SilverCrest Mines Inc.
Posted: May 22, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Gold, Mexico, NAVPS, Ounce, Santa Elena, Silver, TSX Venture Exchange Leave a comment »
English: Silver bullion bar 1000oz bottom view / view from underneath (Photo credit: Wikipedia)
SVL : TSX-V : C$1.80
SPECULATIVE BUY
Target: C$4.25
COMPANY DESCRIPTION:
Silvercrest is a junior silver producer with a 100% interest in the Santa Elena silver-gold mine in Mexico and a 100% interest in the La Joya silver-gold-copper project in Mexico. Santa Elena is ramping up to produce an estimated average of 4.6 million ounces of silver-equivalent per year by 2014E through the development of an underground operation and facility at Santa Elena.
All amounts in C$ unless otherwise noted.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of SVL with a 12-month target price of C$4.25, unchanged.
Investment highlights
SilverCrest reported Q1/13 EPS of US$0.06. After adjusting for deferred revenue of US$0.5 million and a foreign currency gain of US$0.5 million, results were in line with our forecast of US$0.04.
In Q1, SVL sold 157,088 ounces of silver and 7,370 ounces of gold, from production (pre-released) of 153,481 ounces of silver and 7,225 ounces of gold. This resulted in cash flow from operations of US$7.7 million or US$0.07 per share, in line with our forecast.
The pre-feasibility study for Santa Elena expansion is expected to be released before the end of May. This study is to include an updated
reserve and resource estimate, as well as an updated mine plan. We expect to see an increase in mine life from 6.5-years to roughly 10 years. Development of the new 3,000 tpd CCD processing facility remains on schedule and on budget for commissioning in early 2014. With grades expected to increase and strip expected to decline in H2/13, we expect SVL to meet its 2013 guidance for production of 625,000 ounces of silver and 33,000 ounces of gold.
Valuation
SVL is on track to ramp up production from 2.2 million AgEq ounces in 2013 to 4.6 million AgEq ounces in 2014 with the commissioning of the
new CCD processing facility. After adjusting our model for the Q1 results, our peak silver estimate of NAVPS (5%, US$32.50/oz Ag) decreased marginally to $5.42, from $5.43 previously. We continue to value the shares of SilverCrest based on a 0.75x multiple to our peak silver price estimate of NAVPS (5%, US$32.50/oz Ag).
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Colossus Minerals Inc.
Posted: May 21, 2013 Filed under: Speculative | Tags: Brazil, Canadian dollar, Colossus, Finance, Gold, Mining, Serra Pelada, Toronto Stock Exchange Leave a comment »
CSI: Crime Scene Investigation (Photo credit: Wikipedia)
CSI : TSX : C$1.92
SPECULATIVE BUY
Target: C$7.50
COMPANY DESCRIPTION:
Colossus Minerals is a junior exploration and development company with a focus on gold in Brazil. Colossus is under the stewardship of John Frostiak, Chairman, and Claudio Mancuso, President and CEO. The company’s primary asset is the Serra Pelada project, an extremely high grade gold-platinum-palladium project in Northern Brazil. Colossus has a 75% ownership interest in the project.
All amounts in C$ unless otherwise noted.
CONSTRUCTION 80% COMPLETE
Investment recommendation
We maintain our SPECULATIVE BUY recommendation with a 12-month target price of C$7.50, unchanged.
Investment highlights
Colossus provided a development update for its 75%-owned Serra Pelada project in Brazil. Construction is approximately 80% complete with completion expected by the end of July. Production is expected to start in late Q3/13 at a rate of 250 tpd, ramping up to 1,000 tpd by the end of Q1/14.
With the processing plant available in August, CSI now plans to process the bulk sample onsite. In addition, CSI could potentially increase the size of the sample to include a lower-grade halo zone that was discovered 30-40 metres in advance of the Central Mineralized Zone (CMZ) (assays currently pending). Results from the bulk sample will be used to calculate an initial one-year reserve estimate. Based on better than expected ground conditions and the potential addition of material from the low grade zone, CSI is exploring the use of more cost effective overhand-cut-and-fill mining.
Underground development has been improving and is currently advancing at a rate of 3.1 metres per day for a total of 1,950 metres.
To achieve a mining rate of 1,000 tpd, CSI will need to complete a further 1,750 meters, which should be complete in H1/14.
Valuation
While the development of Serra Pelada continues to advance on schedule, with only $32.1 million in cash at the end of March, the company’s balance sheet appears strained. We believe CSI is likely to need an additional working capital top up of $20-25 million to get the project into production, which we expect will be financed with a debt facility. We have adjusted our model for the Q1 financials and we have incorporated an assumed US$25 million debt financing in late Q2/13.
The net impact is a drop in our estimate of peak gold price NAVPS (10%, US$1,750/oz Au) to C$9.67, from C$9.89 previously. We continue to
value the shares of CSI based on a 0.75x multiple to our peak gold price estimate of NAVPS (10%, US$1,750/oz Au).
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- Colossus Minerals Provides Development Update (sys-con.com)
B2Gold Corp.
Posted: May 17, 2013 Filed under: Intermediate Producers | Tags: Bema Gold, Canadian dollar, Colombia, Color Graphics Adapter, Costa Rica, Namibia, Nicaragua, Toronto Stock Exchange Leave a comment »
English: San Juan River border between Nicaragua and Costa Rica. Disputed area highlighted. (Photo credit: Wikipedia)
BTO : TSX : C$2.23
BUY
Target: C$5.00
COMPANY DESCRIPTION:
B2Gold is a Vancouver-based gold producer led by the former management team of Bema Gold. The company is targeting production growth from the Limon and La Libertad mines in Nicaragua and a pipeline of exploration projects in Namibia, Nicaragua, Colombia, Costa Rica and Uruguay.
All amounts in C$ unless otherwise noted.
Investment recommendation
We reiterate our BUY rating on B2Gold shares following the release of Q1/13 financial results, which were better than expected at all operations and continued to highlight the team’s excellent operational track record. Based on one of the best production growth profiles in the sector, relatively low permitting, financing and new mine development risk, and several upcoming potential catalysts that we believe should pave the way for a strong share price performance in 2013. With a strong balance sheet and relatively low capital requirements to fund growth to 540 koz by 2015E (relative to the expected cash flow profile), we see B2Gold as very well positioned to weather even an extended period of low gold prices.
Investment highlights
Q1/13 adjusted EPS of $0.07 beat of our estimate of $0.05 and consensus of $0.06. There were several one-time/non-cash adjustments
mostly related to the CGA acquisition. While production had been prereleased, cash costs were materially lower than we expected and were
also below levels budgeted by the company. In our view, B2Gold’s ability to keep costs under control in a sector struggling to handle
inflationary pressures should be viewed as a testament to the quality of the operating team.
Consolidated cash operating costs excl. royalties were $722/oz ($771/oz incl. royalties), below our estimate of $764/oz ($825/oz incl. royalties). Consolidate cash operating costs (excl. royalties) were 8% below the company’s internal budget of $785/oz.
As of March 31, 2013, the company’s balance sheet remained strong with $120.7 million in cash, and $113.6 million in working capital. Total debt was $65.8 million, including current debt of $49 million included in working capital, of which $37.5 million was consolidated with the CGA acquisition
Our 12-month target price remains unchanged at C$5.00 per share, based on 1.05x our 5%/peak NAVPS estimate of US$4.71 assuming US$/C$ parity
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- B2Gold Reports Record First Quarter 2013 Adjusted Net Earnings of $40.0 Million (virtual-strategy.com)
Osisko Mining Corporation
Posted: May 13, 2013 Filed under: Intermediate Producers | Tags: Canadian dollar, Company, Malartic, Ontario, Osisko, Osisko Mining, Osisko Mining Corporation, Toronto Stock Exchange Leave a comment »
English: Malartic, Quebec, Canada (Photo credit: Wikipedia)
OSK : TSX : C$4.44
BUY
Target: C$7.50
COMPANY DESCRIPTION:
Osisko Mining Corporation is an emerging intermediate gold producer that recently advanced the Canadian Malartic project to production (commercial production – May 2011), and hosts 10.7 mm oz in gold reserves. Other projects include the Hammond Reef project in Ontario that is host to a 10.5 mm oz gold resource.
Investment recommendation
We are reiterating our BUY rating on Osisko shares following the release of Q1/13 financial results. Our rating is based on relative valuation, implied return to target price due to recent share price weakness, and our view that Malartic is nearing an operational inflection point by mid-year.
Investment highlights
Q1/13 adjusted EPS was $0.05 (excluding adjustments for deferred taxes and stock-based compensation) versus our estimate of $0.07 and consensus of $0.06. The variance to our estimate was largely due to lower margins and higher depreciation expense partially offset by lower deferred tax expense.
The company pre-released Q1/13 production of 106,047 oz (sales of 95,511 oz) at cash costs of $798/oz versus our estimate of cash costs at $872/oz. If Osisko had sold the additional ~10,500 oz that they produced, EPS would have been roughly in line with our estimate. The company has reiterated 2013 guidance of 485,000-510,000 oz at cash costs of $780-825/oz, which represents a cost reduction of 9-14% from 2012.
Osisko had previously announced in a corporate update on April 29, 2013 that they reviewed the rate of discretionary spending in light of the recent volatility in gold prices and decreased spending on exploration and advanced new projects by $80.8 million in 2013. Capital costs were previously expected to be $220 million with nearly half allocated to Malartic ($98 million).
Our 2013 EPS/CFPS estimates have been revised to $0.34/$0.89 from $0.39/$0.86, largely due to the underperformance in Q1/13.
Valuation
We are maintaining our BUY rating, but lowering our 12-month target price to C$7.50 from C$7.65 previously based on 0.80x our 5%/peak NAVPS estimate of US$9.38 (previously US$9.57), translated assuming US$/C$ parity. Osisko continues to trade at a significant discount to peers; trading at 0.63x 5%/spot NAV versus peers at 0.91x and 2014E P/CF of 3.6x versus peers at 5.7x.
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Orezone Gold Corporation
Posted: May 1, 2013 Filed under: Speculative | Tags: Burkina Faso, Canadian dollar, Feasibility study, Gold, Gold as an investment, Ounce, Share price, Toronto Stock Exchange Leave a comment »
Gold Feet (Photo credit: @Doug88888)
ORE : TSX : C$0.74
SPECULATIVE BUY
Target: C$2.25
COMPANY DESCRIPTION:
Orezone Gold Corporation is a junior gold exploration and development company under the stewardship of Ron Little, President and CEO. The company’s flagship project is the 5.2-million-ounce Bombore gold project in Burkina Faso.
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on Orezone Gold with a revised 12-month target price of C$2.25, down from C$3.65
previously.
Investment highlights
Orezone reported an updated resource estimate for the Bombore Gold project in Burkina Faso. Based on 67,023 metres of additional
drilling (404,648 meters total), the project hosts a global resource of 158 million tonnes grading 1.03 g/t gold, containing 5.28 million ounces of gold.
Measured and indicated resource has increased by 10% to 4.56 million ounces of gold, which includes 1.96 million ounces of oxide gold resources (a 12% increase in oxide material). Strip for the measured and indicated oxide resource is approximately 1.3:1, with an expected mine life of 10 years.
Valuation
This resource will form the basis for the upcoming Feasibility Study (expected H2/13), assessing the potential to develop Bombore in a twophase
approach focused on oxide material initially. In light of the recent drop in the gold price and gold equity values, we have adjusted the dilution assumptions in our model to account for ORE’s lower share price. The net effect is a drop in our estimate of peak gold price NAVPS (10%, $1,750/oz Au) to C$4.35, from $5.59 previously. Given the recent pullback in the gold price and the risks associated with attaining our one-year peak gold price target, and due to financial liquidity concerns, we have lowered our target multiple to 0.50x, from 0.65x previously, which gives us a target price of C$2.25 (rounded), down from C$3.65 previously.
Santacruz Silver Mining Ltd
Posted: April 1, 2013 Filed under: Silver, Speculative | Tags: Canadian dollar, Mexico, Rosario, Rosario Santa Fe, San Felipe, Silver, Silver as an investment, TSX Venture Exchange Leave a comment »SCZ : TSX-V : C$1.94
SPECULATIVE BUY
Target: C$3.90
COMPANY DESCRIPTION:
Santacruz Silver Mining Ltd. is a junior silver developer focused on the advancement of the Rosario project (100%, Mexico), the San Felipe project (100%, Mexico) and the Gavilanes project (100%, Mexico). Through the development of the Rosario project, we forecast production of 1.3 million ounces of silver-equivalent in 2013, growing to 4.7 million ounces of silver-equivalent in 2015 through the development of the San Felipe project.
Investment highlights
We have been waiting for the receipt of an explosives permit for the Rosario mine since January 2013. The explosives permit now appears to be near at hand. Representatives from the Mexican Ministry of Defense (which regulates the use of explosives in the country) recently completed a site inspection at the Rosario mine with the potential for a permit to be issued within the next two weeks. Once the explosives permit is received, the company estimates that it should take roughly 15 days of underground development to start ramping up throughput at the mine.
In the interim, while waiting for the blasting permit, the company secured 3,200 tonnes of ore (averaging roughly 320 g/t silverequivalent)
from a local miner at a cost of US$28/tonne, and sourced 1,000 tonnes of outcrop material from the mine site. SCZ began processing this material through its mill in mid-February.
With the recently completed C$40.4 million equity offering and in light of the challenging financing environment that we are in, SCZ is also considering a smaller scale (and less capital intensive) development of its San Felipe project in Mexico with the intention of ramping up production over time using internal cash flow.
Valuation
We have adjusted our model to reflect expectations of lower production and throughput at the Rosario project in 2013, and to reflect the potential for less dilution associated with the recently completed equity offering and the potential for a smaller scale start-up of the San Felipe project. After adjusting our model, our peak silver price estimate of NAVPS (7.5-10%, US$35/oz Ag) has decreased slightly to US$4.88, from US$4.97 previously. We continue to value the shares of Santacruz Silver based on a 0.8x multiple to our peak silver price estimate of NAVPS.
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Fortuna Silver Mines Inc
Posted: March 22, 2013 Filed under: Juniors, Silver | Tags: Canadian dollar, Caylloma Province, Mexico, Ounce, Peru, San Jose California, Silver as an investment, Toronto Stock Exchange Leave a comment »
5 kg Silver bar (Photo credit: Wikipedia)
FVI : TSX : C$4.41
SPECULATIVE BUY
Target: C$6.75
COMPANY DESCRIPTION:
Fortuna Silver is a junior silver producer with interests in the Caylloma silver-lead-zinc mine in Peru and the San Jose silver-gold project in Mexico. The company is on track to ramp up silver-equivalent production to 5.3 million ounces by 2013 and 6.5 million ounces by 2015
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of Fortuna Silver with a revised 12-month target price of C$6.75, down from C$7.00.
Investment highlights
Fortuna reported Q4/12 EPS of US$0.07, slightly higher than our forecast of US$0.06 on lower than expected income taxes, partially offset by higher minesite and G&A costs.
In Q4, FVI sold 936,350 ounces of silver, 4,150 ounces of gold, 4.7 million pounds of lead, and 6.2 million pounds of zinc, from production (pre-released) of 1.01 million ounces of silver, 4,368 ounces of gold, 4.94 million pounds of lead, and 6.14 million pounds of zinc.
FVI reiterated 2013 production guidance of 4.4 million ounces of silver and 23,300 ounces of gold (5.7 million ounces of silverequivalent), in line with our model. The company also reiterated its guidance for 2013 capex of US$52 million and exploration of US$15 million, which should be fully funded from its current balance sheet and ongoing cash flows. With San Jose expected to start ramping up to 1500 tpd in Q3, the company should begin to generate significant free cash flow in H2/13.
Valuation
Fortuna’s Q4 results were in line with our forecast, with slightly higher than expected minesite and G&A costs offset by lower than expected taxes. After adjusting our model for the Q4 results and higher G&A costs, our peak silver price estimate of NAVPS (5%, US$35/oz Ag) has declined to C$6.71, from C$6.96 previously. We continue to value the shares of FVI based on a 1.0x multiple to our peak silver price estimate of NAVPS (5%, US$35/oz Ag). With cash and equivalents of US$64.7 million (including short term investments), we believe FVI is well positioned to pursue a merger or acquisition to further grow its production profile.
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Timmins Gold Corp.
Posted: March 21, 2013 Filed under: Juniors | Tags: Canadian dollar, Gold, Gold as an investment, Investment, Mexico, San Francisco, Timmins, TMM Leave a comment »TMM : TSX-V : C$2.86
SELL
Target: C$2.25
COMPANY DESCRIPTION:
Timmins Gold is an emerging junior gold producer, focusing on the advancement of its San Francisco gold project (100%) in Mexico. Timmins is under the stewardship of Bruce Bragagnolo, CEO, and Arturo Bonillas, President. The San Francisco gold project is expected to produce 100,000+ ounces of gold per year
Investment recommendation
We maintain our SELL recommendation on the shares of Timmins with a revised 12-month target price of C$2.25, up from C$2.00 previously.
Investment highlights
Timmins reported Q4 EPS of US$0.09, in line with our forecast of US$0.08 after accounting for lower depreciation and share-based compensation. TMM reported Q4 sales of 24,241 ounces of gold (down from 25,153 in Q3/12) at a cash cost of US$760/oz (up from US$715/oz in Q3/12). Cash flow from operations of $12.9 million was in line with our forecast; however, higher than expected capex of US$17 million resulted in negative free cash flow of $4 million.
Throughput has finally started to expand at San Francisco and as it increases, the average grade is expected to decline. In 2013, throughput is expected to increase to 24,000 tpd by mid-year with a further ramp up to more than 30,000 tpd as the company brings the La Chicharra pit on stream. The company guided for a gold grade of between 0.75 and 0.72 g/t for the year, with the grade expected to drop to 0.62 g/t once throughput has ramped up to full capacity.
Valuation
We have adjusted our model for the Q4 results and guidance for 2013.
With an updated reserve/resource and mine plan expected to be completed in the summer, we have factored in a 10-year mine life into our valuation of the San Francisco mine. The net impact is an increase in our estimate of peak gold price NAVPS (5%, US$1,850/oz) to C$3.21,
up from C$2.84 previously.
We estimate that TMM is trading at 1.28x P/NAV (5%, spot) and 4.9x 2014E CFPS vs. the junior producer average of 0.67x P/NAV (5%, spot) and 6.6x 2014E CFPS. From our perspective, the shares of TMM look fully valued. We feel that the production and cash flow growth is fully reflected in the shares today and see downside risk potential as costs creep higher with a decline in grade.
We continue to value the shares of Timmins based on a 0.70x multiple to our peak gold price estimate of NAVPS (5%, US$1,850/oz Au).
Argonaut Gold Inc. Update
Posted: February 27, 2013 Filed under: Gold, Juniors | Tags: Canada, Canadian dollar, El Castillo, La Colorada, Mexico, San Antonio, Sonora, Toronto Stock Exchange Leave a comment »
El Castillo (Photo credit: Wikipedia)
AR : TSX : C$7.95
BUY
Target: C$13.50
COMPANY DESCRIPTION:
Argonaut Gold is a Mexico-focused junior gold producer that operates the 100%-owned El Castillo mine. The company is also seeking to advance the San Antonio and La Colorada projects. In addition, the company holds 11 exploration properties in the state of Sonora, Mexico
Investment recommendation
We maintain our BUY rating on Argonaut Gold following the release of detailed 2013 guidance - based on attractive valuation in the context of one
of the best, fully funded growth profiles in the sector, in our view. With a proven management team at the helm and expected continued strong
operational momentum over the next 12 months, we see substantial rerating potential on execution on the ramp-ups at El Castillo and La Colorada,
in addition to the advancement of the San Antonio and Magino projects.
Investment highlights
Consolidated 2013 production guidance of 120–140koz at net cash costs of $630-660/oz, in line with our previous estimate of 131,000 oz at cash costs of $647/oz.
Capital cost budget for 2013 expected to be $57–75 million. Capital costs were higher than our estimate at El Castillo (additional leach pad space, transfer of contractor mining equipment, crushing/conveying system for West pad 8) and La Colorada (new crusher, pre-strip and plant/pad expansions), although some initiatives at El Castillo could potentially lower costs longer-term (we currently assume no savings).
89,330 m (340 holes) of drilling was completed after the cut-off date for the October 2012 resource. Drilling was mostly infill and condemnation,
but also outlined a new zone of mineralization (PD zone). No material change to 2013E EPS/CFPS forecasts. 5%/peak NAVPS estimate lowered 3.7% to US$13.43 from US$13.95 based on higher expected 2013 capex, higher assumed longer-term site costs at El Castillo and a slightly lower Magino constrained mineable resource estimate.
Valuation
Our 12-month target price has been revised to C$13.50 from C$14.00 based on 1.0x our 5%/peak NAVPS estimate of US$13.43 (previously US$13.95) assuming US$/C$ parity.
Related articles
- Argonaut Gold Inc. Target $ 14 (ampgoldportfolio.com)
B2Gold Update
Posted: February 5, 2013 Filed under: Intermediate Producers | Tags: Canadian dollar, Clinical trial, Gramalote, LaLibertad, Masbate, Record producer, Target price, Toronto Stock Exchange Leave a comment »
English: Picture of churche of Gramalote colombia Español: Foto de la iglesia deGramalote Colombia (Photo credit: Wikipedia)
B2Gold
(BTO : TSX
BUY, Target C$6.00
2013 exploration and development outlook
We maintain our BUY rating on B2Gold following the release of 2012 exploration results and 2013 exploration/development budget. B2Gold is a Canaccord Focus List pick based on one of the best production growth profiles in the sector, with expected production growth from 158 koz in 2012 to 550 koz in 2015 (and potentially to 750 koz by 2017 if Gramalote is advanced to production).
Growth to the +500 koz intermediate producer category by 2015 is largely permitted and fully funded, leading to a relatively low development risk profile. Encouraging results from the 2012 program at most of its mines/projects highlight the significant exploration optionality in the company’s project pipeline. The company’s strong balance sheet/cash flow profile facilitates a significant 97,000 m (at least) drill program in 2013 ($35.9 million Phase I budget).
With a proven exploration team leading the efforts, we see the potential for strong news flow that could help unlock further value from what we consider to be a very attractive asset portfolio.
Investment highlights
La Libertad – $16.9 million in Jabali development plus $4.7 million on infill drilling at Jabali, and resource drilling and exploration at La Libertad. An updated, potentially increased Jabali resource estimate is expected in Q1/13, based on results from 2012 drilling Limon – $5.74 million to develop preliminary mine plans at Pozo 4-5, and drill test several targets with a goal to extending mine life and increasing grades to the mill.
Masbate- $11.0 million, 8 drill rig reserve/resource and exploration program is underway focused on a number of attractive targets.
Otjikoto – $134.4 million development budget in 2013 plus $8 million exploration budget with a key focus being to define an initial resource at the new high-grade
Wolfshag zone discovery.
Valuation
Our 12 month target price remains unchanged at C$6.00 based on 1.15x our 5%/peak NAVPS estimate of US$5.15 assuming US$/C$ parity.
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