The MAT Difference

This is how I currently view MAT and its price action.

When a company makes a discovery, its price jumps. Further positive drilling continues to increase the share price even though placements are usually made along the way.

Once the parameters of the discovery are outlined and the scoping study, PFS and DFS completed – a process that usually takes about 3 years and costs millions of (dilutive) dollars. The explorer then has to buy/build a plant and ramp up production – a process that costs tens (or even hundreds) of millions more and requires further debt and dilution. This process takes another (approximately) 2 years.

During this period, as it is usually pretty boring, the share price drifts lower.

Once the explorer transitions into a producer, the share price takes out the highs reached in its exploration phase as a new class of more conservative investor buys in.

Now let’s take a look at MAT and where it currently stands with the Fortitude Gold Project.  

The resource is defined and JORC compliant. The company doesn’t have to spend millions and a few years on the scoping study, PFS and DFS. Given that they are looking to toll treat the ore, there is no need to build a plant or finance it.

MAT has missed out on the first phase of the price appreciation of an explorer as it bought the resource (at about 2.8c in the dollar). It may get an uptick from further positive drill results that may hit at any time. However, even if MAT doesn’t find another ounce of gold:

• MAT won’t need to dilute or raise money to go into production
• It won’t need to ramp up the plant
• It will soon be a 40,000 oz per annum producer

Sure, we have missed out on the lift in share price due to not having discovered Fortitude; however, I have no doubt that once further numbers and plans are released re production, MAT will undergo a quick and savage re-rating.

The onus is on PP to properly relay and promote the game plan so that shareholders can fully benefit from this masterful acquisition.