AVR Shares Rising

Canaccord Genuity's Morning Coffee (08/30/2010)
"Shares of Avion clawed back after plummeting on Thursday on disappointing Q2 results. Higher-than-expected operating cash and non-cash expenses eroded reported net income (-$0.2M, -$0.0/share) and cash flow from operations ($6.7M, $0.02/share—before non-cash working capital) relative to Canaccord Genuity estimates ($0.03 EPS and $0.04 CFPS). In particular, a large non-cash, stock-based compensation charge of US$3.8M took a heavy toll on Avion's bottom line. However, on a positive note, the company continues to guide for cash costs of between US$600 and US$550/oz. in the third and fourth quarters (compared with US$596/oz. in Q2), which suggests that on a relative per-ounce basis, operating costs could still come down in the H210.

Also, more importantly, it remains on track to meet its stated production guidance of 75–85 Koz. Au. Moreover, Canaccord Genuity Senior Mining Analyst Eric Zaunscherb continues to expect the company to ramp up towards +200 Koz./year in 2012 and onwards, bringing Avion into junior producer territory and an expected rerating in its P/NAV multiple along with it. . .judged on par with junior producers (given its expected growth in production to +200 Koz./year by 2012), Avion is a significantly undervalued asset. Considering also the recent and expected M&A activity in West Africa, Zaunscherb recommends building a position and capitalizing on share price weakness as he believes that Avion is also an attractive potential takeover target."

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