Release Date: 25 June 2020

GT Gold Corp.
Saddle Up

Ticker: GTT.V • GTT is a Canadian gold exploration company

with an inaugural resource estimate for its
Enterprise Value: C$210 million Saddle North project scheduled to be
released on July 6th.
Recent Price: C$1.78 • Recently, GTT attracted interest from
Price Target: N/A Newmont, which acquired 14.9% of the
Company at substantial market premium
over two rounds of financing.
Opinion: Strong Buy • A preliminary analysis of the two high-grade
portions of the Saddle North deposit leads
us to believe that C$3 billion of net cash
flow can be generated with a fast, low-risk
CapEx payback on a mine build of only
C$700 million.

You should have expected us

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 Disclaimer
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Don’t be stupid and invest in the public markets unless you are prepared to do your own homework and due diligence.

1
 Executive Summary
[Note: This is our attempt at a preliminary, high-level overview of GTT’s Saddle North deposit for what we
expect to be exceptional results when the Company releases its resource estimate early next month.
Consider this a teaser, with a fully detailed piece to follow. Furthermore, while we feel confident that we
have enough data points to consider GTT a Strong Buy, we do not have enough data to pinpoint an exact
price target. We also don’t want to do that obnoxious thing that analysts do where they make up a price
target, and reverse-engineer a model to fit the target. Anyway, let’s get right into it…]

GT Gold Corp. (“GTT”) is a Canadian gold exploration company with an Enterprise Value of C$210 million,
with an inaugural resource estimate for its Saddle North project in B.C., Canada scheduled to be released
on July 6th.1

Since the discovery of Saddle North 19 months ago, GTT has attracted interest from Newmont – the
world’s largest gold mining company – which acquired 14.9% of the Company at substantial market
premium over two rounds of financing. What makes Newmont’s interest in GTT particularly notable is
that over the last two years, Newmont has publicly been in the process of divesting its portfolio of smaller
mining companies, having shed nearly C$1.5 billion of its stakes in a host of junior miners.2

We believe GTT’s Saddle North porphyry deposit has a unique combination of low capex requirements, a
fast payback period, with easy access to a paved highway and powerline, all in a stable jurisdiction. It is
ideally located, just 14km from Newcrest’s Red Chris mine. For the uninitiated, last year, the Red Chris
copper-gold mine was majority purchased by Newcrest at a C$1.6 billion valuation.

A preliminary analysis of the two high-grade portions of the Saddle North deposit leads us to believe that
C$3 billion of net cash flow can be generated with a fast, low-risk CapEx payback on a mine build of only
C$700 million. As a reference point, next door to GTT, the Red Chris mine completed construction for
approximately C$700 million, with 11 million tonnes of annual open-pit processing capacity.3

Looking at the deposit, we believe the rock near the surface can be open-pit mined, which is considerably
less capital intensive, and less technically challenging than an underground mine. With a critical mass of
lower-grade rock near the surface for a ‘starter pit’, we believe GTT can recoup its initial capital. This
makes an underground mine far more attractive to finance than many of the larger deposits that won’t
show a return on invested capital until five to ten years after the first dirt is removed from the ground.
Subsequently, the bulk of the C$3 billion in net cash flow we believe this mine can achieve is through
construction of an underground mine to reach the higher-grade rock.

Although we feel the market has overlooked the opportunity here, we believe that with the mineral
resource estimate scheduled to be released soon, the market will be compelled to take notice of GTT. The
deposit under Saddle North does not appear to have eluded the largest gold company by market cap.
We doubt it will continue to elude the market once the mineral resource and PEA are released.

1
https://www.gtgoldcorp.ca/_resources/news/nr_2020_06_24.pdf
2
https://finance.yahoo.com/news/newmont-goldcorp-divest-stake-kcgm-141202143.html
3
https://www.imperialmetals.com/our-operations/red-chris-mine/overview

2
 Introduction
GT Gold Corp. (“GTT”) is a Canadian gold exploration company with an Enterprise Value of C$210 million,
trading on the TSX Venture exchange under the symbol GTT.V. The Company is scheduled to release its
inaugural resource estimate for its Saddle North project in B.C., Canada on July 6th.4

Based on analysis of existing drill data released by the Company, we believe the deposit contains upwards
of 500,000 tonnes of copper. What’s more, GTT’s project is predominately a gold deposit, and we expect
the copper resource to be accompanied by as much as 3 million ounces of gold.5

Despite the preponderance of mining companies, greenfield mine discoveries of substantial scale –
particularly in stable jurisdictions – are extremely rare. In a June 2020 report titled “Major Copper Deposit
Dismal Discovery Rate Continues”, S&P Global Market Intelligence deemed the period from 2009 to 2019
“a dismal decade” for copper discoveries and noted that:

“Canada, and the U.S. have languished over the past decade, with no major copper
discoveries at all. This trend does not look to be changing anytime soon, as there have
been only 10 copper deposits with initial resources in North America over the past five
years, none containing over 100,000 tonnes of copper.”

In this context, we believe GTT’s current Enterprise Value of C$210 million vastly understates the potential
of its Saddle North deposit. For comparison, the below comp table shows all the new discoveries over the
last ten years in base metals or precious metals that we are aware of, with comparable cash flow profiles
and capex requirements, based on our estimates and assumptions:

Comp Table

Source: company filings, press releases, our analysis and estimates. Currency converted to C$ based on announcement date of
acquisition. All asset transactions are converted to 100% project ownership.

4
https://www.gtgoldcorp.ca/_resources/news/nr_2020_06_24.pdf
5
Cu = 30Mt at 0.34% from open pit and 90Mt at 0.5% from underground, as per assumptions on pg. 8 and 9.
Au = 30Mt at 0.38g/t ÷ 31.1 from open pit and 90Mt at 0.9g/t ÷ 31.1, as per assumptions on pg. 8 and 9.

3
Newmont’s Investment

Perhaps nothing illustrates the potential at GTT better than the fact that Newmont – the world’s largest
gold mining company – has not once, but twice taken an equity stake in GTT at a market premium in the
recent past:

On 9 May 2019, GTT announced a C$17.6 million investment by Newmont, for a 9.9% stake in the
Company. This investment represented a per-share value of C$1.006, a 16% premium to the previous day’s
closing price of C$0.86 per share. As part of the investment, Newmont was given the right by GTT to
increase its ownership up to 14.9% of the outstanding shares.7

Then, on 27 November 2019, GTT announced a second investment by Newmont for C$8.3 million, to bring
its interest up to the full 14.9% cap allowed by the Company. The investment was at a per-share price of
C$1.20, representing an even higher 33% premium to the previous closing price of C$0.90.8

What makes Newmont’s interest in GTT particularly notable is that over the last two years, Newmont has
actually been in the process of divesting its portfolio of smaller mining companies. Since publicly
announcing its divestment plans in 20199, Newmont has shed nearly C$1.5 billion of its stakes in a host of
junior miners.10

To summarize, the world’s largest gold mining company recently made two investments in GTT, at
increasing premiums to market, all while they were divesting their portfolio of smaller mining companies.

Clearly, Newmont sees something here.

6
C$1.53 per share price adjusted for flow-through credit.
7
https://www.gtgoldcorp.ca/_resources/news/nr_2019_05_08.pdf
8
https://www.gtgoldcorp.ca/_resources/news/nr_2019_11_27.pdf
9
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/newmont-getting-lots-
of-calls-about-merger-related-asset-sale-49337002
10
https://finance.yahoo.com/news/newmont-goldcorp-divest-stake-kcgm-141202143.html

4
 What Makes GTT Unique?
There are countless obscure, small mining and exploration companies littered on stock exchanges all over
the world. So, what makes GTT unique?

Consider that no initial resources containing more than 100,000 tonnes of copper have been discovered
in North America in the past decade, as stated by S&P.11 Yet, we believe GTT’s mineral resource estimate
will show the Saddle North deposit contains in excess of 500,000 tonnes of copper, alongside 3 million
ounces of gold, when it is released in less than two weeks.12 Equally as important, we believe GTT has a
unique combination of low capex requirements, a fast payback period, with easy access to a paved
highway and powerline, all in a stable jurisdiction.

In GTT’s case, its discovery is in close proximately to highway 37 and powerlines snaking through the vast
rugged terrain, just 14km from Newcrest’s operational Red Chris copper-gold mine. For the uninitiated,
last year, the Red Chris mine was majority purchased by Newcrest at a C$1.6 billion valuation:

GTT Flagship asset Highway 37 Powerline Red Chris mine

Source: https://www.gtgoldcorp.ca/_resources/presentations/Tatogga-location-map.pdf

11
https://www.spglobal.com/marketintelligence/en/news-insights/research/major-copper-deposit-dismal-
discovery-rate-continues
12
Please refer to footnote 5.

5
Project Overview

Next, we need to look at the economics of Saddle North. Even if the combination of location and scale
come together, any potential deposit likely needs to have enough attractive economics to push the project
over the edge from marginal to obvious. In particular, we are looking for fast payback of initial capital,
with additional years of positive net cash flow. We believe GTT offers that.

Below is the deposit rendering. Looking at this, it’s apparent that there is a lot more rock value sitting
underground in the deeper, high-grade shell (red and purple blobs), than near surface. The gold and
copper are hosted in a large, continuous, steeply-angled tube-shaped blob. In the center is the highest-
grade tube, which is wrapped in concentric layers of lower grade rock:

Saddle North Deposit

Source: https://vrify.com/explore/companies/gt-gold-corp

A preliminary analysis of the two high-grade portions of the deposit leads us to believe that C$3 billion of
net cash flow can be generated with a fast, low-risk CapEx payback on a mine build of only
C$700 million. The resource estimate scheduled to be released on July 6th should provide more visibility
around any potential upside.

So, how do we get there?

We believe the high-grade, underground rock will produce the bulk of the C$3 billion in net cash flow.
However, underground mines require a lot more upfront infrastructure, and it can take a long time to get
that initial investment back (payback period), particularly if you have to dig deep. This is where the
importance of the lower-grade rock near the surface comes into play. The rock near the surface can be
open-pit mined, which is considerably less capital intensive, and is less technically challenging than an
underground mine.

With a critical mass of lower-grade rock near the surface for a ‘starter pit’, we believe GTT can recoup its
initial capital. This makes an underground mine far more attractive to finance than many of the larger
deposits that won’t show a return on invested capital until five to ten years after the first dirt is removed

6
from the ground. This is analogous to a real estate developer that sells pre-construction units to help
finance the building.

As a result, our analysis begins by looking at the near-surface area for an obvious starter pit payback zone.

The Starter Pit

In this section, we are only performing a back-of-the-envelope check to see if there is enough obvious
value in an open-pit mine to achieve payback on initial CapEx. We are not really concerned with any
additional profitability that would stem from an optimized pit design, or maximizing incremental cash flow
from the surrounding rock. Once GTT releases its resource estimate, we plan to subsequently publish a
more detailed, deep-dive opinion piece. Until then, let’s use broad strokes.

First, we need to know how much the initial CapEx will be and how much rock we can process, and sell
each year. Luckily, as a reference point, one of the most recent mine constructions on a similar asset took
place next door to GTT, with the Red Chris mine completing construction for approximately C$700 million,
with 11 million tonnes of annual open pit processing capacity.13

So, let’s assume GTT also spends upwards of C$700 million to build the open-pit milling operation. How
will the Company get that money back?

For our analysis, we only look at the high-grade blob near the surface (circled in orange), and ignore the
additional economic benefits of the surrounding medium- and low-grade rock that we would expect to be
mined alongside it:

Saddle North Deposit

Source: https://vrify.com/explore/companies/gt-gold-corp

13
https://www.imperialmetals.com/our-operations/red-chris-mine/overview

7
Here we assume 30 million tonnes of rock can be mined, grading at 0.38g/t of gold, and 0.34% copper.
Based on current spot metal prices and net of estimated recoveries, we assume average recoverable rock
value of C$40/t.14

Great – so, we assume that every tonne of rock that GTT pulls out of the open pit will be worth C$40. But
how much will that rock cost to pull out, process, and move to market?

Based on our industry review, we estimate all-in costs of C$17 per tonne processed, broken down as
follows:

• C$7.50/t to extract one tonne of ore milled. This represents C$2.50/t for the ore itself, and an
addition C$5.00/t to pull out two tonnes of waste rock with the ore (a 2:1 strip ratio).
• C$5.50/t in processing and milling costs.
• C$2.00/t in general and administrative costs.
• C$2.00/t in offsite costs.

With an average recoverable rock value of C$40/t, less C$17/t of costs, we are left with a net profit margin
of approximately C$23/t. At 30 million tonnes of rock, this amounts to C$690 million of cash flow without
even considering the additional economics of the medium grade rock surrounding the high-grade shell.
At a mill feed rate of 11 million tonnes per year, we will have paid back our initial C$700 million mine build
in just three years. That sounds pretty sweet.

But so far, we’ve only touched on the small blob near the surface (in orange). Now let’s look at the much
bigger, higher-grade blob deeper down (in green):

14
Au component = (0.38g grade ÷ 31.1conv x 1740 Au spot price x 1.36 C$fx x 0.595 recovery rate) = C$17.20/t
Cu component = (0.34% grade x 2204conv x 2.65 Cu spot price x 1.36 C$fx x 0.82 recovery rate) = C$22.15/t
Ag component = estimate C$1.00/t of silver byproduct.
Taken together, 17.20 + 22.15 + 1.00 = C$40/t of rock value.

8
The Underground Mine

Similar to our open-pit analysis, here we are looking for obvious economics only, and not trying to envision
a full and optimal plan for the underground mine that incorporates the additional economics from all the
surrounding rock area. We just want to gain confidence that the deposit is likely to provide a substantial
scale, low-risk economic proposition. Again, once GTT releases its resource estimate, we plan to
subsequently publish a more detailed, deep-dive opinion piece.

For this section, we are going to be conservative and only focus on the central cohesive tube of the
highest-grade core, between 200m and 1km below surface.

Here, we assume 90 million tonnes of mineralization with

continuous broad grades averaging 0.90g/t Au and 0.50% Cu. We
assume this will be mined with an additional 11% dilution at zero
grade, resulting at a total minable tonnage of 100 million tonnes
at diluted grades of 0.81g/t Au and 0.45% Cu, yielding an average
recoverable rock value of C$75/t.15

This C$75/t rock is a lot juicier than our C$40/t rock from the open
pit, but of course, it’s also going to be more expensive to go digging
for it. Based on our industry review, we estimate all-in costs for a
bulk-underground mine of C$42/t, broken down as follows:16

• C$22.50/t for underground mining costs.

• C$5.50/t in processing and milling costs.
• C$2.00/t in general and administrative costs.
• C$2.00/t in offsite costs.
• C$10.00/t in underground sustaining costs.

With an average recoverable rock value of C$75/t, less C$42/t of

costs, we are left with a net profit margin of approximately C$33/t.
At 100 million tonnes of rock, this amounts to C$3.3 billion of cash
flow. Let’s assume another $300 million in underground CapEx,
and that brings our net cash flow down to an even C$3 billion, over
a nine-year mine life.

If you just skimmed everything up to this point, here is the TL;DR version: this deposit has two blobs – a
smaller blob near the surface that can be open-pit mined, and a much larger, richer blob underground
which needs a more complex underground mine. We think the small blob is rich enough to recoup the
cost of the initial mine, which will allow GTT to dig deeper and get at the much bigger, richer blob, which
we expect to spit out C$3 billion in cash flow. EZ PZ.

15
Au component = (0.81g grade ÷ 31.1conv x 1740 Au spot price x 1.36 C$fx x 0.687 recovery rate) = C$42.34/t
Cu component = (0.45% grade x 2204conv x 2.65 Cu spot price x 1.36 C$fx x 0.88.8 recovery rate) = C$31.74/t
Ag component = estimate C$1/t of silver byproduct.
Taken together, 42.34 + 31.74 + 1.00 = C$75/t of rock value.
16
For our analysis, we do not consider a block-cave potential. Instead we base our costs on comparable bulk-
underground operations (bulk-longhole/sub-level stoping mines).

9
 Why Hasn’t the Market Figured it Out?
So, if GTT is so great, why hasn’t the market figured it out?

First, GTT has not yet published a mineral resource estimate, and therefore no Preliminary Economic
Assessment (“PEA”) has been published either. The former is due imminently, and the latter is slated to
come before year-end.17 The mineral resource estimate tells the market what’s in the ground, and the
PEA tells the market what it might be worth. Investing before either of these documents are released is a
niche realm of the market, requiring detailed data analysis on companies that most institutions simply do
not undertake, particularly with small cap companies.

Second, unlike most juniors, GTT has primarily received financing from Newmont since the Saddle North
discovery.18 Most junior explorers need to rely on investment banks to help them raise capital through
brokered placements. Institutional investors use these capital raise opportunities to make sizable entry
points by buying large blocks of shares at a discount alongside other institutions. The fact that Newmont
stepped in to finance GTT removed these entry points from most institutional investors.
It also removed the brokered deal fees that incentivize investment banks and other sell-side institutions
to promote a stock they are raising money for.

Third, previous to the discovery of Saddle North, the company drilled the smaller Saddle South discovery
and the initial euphoria turned to disappointment, which caused investors to flee. The Saddle South
disappointment is what the initial spikes in 2017 on the five-year stock price chart represent:

GTT – Five-Year Price Chart

Source: https://web.tmxmoney.com/charting.php?qm_symbol=GTT

However, since the discovery of Saddle North 19 months ago, GTT has undergone a complete
transformation. Not only has it attracted interest from Newmont, it also attracted a slew of industry
heavyweights including CEO Paul Harbridge, who served as Senior Vice President of Exploration at
Goldcorp, and Michael Skead who was the Director of Geoscience at Newmont.19

17
https://www.gtgoldcorp.ca/_resources/presentations/GT-Gold-Presentation-May-2020.pdf Slide 9
18
The company announced a small brokered financing of C$3.5 million on the day of their first discovery hole on
10 Sept 2018, but that’s it.
19
https://www.gtgoldcorp.ca/corporate/management/

10
Although we feel the market has overlooked the opportunity here, we believe that with the mineral
resource estimate scheduled to be released soon, the market will be compelled to take notice of GTT. The
deposit under Saddle North does not appear to have eluded the largest gold company by market cap. We
doubt it will continue to elude the market once the mineral resource and PEA are released.

Opinion: STRONG BUY

11