ANALYSTS BEGIN TO BET ON TINKA

Named after Peru's popular lottery game, zinc explorer Tinka Resources ($TK on the Canadian TSXV and $TKRFF on the US OTC) has seen its stock price triple in value since I made it a top pick last September.

Though a handful of newsletter writers have been covering the stock through its run, Tinka Resources finally received some much deserved analyst attention with GMP Securities initiating coverage with a BUY recommendation on June 29th.

In their research note, GMP Securities assigned a price target of C$1.00/sh (0.8x NAV multiple applied to NAV8% of C$1.25/sh), implying over 56% upside from Friday's close.  It should be noted that GMP Securities calculated the NAVPS at C$1.25 based on the NI 43-101 compliant resource of 18.8Mt @ 5.9% Zn (8.2% ZnEq including by-products), which was published a year ago. GMP Securities also assumes a zinc price of US$1.10 per pound.

This is just the first of much more coverage to come for this under-appreciated junior. Mining blogger Otto Rock at IncaKolaNews reported a couple weeks ago that Tinka Resources was hosting site visits for several analysts (click for link).


SLOW PLAYING THE HAND

As noted above, GMP Securities is using an out-dated resource estimate and conservative commodity price assumptions in calculating their NAVPS.

Since publishing their NI 43-101 resource estimate in June 2016, Tinka Resource has had tremendous success exploring their project and may have more than doubled the resource half-way into the ongoing exploration program.  Here, blogger AngryGeologist estimates that Tinka Resources has (so far) added another 18.3Mt @ 5.3% Zn (click for link).

Note that the AngryGeologist is using low density assumptions at 2.9t/m^3 whereas the NI 43-101 resource estimate used a higher density at 3.6t/m^3. 

Angry Geologist estimates 18.3Mt using specific gravity of 2.9t/m^3 
The official NI 43-101 compliant resource estimate published last year estimated density at 3.6t/m^3

Using the same density assumptions in the NI 43-101 resource estimate, Tinka may have added over 22.7Mt of ore to the existing 18.8Mt at Ayawilca.

In spite of all the exploration success, the market has largely ignored these recent results.  This is likely the consequence of zinc prices, after having been on an impressive run through 2016, correcting for the last several months. As can be seen in the six month chart below, the zinc price has bounced off technical support at US$1.10 per pound and has recently broken out to the upside. 

At a zinc price of US$1.20 per pound, GMP Securities calculates NAVPS at US$1.21 (or C$1.59). At a zinc price of US$1.50 per pound, GMP Securities calculates NAVPS at US$2.06 (or C$2.71).  


This clearly demonstrates Tinka's huge leverage to improving zinc prices. Not to belabor the point, but again, these NAVs were calculated using the out-dated resource of 18.8Mt. If Ayawilca has grown to over 40Mt, and if zinc prices continue to improve, the re-rating is going to be massive!


READING THE TELLS

Larger, well-covered zinc stories have already begun to follow zinc prices higher. Below are just two examples - Trevali Mining ($TV on the Canadian TSX and $TREVF on the US OTC) and Arizona Mining ($AZ on the Canadian TSX and $WLDVF on the US OTC).


It appears, with analysts initiating coverage, that it could be Tinka's turn to break out!


THE JACKPOT CONTINUES TO GROW

Even at GMP Securities price target of C$1.00/sh, exploration results since last year's NI 43-101 resource estimate are still being completely discounted. Ayawilca, which has likely grown to over 40Mt, is already a globally significant deposit but the company may still be only scratching the surface.

The exploration team at Tinka Resources have been utilizing geophysical and geochemical surveys to identify prospective targets for drill testing. Below is an aeromagnetic survey with magnetic highs (red blobs) closely correlating with mineralization.  The existing resource is outlined in black. Note the large red blobs present in the high-priority, untested areas labeled Zone 3 and Chaucha.


Below is a zinc-in-soil survey. Here, one can clearly see that Zone 3 and Chaucha have returned the largest and/or highest concentrations of zinc. 

In the next few weeks, the company expects to report initial results from Phase II of the exploration program, which is focused on these high-priority, untested targets at Zone 3 and Chaucha. It doesn't take a rocket scientist to figure that a discovery in these new zones have the potential to open up blue sky upside for Tinka Resources.


GAINING AN EDGE

For those looking to dive deeper into this very compelling story, I've linked articles and interviews below:



DISCLOSURE & DISCLAIMER

The author is long $TK $TKRFF.

The author is not a registered investment advisor and the article expresses their own opinions. The author is not receiving compensation for the article and has no business relationship with any company whose stock is mentioned in this article.

For more information, please visit http://www.tinkaresources.com. This article is provided for information purposes only, and is not intended to be investment advice. All readers are encouraged to perform their own due diligence and consult with a licensed investment advisor before making any investment decisions.