Tinka Resource Ltd. (TK.V) is a mining company focused on exploration and discovery. TK.V is currently actively drilling (three rigs) on its Ayawilca property (100% owned) located 200 km north of Lima, Peru. This property is the zinc-led-silver belt of central Peru with access to infrastructure. TK.V also already has institutional ownership (20%), and Sentient (25%) and IFC (12%) - The World Bank, accounting for 57% ownership.
The current zinc prices are high but the decline in the last five months seems to be related to the rising zinc stock availability. While prices are high, the last cycle was atypical. Despite the drastic movement in stock from 2010 to 2016, the price remained constant.
However, the true function of the correction in zinc price remains to be determined. In fact, Wood Mackenzie postulates that there will be a gap in new production starting in 2020. This is indeed a major driver for many zinc investors.
For TK.V, the big news for 2017 was the doubling of the mineral resources from a high grade deposit discovery in the south section which also happens to be the zone closest to surface. Hence, the Ayawilca Zinc Zone has now an inferred mineral resource estimate of 42.7 M tonnes at 6.0 % zinc, 0.2 % lead, 17 g/t silver, and 79 g/t indium. TK.V also has a separate Tin Zone with inferred resource of 10.5 M tonnes at 0.63 % tin, 0.23 % copper and, 12 g/t silver.
Of note in the inferred estimate calculation is the metal price assumptions of US$1.15/lb Zn, which is about 18% below the current levels.
For 2018, TK.V has two key priorities: (1) Target additional zinc resources at Ayawilca through a planned drill program of 15,000 metres and (2) Advance the project with studies and detailed metallurgical tests to develop the Preliminary Economic Assessment (“PEA”) planned for Q3-Q4 2018.
In the last six months, TK.V has delivered four impressive drill results and filed for N1-43-101 status. In addition, the company completed financing of $8M ( TK.V claims no fundraising needs until 2019) and initiated a drill campaign in February 2018 which was augmented to three drill rigs.
Despite a number of positive catalysts, the stock price has declined from about $0.75 cents to a 52 week low of $0.40 cents.
The 6 Month Zinc price seems to be related. Zinc was down 15% while TK.V is down by 47% during that period.
For Zinc, most of the decline occurred from February to May. However, the price is trending back up of late.
Reviewing TK.V's trading transactions from Apr. 13th to May 2nd (post financing and pre promo) reveals the following characteristics. BMO and GMP were top net buyers while Macquarie and Cannacord were net sellers. In light of Cannacord ($1.0, January 15, 2018), and GMP ($1.00 - Nov 3, 2017) price target, both were influential in the price action for that period.
Even after a paid promo, TK.V is close to oversold territory again and tested S1 ($0.40 cents) yesterday which is the 52 week low. However, with options at $0.50 cents and a latest round of financing at $0.48 cents, warrant at 0.75 cents, and targets of $1.00, TK.V is no doubt attractive at the current level.
In fact, given the quality of deposit, and the number of catalyst in the past year, we believe that TK.V is indeed undervalued.
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