top-pick-page/

https://www.researchfrc.com/company/hot-chili-limited/

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Performance by Sector

Source: FRC

Our complete list of top picks (updated weekly) can be viewed here.

Weekly Mining Commentary

Global equity markets were down 0.3% last week (down 2.5% in the prior week) amid uncertainties from the emergence of Omicron and the U.S. Fed’s hawkish remarks last week.

Source: FRC / Various



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Although Omicron has now spread to 47 countries globally, preliminary indications suggest that this highly mutated variant is less dangerous than Delta. South Africa is experiencing a spike in daily new cases, but the number of daily deaths remain flat. Last week, five countries (previously five) out of the 15 hardest hit nations experienced higher daily new cases. However, only one country (unchanged) experienced a WoW increase in deaths. Globally, 55.04% have received at least one dose, up 0.8 ppt WoW vs 0.9 ppt the same time last week. 76.44% of Canadians are fully vaccinated (0.3 ppt vs 0.4 ppt) vs 68.21% in the U.K. (0.3 ppt vs 0.2 ppt), and 59.47% in the U.S. (1.6 ppt vs 0.1 ppt). African nations are severely under-vaccinated primarily due to a lack of vaccine supply; South Africa is at 24.90% (two doses), Nigeria (1.70%), Egypt (14.88%), and Ethiopia (1.23%).

Source: Our World in Data / FRC



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Metal prices retreated as well even though inventory levels of base metals declined both on the LME, and the SHFE (Shanghai).

Source: FRC / Various



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Valuations of gold producers were down 2% WoW; base metal producers were up 1%.



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Last week, both the U.S. and Canada reported positive jobs data. Unemployment levels are reaching pre-pandemic levels. Typically, strong economic data are catalysts for equity markets. However, in the current environment, strong economic data is negative for equity markets as central banks will be prompted to raise rates sooner.

U.S. Unemployment

Canada Unemployment



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Weak manufacturing data from China has confirmed that the country’ economic growth is slowing. In addition to Evergrande (HKG: 3333), another real estate developer is currently facing a liquidity crisis. A ripple effect will severely impact China’s growth.

China Manufacturing Index

Source: Trading Economics

Bottomline, if Omicron is not as troublesome as the Delta variant, we believe rate hikes will be quicker than our previous expectations, especially considering the strong jobs data and the Fed’s statements last week. That said, real rates are negative in the U.S. As the Fed is unlikely to make large rate changes, we believe real rates will be low through 2022, as inflation is likely to persist due to increased money supply and the temporary supply crisis. We are maintaining our price forecasts, and expect gold/silver to outperform base metals in the near-term. The recent fall in crypto prices will also prompt a segment of investors to move back to gold/silver.



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Updates from Resource Companies Under Coverage

Company Name:

Ticker Symbol

Current Share Price:

FRC Fair Value Estimate:

GCM Mining (formerly Gran Colombia Gold Corp)

TSX: GCM $5.30 $9.17

PR Title Announced updated resource estimate and PEA for its Toroparu project in Guyana

FRC Opinion Positive – The updated PEA showed improvements in almost every key metric. M&I resource increased from 7.4 Moz to 8.4 Moz; grades increased from 0.91 gpt to 1.4 gpt. Initial CAPEX relatively flat at US$355M (fully funded). OPEX increased from US$658 to US$742/oz (this was the only negative metric). As a result of the above, AT-NPV5% increased from US$760M to US$794M, and AT-IRR increased from 28% to 46%, based on US$1,500/oz gold.

Company Name:

Ticker Symbol



Lumina Gold Corp

TSXV:LUM $0.59 $1.35

PR Title Announces signing of an exploration investment protection agreement with the government of Ecuador

FRC Opinion Positive – Reflects a strong vote of confidence and support from the government. The company is planning infill and step-out drilling for a pre-feasibility (expected in early 2023) study. We continue to believe that Cangrejos is an excellent acquisition target.



https://www.researchfrc.com/website/company/colombia/




https://www.researchfrc.com/company/lum/

https://www.researchfrc.com/company/lum/

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Company Name:

Ticker Symbol



Tartisan Nickel Corp.

CSE: TN $0.34 $0.77

PR Title Drills deepest hole to date at the Kenbridge nickel project and intersects 3.18% Ni, 0.19% Cu over 1.05 metres

FRC Opinion Positive - These grades are significantly higher than the average grade of 0.6% Ni in the 2020 resource estimate. We believe the current program has confirmed mineralization at depth. A preliminary economic assessment is expected shortly, which we believe will be the next major catalyst for TN’s shares.

Company Name:

Ticker Symbol



East Africa Metals Inc.

TSXV: EAM $0.19 $0.68

PR Title Provides Ethiopian update

FRC Opinion Negative – Exploration continues to be on hold due to the political unrest in Ethiopia. In addition, Ethiopia’s Ministry of Mines and Petroleum (Ministry) has granted certain exploration licenses held by EAM to a third party. EAM will be taking legal action against the Ministry. On a positive note, these licenses are not related to any of EAM’s existing mining licenses or priority exploration targets. Therefore, we are not making any changes to our fair value estimate.



https://www.researchfrc.com/company/tartisan-nickel-corporation/

https://www.researchfrc.com/company/tartisan-nickel-corporation/

https://www.researchfrc.com/company/eam/

https://www.researchfrc.com/company/eam/

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Company Name:

Ticker Symbol



Monarch Mining Corporation

TSX: GBAR $0.71 $1.44

PR Title Intersects 73.5 g/t Au over 1.35 m, expanding the McKenzie Break deposit to the southwest

FRC Opinion Positive – Continues to return high-grade values; expanded mineralized area by 200 meters to the southwest, and 100 meters to the east and northwest, implying resource expansion potential.

Company Name:

Ticker Symbol



E3 Metals Corp TSXV: ETMC $2.21 $4.20

PR Title Lab pilot prototype initial tests deliver 97% lithium recovery

FRC Opinion Positive – Highly encouraging results; tests are expected to be completed this month, with full results available in early 2022. The company expects to build a pilot plant in 2022.

Company Name:

Ticker Symbol



Gold Springs Resource Corp

TSX: GRC $0.24 $0.30

PR Title Discovers a new gold system on the new “Tremor” target

FRC Opinion Positive – 1 gpt gold equivalent over a long interval of 163 m is highly encouraging, especially considering that the results came from a new discovery. Results of another 15 holes are pending. We believe the current program has not only expanded ounces, but also grades.



https://www.researchfrc.com/company/mqr/

https://www.researchfrc.com/company/mqr/

https://www.researchfrc.com/company/c3-metals-inc/

https://www.researchfrc.com/company/gold-springs-resource-corp/

https://www.researchfrc.com/company/gold-springs-resource-corp/

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Company Name:

Ticker Symbol



Hannan Metals Ltd.

TSXV: HAN $0.23 $0.57

PR Title 1.0 metre at 2.1% copper, 29 g/t silver within 8 km by 1 km area at San Martin project, Peru

FRC Opinion Positive – These are very high copper grades for a copper-silver project. Although most of the project area remains largely untested, there are similarities with Poland’s large and high-grade Kupferschiefer copper-silver mine.

Company Name:

Ticker Symbol



Ion Energy Ltd. TSXV: ION $0.48 $0.91

PR Title Identifies new lithium discovery: White Wolf prospect, with highly-encouraging results up to 1,502 ppm

FRC Opinion Positive – Encouraging results from two holes: one returned up to 1,502 ppm and the other returned up to 860 ppm – we note that grades of over 750 ppm are considered attractive for brine lithium deposits. Results of only 12.5% of drill holes received to date.

Company Name:

Ticker Symbol



Kingman Minerals Ltd.

TSXV: KGS $0.05 $0.28

PR Title Private placement

FRC Opinion Neutral – Pursuing a $2.1M equity financing; upon receipt of results of prior drilling and completing this financing, the company will resume its Phase II drill program.



https://www.researchfrc.com/company/han/

https://www.researchfrc.com/company/han/

https://www.researchfrc.com/company/ion-energy-ltd/

https://www.researchfrc.com/company/kingman-minerals-ltd/

https://www.researchfrc.com/company/kingman-minerals-ltd/

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Company Name:

Ticker Symbol



Enertopia Corporation

OTCQB: ENRT

US$0.05 US$0.16

PR Title Provides solar booster and rainmaker update

FRC Opinion Neutral – Procurement issues have delayed testing programs. Management expects to commence testing by the year-end. Note that, for conservatism, our fair value estimate does not include any value on the company’s proprietary technologies.

Company Name:

Ticker Symbol



Kootenay Silver Inc.

TSXV: KTN $0.19 $0.60

PR Title Drill results from Copalito silver-gold project - highlights include 276 gpt silver eq. over 23 meters and 642 gpt silver eq. over 5 meters

FRC Opinion Positive – Results to date indicate potential for a sizable resource. Drilling indicates potential for high grades in at least four veins.

Company Name:

Ticker Symbol



Goldplay Mining TSXV: AUC $0.14 $0.38

PR Title Announces encouraging results of up to 5.90 gpt gold and 155 gpt silver from the first exploration program completed on the Scottie West project

FRC Opinion Positive – Sampling returned multiple high-grade values. The project is close to Pretium Resources’ (TSX: PVG) Brucejack mine. Although too early to comment on the project’s prospects, we believe these high-grade values, and close proximity to past producing mines, warrant a detailed exploration program.



https://www.researchfrc.com/company/enertopia-corporation/

https://www.researchfrc.com/company/enertopia-corporation/

https://www.researchfrc.com/website/company/ktn/

https://www.researchfrc.com/website/company/ktn/

https://www.researchfrc.com/company/goldplay-mining-inc/

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Financials, Technology, Energy, and Special Situations

Company Name:

Ticker Symbol



TAAT Global Alternatives Inc.

CSE: TAAT $3.09 $5.92

PR Title Reports record domestic performance in November 2021 with multiple pallets sold each week / Grows northeastern U.S. footprint with 350 additional stores in Virginia

FRC Opinion Positive – We are expecting record revenue in Q4. Our revenue estimate for FY2021 (year end Oct 31) is $4.3M (unchanged).

Company Name:

Ticker Symbol



Trillion Energy International Inc.

CSE: TCF $0.20 $0.48

PR Title Announces resource and reserve update

FRC Opinion Positive – Although reserves remain unchanged YoY, their NPV10% increased approximately 20% due to higher gas prices. Q3 revenue was up 78% YoY due to higher commodity prices and production. We will be publishing an update shortly.

Weekly Cryptocurrency Commentary Last week, we had warned of a potential correction in crypto prices due to weaker crypto trading volume and uncertainties in the equity markets. Note that our studies indicate a positive low-moderate correlation between Bitcoin and trading volume/the S&P 500. The global MCAP of cryptos were down 9.9% WoW to US$2.4T. Global crypto trading volume was up 24% WoW, but considering the S&P 500 could face downward pressure due to uncertainties related to Omicron, we are expecting crypto prices to remain flat this week,



https://www.researchfrc.com/company/trillion-energy-international-inc/



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Source: Coinmarketcap

Performance of Select Cryptos Prices of mainstream/popular cryptos were down 15% on average last week.

Source: FRC / Yahoo Finance

Companies operating in the crypto space are trading at an average EV/R of 12.9x (previously 13.0x).



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Source: S&P Capital IQ/FRC

Source: S&P Capital IQ/FRC

Key sector development listed below (positive):

➢ El Salvador’s President announced over the weekend that his country has

“bought the dip.” Sources indicate that the country’s entry in Bitcoin was at approximately US$48k.



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Weekly Cannabis Commentary

Cannabis Industry Performance

Source: FRC

Last week, both U.S. and Canadian cannabis stocks fell, although Canadian companies had a steeper fall. Key sector developments below (all positive): ➢ According to BDSA, cannabis sales were up MoM in Arizona, California, Colorado,

Oregon, Illinois, Maryland, and Massachusetts. Nevada experienced a 0.9% decline, as the state gets most of its cannabis sales from tourists. Tourism has not yet fully recovered due to travel restrictions.

➢ Treasury Secretary, Janet Yellen, expressed her support for the SAFE Banking Act last week. The banking act would allow state-legal marijuana companies to access federal banking services.

Valuation As of December 6, 2021, the Canadian big four LPs were trading at a 31% premium (down from 45% in the previous week) over their U.S. peers.



https://nypost.com/2021/12/01/irs-could-collect-taxes-from-pot-firms-with-big-bank-use-janet-yellen/

https://nypost.com/2021/12/01/irs-could-collect-taxes-from-pot-firms-with-big-bank-use-janet-yellen/

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Source: S&P Capital IQ, FRC

Average EV/R

Source: S&P Capital IQ, FRC



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Canadian Retail Cannabis Pricing

Source: Online Provincial Cannabis Stores, FRC

The average retail price per gram fell $0.01, to $10.98, last week.

Canadian Retail Dried Cannabis Flower Pricing

Source: Online Provincial Cannabis Stores, FRC

Canadian Retail Cannabis Stores As of December 6, 2021, there are 2,821 retail cannabis stores in Canada, a WoW increase of 11 stores, including three in Alberta, four in Quebec, and four in B.C. For two weeks in a row, store-count growth has been significantly below the historic weekly average. If growth remains low for another few weeks, we can confirm that the



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sector is slowing down for real. Note that we believe there is room for 1,500+ stores in the country.

Nationwide Store Count

Source: Provincial Websites, FRC



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Updates from Cannabis Companies Under Coverage Company Name:

Ticker Symbol



Pure Extracts Technologies Corp.

CSE: PULL $0.11 $0.90

PR Title Ships repeat order of one-gram vapes

FRC Opinion Positive – Pleased to see repeat orders for products, a sign of brand awareness among retailers and customers.

Weekly Psychedelic Commentary

Psychedelic Industry Performance

Source: TMX Money, FRC

Today, the Drug Enforcement Administration (DEA) and the National Institute on Drug Abuse (NIDA) came out supporting a White House proposal to streamline the research process of Schedule 1 drugs like psilocybin, MDMA, and other psychedelics. The



https://www.researchfrc.com/company/pure-extracts-technologies-corp/



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agencies testified at a House Energy and Commerce subcommittee hearing saying “it is critical that the scientific and medical community study Schedule 1 substances, as some may turn out to have therapeutic value.”

Reddit Discussed Stocks Our pick last week, Gores Guggenheim Inc. (NASDAQ: GGPI), dropped below our 10% threshold on Tuesday. The Electric Vehicle sector remains the most actively discussed among retail investors, followed by crypto, betting, and cannabis. This week, we are observing strong retail sentiment around NVIDIA Corp. (NASDAQ: NVDA). We suggest exiting if the stock rises or drops by at least 10%.

Key parameters used may include – a) total number of mentions, b) percentage change in the number of mentions, c) stock sentiment, and d) market capitalization.

Historic Weekly Returns (Mar 1, 2021 – Present) 33 out of 40 picks have generated positive returns

Average return = 18.67%

➢ Mar 1 – Nov 22: Returns were calculated based on the assumption that picks were sold at

their peak the same week. ➢ Nov 29 – present: Returns were calculated based on the exit guidance provided by us prior

to each recommendation. ➢ Past performance is not indicative of future performance.

Source: FRC



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Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst(s) about any companies and industries mentioned. 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. Certain companies mentioned in pages 2, and 9-14, and 21 are covered by FRC under an issuer paid model. FRC or companies with related management, and Analysts, may hold shares in some companies mentioned in this report including Barrick, AUC, and TCF. 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. 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, industry, 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. 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.



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Hawkish Fed and Omicron Vs Inflation December 6, 2021