Eclipse Gold Mining Corporation

Eclipse Gold Mining Corporation (TSXV: EGLD) is an exploration stage mining company principally engaged in acquiring and exploring mineral resource properties. The group is exploring the district-scale Hercules gold property within the Walker Lane, which is located only a one-hour drive from Reno, Nevada.

Key Highlights:

• The company informed the commencement of Phase II drilling at its Hercules Gold Project in Nevada's Walker Lane trend, which is planned to comprise 18 holes totalling ~6,750 meters of the drilling program.

• Earlier, the company released the results of the first phase of drilling. The above drill results for the Cliffs target was reported at 74.68 meters of 0.54 g/t Au and 4.78 g/t Ag, and for the Hercules Target 89.92 meters of 0.65 g/t Au and 12.51 g/t Ag. The area between the two targets was ~600 m apart, has not been tested by drilling to date.

Q3FY20 Financial Highlights: The group announced its quarterly results, wherein the company posted total expense CAD 2.907 million, which includes exploration and evaluation expenditures of  CAD 1.361 million, investor relations, marketing and consulting fees of CAD 0.528 million, salaries and wages of CAD 0.487 million and share-based payments of Share-based payments. Loss and comprehensive loss for the period stood at CAD 2.904 million. The company reported a cash balance of CAD 11.73 million, while total assets stood at CAD 14.127 million.

Q3FY20 Income Statement Highlights (Source: Company reports)

Risks: The company has commenced its drilling activities in the recent past and is yet to report any positive results. Due to the lack of any mineral deposits, the company has to use its capital for its working capital requirements, which is a drawback as it will increase the total deficit amount.

Stock Recommendation: Due to the commencement of recent exploration activities, the stock appreciated ~43% in the last six months. The company is an exploration-stage company and is yet to report a concrete deposit, which a key challenge. Though the company has accelerated its phase II drilling activities at Hercules gold project, which is planned to comprise 18 holes totaling approximately 6,750 meters; the timing of the mineral discovery is unknown, and hence we prefer to remain on the sidelines. The company might face a liquidity crisis due to longer tenure of exploration activities, which is a major drawback for the business. Further, the 14 days RSI strength stood at 56.138, which is in the neutral zone. Considering the aforesaid facts, current price appreciation and due to lack of growth catalyst, we remain skeptical on the stock and suggest the investors to ‘Avoid’ the stock at the closing price of CAD 0.82 on 25 September, 2020.

EGLD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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