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Canarc Resource Corp.: THE INVESTMENT CASE

Canarc Resource Corp: An old story worth revisiting

The company has transformed itself over the last three years through three major transactions
Canarc Resource Corp: An old story worth revisiting
INVESTMENT OVERVIEW: CCM The Big Picture
Canarc aims to kick off a first drill campaign at Fondaway in September this year

For the investor, precious metals explorer Canarc Resource Corp (TSX:CCM) is an "old story that's worth revisiting because it has completely changed".

So says chief executive Catalin Chiloflischi, who says the company has transformed itself over the last three years, through three major transactions and he is keen to do more deals. The company is now in the strongest financial position it has ever been and has been steadily growing.

The name's been around 25 years, but due to various factors, including the gold price drop, the founder Bradford Cooke concentrating on developing the successful Endeavour Silver (in which Canarc was a founding shareholder), the firm was effectively shelved for years.

Back with a vengeance..

But now it's back with a vengeance, with the near term focus being on developing the exciting Fondaway Canyon gold project in mining friendly Nevada, USA.

It secured the property when it sealed a deal in March this year to buy American Innovative Minerals (AIM), which gave it Fondaway, plus ten other exploration properties in the US for a very reasonable US$2mln.

Fondaway already has around 1mln ounces of gold resources (409,000 at 6.18 g/t indicated and 600.000 ounces inferred) so as Chiloflischi points out, from a shareholder point of view, that's about US$2 an ounce of gold, representing a deal of outstanding value.

The plan now is to bring the project further up the value curve, and a recent re-examination of historical data has resulted  in new model, which shows possible ore bodies could lie in an area 3.5km by 800 metres (m) width.

Canarc aims to kick off a first drill campaign worth around CS$1.0mln (it sits on cash of around CS$7.5mln, with no debt) in September this year to refine specific targets  or discoveries and go deeper up to 1,200ft, where drilling has so far only gone to around 400ft depth.

High grade for Nevada..

The project is exciting as it is high grade for Nevada, and there is potential for open pit areas,  so the aim is to create more buzz around the project, either to bring in a partner or to raise money for a bigger campaign.

"If you look at the history of the project, majors have had their hands on it and the goal is here to reignite interest and move the project towards production," said Chiloflischi.

And the mining industry executive is no stranger to this kind of value creation.

A deal he struck in late 2015 resulted in around a CS$12mln cash gain to Canarc after subsidiary Oro Silver, which held the El Compas gold-silver mine in Mexico, was sold to Endeavour Silver (NYSE:EXK).

He hopes to create the same kind of value here for shareholders, though he explains Canarc is not necessarily looking to sell Fondaway project -  the firm does have the expertise to bring it into production itself.

Possible further M&A opportunities..

The firm wants to grow organically, but its strong cash position also means it can look at possible further M&A in the space.

The lower metals prices mean there are some pretty good looking projects around, but Chiloflischi said any buy would have to meet rigorous criteria.

"Can a project make money at current process? " he says, is a way he decides what opportunities may have intrinsic value.

As well as Fondaway, the group has two projects in British Columbia - one of which (New Polaris) has been its main project for two decades.

It is a past producing mine with a resource of high grade 1.1 million ounces, and the firm is  now considering the best way forward with it. One of the challenges is the type of geology at the project and a new processing technology may be the answer.

Chiloflischi says the main focus in BC will be the Windfall Halls grassroots exploration site, which the firm discovered around two years ago.

It sits next to a 10mln ounce gold deposit, where major Newgold is now conducting a feasibility study to build a 500,000 oz per year open pit.

Canarc has had some exploration success previously at Windfall hills and is now seeking to conduct a Phase 1 drill program to test targets.

So there is plenty of newsflow to come from this junior explorer with a market cap of just $20mln, and as Chiloflischi says, could be well worth looking at again.

Canarc shares are at C$0.08.

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Canarc Resource Corp. Timeline

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