GoldMining Inc.

Rodman Renshaw - Buy recommendation for Brazil Resources with 2.20 $ price target

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On April 6, 2016, Brazil Resources announced an update for its Rea uranium project. The firm released a Time Domain Electromagnetic (TDEM) ground survey for the Rea Project. The site is located in the Western Athabasca and is 75% owned by Brazil Resources while AREVA (AREVA; not rated) owns the remaining 25%. In our view, the survey uncovered multiple anomalies that deserve further exploration work. In short, we think the completed survey should provide the necessary information required to conduct a drilling program at Rea in the future. Given significant recent discoveries in the Western Athabasca, including Fission’s (FCUUF; Buy) Patterson Lake South and NexGen’s (NXE; not rated) Arrow deposit, we expect management to actively pursue potentially similar mineralization at Rea through additional exploration work. Signs of a potentially meaningful discovery. The TDEM survey took a total of 10 days along 19 east-west lines that were 200 meters apart. While the data is still being interpreted by the firm, a single northtrending conductor over 1.8km has already been identified.

We note that the anomalies discovered are just two kilometers west of AREVA’s Maybelle deposit (see Exhibit 1) with the decay rate of the conductor response in the TDEM showing similar characteristics to a graphiterelated ore body. That said, while we do believe the potential for a game changing discovery at Rea remains possible, we believe further drilling is required and expect the firm to allocate additional drilling dollars towards Rea going forward. Recent financing allows for exploration work. During 1Q16, Brazil Resources closed an oversubscribed C$4.5 million capital raise, which we feel should provide necessary capital to allocate exploration dollars to Rea. That said, we do expect the firm to concurrently focus on permitting for its two Brazilian gold assets, as we expect progress to be made on this front throughout the year.

We continue to believe Rea provides commodity diversification to the firm’s asset base, while providing upside for shareholders through either a spin out or a sale of the asset. Alternatively, we believe the project may host a meaningful discovery across the 88,400 hectare land package. We are reiterating a Buy rating and C$2.20 per share price target on Brazil Resources. Our valuation is based on a DCF of operations at São Jorge utilizing a 10% discount rate. Our model assumes first production in 2019, with total production reaching 1.2 million ounces over a 12-year mine life. To this, we add net cash and value for the firm’s other assets such as Rea.



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