Callinex Mines' New Geophysical Approach Unlocks Deeper Discoveries as Copper Market Turns

• Callinex Mines is expanding high-grade copper-rich discoveries near Flin Flon, Manitoba with a deep portfolio across mining jurisdictions in Canada.
• The company has a strong shareholder registry including institutional investors and the CEO himself, with about 6 months of cash runway and no debt.
• Callinex's key asset is the Pine Bay project, where recent discoveries like Rainbow, Alchemist, and Descendant show significant potential based on alteration footprints and geophysical signatures.
• The company is using new geophysical techniques like magnetotellurics (MT) to better target mineralization at depth and plans to significantly expand drilling in the near future.
• Callinex is well-positioned for a re-rating as they grow the scale of their discoveries and about a turnaround in the mining markets, especially for gold and base metals.

For investors seeking exposure to high-grade copper discoveries in a favorable mining jurisdiction, Callinex Mines (TSX-V:CNX) presents a compelling opportunity. The company is advancing several promising projects in the prolific Flin Flon mining district of Manitoba, Canada, where it has made multiple discoveries in recent years.

The Pine Bay Project: A New Chapter in Flin Flon

Callinex's flagship asset is the Pine Bay project, located in the shadows of Hudbay's Flin Flon. While the district has a long history of production, much of the exploration has been focused on near-surface deposits using traditional electromagnetic (EM) techniques. Callinex has taken a new approach, applying modern geophysical methods to target deeper mineralization.

As CEO Max Porterfield explains,

"The real success came when we completed threw the model out and said let's try something new." This led to the discovery of the Rainbow deposit in 2020, which has an average thickness of 8 meters and remains open at depth. Follow-up drilling has led to two more discoveries, Alchemist in 2022, and the recent Descendant in 2023.

Interview with President & CEO Max Porterfield

Applying New Geophysical Techniques

To better target these deeper zones, Callinex has conducted initial surveys using magnetotellurics (MT), which maps resistivity and chargeability in a similar fashion to induced polarization (IP).

"Often times when you look at the statistics on making a discovery, it's one in 4000. We hit the first discovery on Rainbow 37 holes in." -CEO Max Porterfield

The initial results have been encouraging, with the MT signatures closely matching known mineralization at Pine Bay. The company now plans to expand the MT coverage to refine additional targets across their landholdings.

A Disciplined Approach to Value Creation

Another key aspect of the Callinex story is the company's focus on capital discipline and risk management. Despite the technical risks inherent to exploration, Callinex benefits from exploring in a well-established mining camps with access to infrastructure and a skilled labor force. This not only compresses exploration costs but also shortens potential development timelines.

"Even if you're on the most expensive side, you're still 2/3rds the cost of exploring somewhere remote," explains Porterfield. "That's really how you can spread your exploration dollar further and give yourself more shots at the end of the day to make a discovery."

This approach has allowed Callinex to make multiple discoveries while maintaining a tight share structure. The company currently has about 6 months of working capital with no debt, and a supportive shareholder base that includes both institutional investors and the CEO himself as a significant owner.

Timing the Turn in the Mining Markets

Like many of their peers, Callinex has seen their market valuation impacted by the broader downturn in mining equities over the past year. However, Porterfield sees the potential for a significant re-rating as the company delivers growth and the macro picture improves.

"When you have these moves in gold, these moves happen very quickly, and you look back and think 'How did I miss it?'," he remarked on the recent breakout in gold prices. "I definitely think we're at a real key tipping point."

This is supported by the level of interest Callinex is seeing from larger players. "Industry is taking note of the asset base, and it continues to take note," said Porterfield, referencing several meetings with significant investors and corporations at the recent PDAC conference.

With a portfolio of high-grade discoveries in a world-class mining jurisdiction, a strong financial position, and multiple near-term catalysts on the horizon, Callinex presents a compelling opportunity for investors looking for exposure to the next generation of Canadian copper mines. As the company continues to grow the scale of these discoveries and the mining markets recover, the potential for a significant re-rating appears likely.

The Investment Thesis for Callinex Mines

• High-grade copper-gold discoveries in a proven mining camp with access to infrastructure
• New geophysical techniques accelerating the discovery process and expanding exploration potential
• Tight share structure, supportive shareholder base, and significant management ownership
• Potential for a significant re-rating as discoveries are expanded and mining markets recover
• Attractive entry point after recent market pullback provides favorable risk/reward setup

Key Takeaways

• Callinex's new geophysical approach is unlocking deeper discoveries in the shadows of headframe
• The scale of recent discoveries points to the potential for a much larger system
• The company is well-funded to aggressively expand drilling and has multiple near-term catalysts
• The macro setup for gold and copper is improving, which could drive a significant re-rating

Macro Thematic Analysis

The recent breakout in gold prices above $2000 per ounce is a bullish sign for the broader mining sector, which has been beaten down over the past year despite the strong underlying fundamentals for many metals. This move is likely driven by a combination of safe-haven demand, inflation concerns, and the anticipation of a Fed pivot as we enter the next presidential election cycle.

As Callinex CEO Max Porterfield notes:

"I definitely see a light at the end of the tunnel. Gold prices needed to break out and stabilize above $2,000 an ounce. At some point this year, you're going to get a rate cut of some sort. They're going to want to goose the market going into a presidential election. This is a very established cycle."

This macro tailwind should be supportive of higher valuations for gold and copper miners as the market looks ahead to the next phase of the cycle. For copper specifically, the long-term demand picture remains robust driven by the energy transition and global infrastructure spending, while supply remains constrained due to a lack of new discoveries and the long lead times required to bring on new production.

In this context, companies like Callinex that offer exposure to high-grade discoveries in favorable jurisdictions should be well-positioned to outperform. As Porterfield sums it up, "The asset is the asset, and industry is taking note of the asset base. 2024 is the year that Pine Bay grows into a tier-one asset."