Activist short-seller Carson Block shot to fame when he wrote a damning report on the Chinese forest operator Sino-Forest. He founded Muddy Waters Research, the investment research firm, which took up the mantle of looking “through appearances to a Chinese company’s true worth.”
Contrary to his usual stance, Block took a rare bullish position on Canadian junior miner Snowline Gold (SNWGF). The renowned short-seller believes that the company has made a “first-of-its-kind” discovery in the Yukon territory of Canada.
The primary asset of Snowline is its flagship Rogue Project’s Valley deposit, which has an estimated 8 million ounces of gold, which is expected to attract attention from major gold producers with declining reserves. This also makes Snowline a solid candidate for a takeover within the next three years.
Let's take a look at Snowline Gold to see whether it might be a buy before that.
About Snowline Gold Stock
Snowline Gold is a Vancouver, British Columbia-based gold exploration and development company focused on discovering and advancing district-scale gold systems in the Selwyn Basin of Yukon Territory, Canada. The company operates multiple projects throughout this region, including its flagship Valley Deposit at the Rogue Project, which is characterized by an extensive, near-surface bulk-tonnage gold system.
With strategic operations centered in the Yukon and its headquarters in Vancouver, Snowline aims to unlock significant gold resources in one of North America's most promising and underexplored mining regions. The company has a market capitalization of $1.63 billion.
Snowline Gold’s stock has risen over the past year, driven by strong market momentum and its promising exploration and development projects in the Yukon Territory. Over the past 52 weeks, SNWGF stock has gained 217%, while it is up 82.2% over the past six months. Its shares reached a 52-week high of $12.36 today, Dec. 5, but are down 4% from that level as of this writing.
However, the stock is trading at a stretched valuation. Its price-to-book ratio of 17.37 is significantly higher than the industry average of 2.07.
Snowline Gold Is Raising Cash
In August, Snowline announced that it had entered into an agreement with Canaccord Genuity Corp. (CCORF) and BMO Capital Markets (BMO) (on behalf of a syndicate of underwriters) to offer on a “bought deal” basis 8,888,900 common shares.
The company expected to raise CAD 80 million ($57.07 million) as gross proceeds. In addition, the company granted the underwriters an option to acquire up to an additional 1,333,300 common shares for gross proceeds of about CAD 12 million ($8.56 million).
Just a few days after this announcement, the company announced that existing shareholder B2Gold (BTG) had agreed to maintain its 9.9% interest in the company via a concurrent non-brokered private placement. This was seen as a sign of B2Gold’s continued confidence in Snowline. The bought deal was closed in September, with total gross proceeds from the offering and the private placement being CAD 102 million ($72.76 million).
The funds raised are expected to be used to advance Snowline’s projects in the Yukon Territory. Scott Berdahl, CEO and Director of Snowline, believes the capital raise provides the company with multiple years of runway to advance the Valley Gold deposit on the Rogue Project.
Progress on Snowline’s Projects
In July, Snowline provided a field program update for the current year. In that, the company highlighted that its annual drill program was proceeding ahead of schedule, with five drills turning and over 11,000 meters completed as of that time in 28 holes on three targets. Snowline also reported that over 8,000 meters of this drilling has been completed around the Valley Gold deposit.
After a preliminary economic assessment (PEA) of the Valley, Snowline reported the project’s potential as robust and high-margin. Production is expected to stand at 544 koz/year for the first five years of the mine and 341 koz/year throughout the mine’s life, expected to be 20 years. It is said to have an initial capex of CAD 1.70 billion ($1.21 billion), with 3.5 years of build.
How Have Snowline’s Financials Held Up?
As of last year, Snowline did not report any revenue. Its annual operating expense, on the other hand, increased from CAD 31.19 million ($22.25 million) in 2023 to CAD 45.10 million ($32.17 million) in 2024. Loss per share also increased from CAD 0.17 to CAD 0.20 year-over-year (YoY).
Despite this, Snowline had ample cash on its balance sheet. Its year-end cash and cash equivalents were CAD 43.42 million ($30.97 million) in 2024, up from CAD 35.79 million ($25.53 million) in the previous year.
Key Takeaways
Snowline Gold is optimistic about the Valley, as it raises capital to continue exploring and developing. However, the company seems to have a long way to go before it starts generating financial gains. Therefore, it might be wise to monitor the company’s stock for now.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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