Dakota Gold Corp.'s "significant resource increase" for its Richmond Hill project in the historic Homestake District of South Dakota has led BMO Capital Markets to raise its price target for the stock from US$6 to US$7.50 per share, which would mean a more than 130% increase from the company's share price at time oof writing.
The resource increase was highlighted by 6.3 million ounces (Moz) of oxide+transition resource in all categories defining a meaningful deposit not only in the US but also globally, noted Analyst Andrew Mikitchook, who rated the stock Outperform in an updated research note on February 10.
"The new resource defines Richmond Hill oxides to be directly comparable in scale to the Wharf mine where (more than) 4 Moz have been mined and 0.76 Moz Au (gold) remain in reserves, the analyst wrote. "The larger resource inventory supports more than doubling our placeholder development plan from 85,000 ounces per year to about 200,000 ounces per year, which in turn drives our target increase."
Dakota's announced updated global resource (oxide and sulfide) for Richmond Hill included 4.64 Moz of Measured and Indicated and 5.06 Moz of Inferred.
"The market will be more focused on the heap leachable M&I resource of 3.65 Moz at 0.46 g/t (grams per tonne Au) and Inferred resource of 2.61 Moz at 0.35 g/t," Mikitchook wrote. "This is materially higher than the April 2024 total resource of 1.33 Moz at 0.80 g/t of Indicated and 1.13 Moz at 0.61 g/t of Inferred as a result of infill and extension drilling (about 46,000 meters) and using a lower cutoff."
'Clear Opportunities'
At the cutoff grade presented in the press release, the updated resource came in above
the range of BMO's expectations, the analyst said.
"We see clear opportunities to optimize the development at higher cutoff grades than the default selected for the resource," Mikitchook said.
The data show high-grade areas at surface at Twin Tunnels and Chism Gulch, which are likely to be scheduled early in the mine plan, he said.
"In addition, the strip ratio at Richmond Hill is low overall and could be near zero in the early years," he wrote.
A 'Globally Meaningful' Deposit
The updated resource will inform the Initial Assessment with Cash Flow (similar to a PEA)
planned for release mid-2025 for an open pit heap leach development, BMO noted.
"At 6.3 Moz of oxide resource in all categories, Richmond Hill is a meaningful deposit not only in the U.S. but also globally and is entirely on private ground, which should simplify permitting and development," Mikitchook said. "Another 3.4 Moz of sulfides adds future potential after the oxides are developed."
The updated resource justifies a larger development "than our previous assumptions," which is why the firm increased its target price per share, he said.
