Omai Gold Mines (TSXV:OMG) is a Canada-based mineral exploration and development company engaged in the acquisition, exploration, evaluation, and development of mineral-rich properties.
Through its wholly-owned subsidiary Avalon Gold Exploration Inc., Omai Gold Mines holds a 100% interest in the Omai Prospecting License and a 100% interest in the adjoining Eastern Flats Mining Permits.
The company's work focuses on the exploration of the past producing Omai Gold Mine in the Potaro Mining District of Guyana, which is located some 165 km south-southwest of the country's capital city of Georgetown.
In addition to its African assets, Omai Gold Mines Corp. also has a 100% ownership interest in the Grenfell Gold property in Kirkland Lake, Ontario.
The Catalyst: New Drill Results in Guyana
On October 23, the company announced new, compelling drill results from the Omai gold project in Guyana. Assays were received for diamond drill hole 23ODD-071 in the West Wenot target, which encountered multiple gold zones associated with the main gold-bearing Wenot shear complex, including a 70.0-meter wide intercept with gold grades — 2.26 g/t/Au — well above the current Wenot resource estimate grade.
Thus far this year, sixteen holes have been completed this year, totaling 6,131 meters of drilling, and an updated Mineral Resource Estimate will commence as soon as assays from the remaining five holes are received.
Ben Pirie, an analyst with Atrium Research said,"These zones appear to have come together in this area, resulting in the highlight intercept reported today (2.26 g/t Au over 70.0m)."
Elaine Ellingham, Omai Gold Mines President & CEO, explains that "These strong results from hole 23ODD-071 further demonstrate the extent of wide mineralized zones with good gold grades along the western extension of the Wenot deposit."
"This area west of the past-producing Wenot pit," she continues, " is particularly attractive as a potential area for initial mining. We are pleased with the results to date from this recently completed drill campaign that exceeded our expectations. They are not only expected to have a positive impact on the upcoming update to the Mineral Resource Estimation but also have highlighted a high potential area for further expansion of the Wenot deposit."
Ben Pirie, an analyst with Atrium Research, highlighted the positive nature of the new drill results. "Hole 23ODD-071, unlike Hole 23ODD-065 reported on August 22, achieved its target depth and reached the targeted quartz-feldspar porphyry dike that intruded along the sheared contract between the volcanics and the sediments, the adjacent protomylonite unit, followed by the sediment-hosted zone," he explained in a research brief. " These zones appear to have come together in this area, resulting in the highlight intercept reported today (2.26 g/t Au over 70.0m)."
Why This Sector? Gold Maintains Gains, Seeks Breakout
Gold remains a most precious metal and a potent hedge against both inflation and market fluctuations. The past couple of years have seen the yellow metal consistently bumping against the powerful psychological barrier of US$2,000 per ounce — a record high — with many analysts convinced that once that level is cracked, the floodgates, so to speak, will open.
It's no surprise that CNBC is highly bullish on gold, reporting in January that experts expect record price highs this year.
"In general, we are looking for a price-friendly 2023 supported by recession and stock market valuation risks — an eventual peak in central bank rates combined with the prospect of a weaker dollar and inflation not returning to the expected sub-3% level by year-end — all adding support," Ole Hansen, head of commodity strategy at Saxo Bank, told CNBC reporter Elliot Smith.
"In addition, the de-dollarization seen by several central banks last year when a record amount of gold was bought look set to continue, thereby providing a soft floor under the market."
Why This Company? Positive Results, Canadian Holdings
In the press release announcing the latest drill results, Omai Gold Mines CEO Ellingham takes pains to point out that the project is home to more than just the one great assay result being presented as phenomenal.
"It is important to note that the Wenot shear corridor, which is up to 500m wide in the central portion, hosts 4 to 5 main gold-bearing zones, most of which can be identified along the full 2.5 km strike length of the Wenot deposit," she explains.
Additionally, shrewd U.S. investors will recall that the company also has considerable holdings in Canada, providing a nearly-onshore backup asset in a far more stable jurisdiction. As some people consider gold a "panic commodity," such relative proximity could be important over the longer term.
Why Now? Incipient Updated Mineral Resource Estimate
"With this phase of drilling completed, we await assay results for the remaining five holes, which are expected shortly," Ellingham continues. "Once received, we can proceed with an updated Mineral Resource Estimate that will form the basis of a Preliminary Economic Assessment ("PEA") to commence thereafter. Certain baseline studies that will be part of the PEA are complete, and others are underway."
Both of these regulatory filings — the MRE and PEA — can rapidly affect a mining company's stock price, and in general, it's best to have one's position established before they are published.
"We are maintaining our Buy rating and target price of CA$0.30/share on Omai Gold Mines," Pirie continues. "We view the recent pullback in OMG shares as a buying opportunity," Pirie said.
As Pirie pointed out in his Atrium Research assessment, "The drilling in 2023 at West Wenot has been an important activity in providing new insight into the geology and mineralization trends along the strike of the Wenot deposit. Specifically, mineralization in the western extensions appears to occur in wider zones with good gold grades that may be enhanced by an NE-trending cross structure. The company plans to explore these structures in 2024 as the widening zone widths and increasing grades make for a highly compelling target."
"We are maintaining our Buy rating and target price of CA$0.30/share on Omai Gold Mines," Pirie continues. "We view the recent pullback in OMG shares as a buying opportunity as the stock now trades at only CA$4/oz, and the company has many significant catalysts coming in the next six months. We derive the valuation for the Omai Gold Project at CA$99.5M or CA$0.26/share using a CA$27/oz in-the-ground multiple on its 3.7 Moz resource."
In point form, he summarizes why Atrium likes OMG:
- Past mining camp proven profitable — Historically mined 3.8 Moz of gold over a 13-year mine life
- 7 Moz of economic material — 1.5 g/t Open Pit and 4.0 g/t Underground
- Significant discount to peers — OMG trades at just $3/oz in-the-ground compared to its South American peer group that averages $16/oz
Ownership and Share Structure
Streetwise Ownership Overview*As of April 3, 2023, Omai Gold Mines Corp. had a market cap of CA$14.95 million, with 377.84 million shares issued and outstanding.
An additional 55.17 million warrants expiring between December 2023 and December 2024 and 35.45 million options expiring between September 2023 and September 2027 add up to a fully diluted base of 468.47 million shares.
The company has a cash balance of CA$1.7 million.
According to Reuters, 3.25% of the company is held by management and insiders.
President, CEO, and Director Elaine Ellingham has 0.93%, with 3.52 million shares, and Director Don Dudek has 0.71%, with 3.52 million
9.12% is owned by strategic investor Silvercorp Metals Inc.
12.07% is with institutional investors.
Mackenzie Financial Corp. has 5.50%, with 20.79 million shares. Ruffer LP has 3.71%, with 14 million, and Orrell Capital Management Inc. has 1.32%, with 5 million.
The rest is with retail.
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