The following analysis is from the September 21st issue of my mining stock newsletter. I want to emphasize that I do not receive compensation from any of the companies that I cover and recommend and I invest my own money in several of the ideas I present. I have a fairly large percentage allocation to Delta Resources. You can learn more about my newsletter here:  Mining Stock Journal

New idea – Delta Resources (DTARF, DLTA.V – US$0.11) – My friend and colleague, Trevor Hall (Mining Stock Daily), showed me this idea. DLTA is advancing two early-stage exploration projects, Delta-1 in Ontario, Canada and Delta-2 in Quebec, Canada. I think DLTA has merit as a highly speculative junior play because, after a deep-dive that included a conversation with the CEO (Andre Tessier), I believe the potential upside outweighs the downside risk if DLTA-1 can not be advanced successfully to an operating mine.

DLTA changed its name from Golden Hope Mines to Delta Resources in July 2019. In October 2019 the Company signed an option agreement to acquire 100% interest in the Eureka Gold Discovery property in Ontario, renaming it the Delta-1 project (as the first project acquired under the new name). Shortly thereafter it signed an agreement to acquire 100% interest in the property named Delta-2. The Company also had the Bellechasse-Timmins project in Quebec, which it sold to Yorkton Ventures in 2022 for C$1.7 million, retaining a 1% NSR on the project.

The Delta-1 project is located in Thunder Bay, Ontario in the Shebandowan Greenstone Belt. Greenstone belts are composed of volcanic rock and interspersed with sedimentary rock. They typically contain high mineral content and are likely to contain high quantities of gold, copper, iron, zinc, silver and nickel. The project is located in the same geologic setting as Goldshore Resources’ Moss Lake gold project, which is currently estimated to have 4.17 million ozs of gold at 1.1 gpt (open pit). Historically 42 holes were drilled to test for copper-nickel targets. The property had been dormant since 2003 (the price of gold was $300 – $400 back then).

DLTA began exploration activities on Delta-1 in 2020. Geochem surveying, sampling and mapping confirmed the presence of a gold-mineralized “halo.” The 2021 drill program returned wide intercepts of economic-grade gold, similar to the Moss Lake deposit, located to the west of Delta-1 on the same geologic structure. The highlight assay showed 1.25 gpt Au over 18 meters. The 2022 drill program results drew investor attention. Visible gold was intercepted and all nine holes intersected the gold-bearing zone. Assays from the headline drill hole intercepted 14.8 gpt Au over 11.9 meters within a broader interval of 5.92 gpt Au over 31 meters. Keep in mind that the Delta-1 mineralization is near-surface, open-pit style with drilling to date going down only to 200 meters. This drill program gained the attention of potential strategic partners.

At the beginning of 2023, DLTA announced a 5,000 meter program. The Company continued to hit broad zones of near-surface visible gold and high-grade intercepts. 100 meter step-out holes to the east also encountered wide intervals of gold mineralization along with visible gold. The Company raised C$10 million through flow-through and standard units. Subsequently it acquired additional claims to expand the size of the property, announced a new 20,00 meter drill program and added a second drill.

The first drill results, though they looked good to me, disappointed the market. This where i think the opportunity lies to acquire “cheap” DLTA shares. The stock ran from 4 cents US$ in late 2022 to 41 cents by April 26, 2023. It then started selling off along with the rest of the sector, particularly juniors. It closed at 26 cents the day before the 1st drill results from the 20k drill program were announced but dropped down to 14 cents after the results were announced.

The Delta-2 project is located 35km southeast of the town of Chibougamau. Optioned in 2021 from Cartier Resources and fully-acquired in 2022, Delta-2 is a VMS formation with gold-copper mineralization. Recall that VMS deposits- volcanic massive sulphide ore – host poly-metallic mineralization, typically copper, zinc, gold, silver and lead. They generally host moderate-sized, moderate-to-high grade deposits. Canada hosts several large VMS camps.

The 2021 exploration program produced a gold discovery in which two drill holes encountered two mineralized zones with visible gold identified. Additional drilling in 2022 encountered four areas of interest that included a gold-enriched target area, a copper-enriched target area and two zinc-enriched target areas.

I had an in-depth conversation with Andre Tessier, the CEO, who came to the Company in 2019 along with a change-over in upper management and the Board. Delta-1 was acquired from a prospector, who still has 1.75% NSR which can be acquired by the Company. The Company was attracted to Delta-1 because of the size of the geologic alteration package. The plan is to advance an open pit resource before spending the resources to explore the underground potential.

Drilling to date has focused on defining the overall “footprint” of mineralization and under-standing the control structures and geometry of the mineralization and potential deposit. “Control structures” are the geologic attributes and hydrothermal alteration that control the formation of mineral-bearing veins. Understanding of the specific control structures of a mineralized area affects the understanding of the technical aspects of exploration and mining, including grade control, resource estimation, targeting, etc.

I asked about the big sell-off in the stock after the “game changer” holes described above from the 2022 drill program were released. At the start of the current drill program the Company announced that it was going to do 100 meter step-out holes to the east of the known mineralization to test a 200 meter, on-strike geophysical attribute (magnetic low) like the one that produced the existing assays. It sounds like retail piled into the shares on the assumption that the first step-out results would produce the fat assays from the 2022 drill program. Andre said the anticipation took on a life of its own.

The assays released apparently disappointed the market despite one assay that intercepted 1.79 gpt gold over 128.5 meters starting at 25.5 meters below the surface and 2.16 gpt gold over 97.5 meters starting at 25.5 meters below the surface. For an open pit configuration, these are home run holes. The market did not like holes further to the east that returned grades generally below 0.5 gpt – grades but that would be considered sufficiently economic in a Carlin trend project. We had a chuckle over that. But these are “first pass” holes testing the targets. Andre believes that the Company will hit higher grades in targeted areas with follow-up drilling.

With respect to the Delta-2 project, I asked why Cartier Resources was willing to sell the project. He said that Cartier has decided to sell ancillary projects in order to focus on advancing its 8.8 million gold resource Chimo Mine project into a mine. DLTA management has elevated Delta-1 as the flagship project and will put Delta-2 on the back burner. That said, the Company raised flow-through money in the last financing that needs to be spent on exploration activities by year-end and will use some of it to do some exploration drilling on Delta-2.

Bottom line – I need to stress that both Delta-1 and Delta-2 are very early stage exploration projects. The series of drill results at Delta-1 are very encouraging. The Company is convinced that Delta-1 hosts an economic deposit. The objective now is to define the scale and grade. The Company’s game plan is to de-risk Delta-1 enough to attract a strategic acquirer to take it over the finish line with DLTA management possibly spinning-off Delta-2 and moving on to develop that project.

Andre said that the Company has several non-disclosure agreements with strategics who want access to data the room to monitor the project. I think Wesdome, Alamos and Agnico Eagle are potential acquirers. That said, it will take a strong, extended bull move in the sector before strategics move to acquire projects until they’ve become almost completely de-risked.

In my opinion, DLTA is worth using some high-risk/high-return capital for a potential 5-10 bagger. I believe the recent sell-off, which appears to have come from the retail momentum chasers, provided a good entry level to minimize the downside risk. While Andre said there’s a seller from the last financing that stripped the warrants and is now selling the stock, a couple of DLTA’s largest shareholders who want to own more shares are buying those shares and Coremark (the deal underwriter) makes sure that they get first look when the shares become available.

The biggest shareholders are 1832 Asset Management (owned by Scotiabank) and some big Quebec funds. Management and insiders own 9%, after taking C$1.4 million of the last $10 million capital raise. The Company has not spent much on promotion. When it does I believe the shares will attract a much wider base of shareholders.

There’s 98.5 million primary shares, with 35 million warrants and 7.8 million stock options, for a total of 144 million fully-diluted shares. However 17.4 million of the warrants are struck too high to be considered relevant (40 to 63 cents C$, with the stock at 19 cents C$). Most of the stock options are in the money or near-money. For purposes of my valuation and potential upside analysis, I’m using 123.9 fully-diluted shares. At the current price this gives DLTA a US$17.3 million valuation.

Assuming we get a sustained rally that takes gold over $2,000 and silver into the high $20’s, I think DLTA could double or triple quickly. Especially if more holes from the current drill program hit good grades. Forty-four holes from the current ongoing drill program have been completed with 23 reported so far. This means there will be a lot of potential positive news flow coming. I have started a position in my personal account, leaving room to add shares opportunistically.