The updated definitive feasibility study for Victoria Gold's 100%-owned Eagle heap leach project reflects improved economics for the mine, prompting five analysts to applaud the company's investment and takeover potential.
In a Sept. 12 press release, Victoria Gold Corp. (VIT:TSX.V) announced the fully permitted Eagle project in the Yukon has a post-tax NPV of $508M and an internal rate of return (IRR) of 29.5%, with annual gold production of ~200,000 oz, operating costs of US$539/oz, and all-in sustaining costs of US$638/oz.
"With a shovel-ready project in a top-tier geopolitical location, we believe Victoria represents a rare opportunity," said Paradigm Capital's Don Blyth in a report issued on Sept. 13.
"The results of the updated study are positive and robust, incorporating both the higher-grade Olive zone and the run-of- mine (RoM) heap leach. We will be reviewing our estimates and expect to make a number of tweaks, but are confident that Victoria will remain one of our favourite takeover candidates," Blyth wrote.
"In our view, the new study confirms the economic attractiveness (and leverage) of Eagle," analyst Adam Melnyk wrote in a Sept. 12 research report for National Bank Financial. "In addition, optimization work and exploration success over the past four years has clearly improved economics and optimized the project for a now more robust gold price environment," Melnyk stated.
Analyst Derek Macpherson, writing for Red Cloud Klondike Strike Inc. in a Sept. 12 report, noted that, "In our view the benefits of this update have not yet been fully reflected in Victoria's valuation and we believe that these results should be a positive catalyst for the stock. As well, there remains multiple ways for Victoria to further improve project economics providing some additional upside. We expect a project financing update, along with ongoing drill results from Olive-Shamrock, are likely to be the next catalysts for Victoria."
The "robust economics" outlined in Victoria's revised study prompted Echelon Wealth Partners analyst Ryan Walker to reiterate the company's Speculative Buy and Top Pick H2/16 status, "which reflects the Eagle project's strategic size, fully permitted status, district-scale land package with substantial exploration potential, and situation in geopolitically stable Canada."
Analyst Richard Gray of Cormark Securities believes potential acquirers will follow on the DFS release. "As one of the very few shovel-ready projects in Canada that can allow a larger company to benefit from the tax synergies of a Canadian development project, we believe a takeover is still a realistic possibility for Victoria Gold. After adjusting our model for the updated feasibility details and equity assumptions, our target increased to C$1.15 (from C$0.80)," he wrote in a Sept. 13 report.
Melnyk has an Outperform rating on the company and also mentioned takeover potential in his comments: "We believe [our] valuation is well-deserved and reflects Eagle's solid economics, exploration upside, fully permitted status and location in Canada. For these reasons, we continue to see VIT as a takeout candidate."
Blyth summed up Victoria's takeover promise this way: "[VIT] offers many advantages to the acquirer and investors over and above an attractive valuation: a shovel-ready, permitted project with a robust IRR; low jurisdictional risk; a quick construction timeline; an efficient use of construction capital, which at <US$300M is within reach of several companies; a meaningful 190Koz/year production at an attractive AISC <$800/oz and considerable optionality to higher gold prices."
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1) Tracy Salcedo compiled this article for Streetwise Reports LLC. Tracy Salcedo provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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Additional disclosures about the sources cited in this article
Paradigm Capital, Victoria Gold Corp., Sept. 13, 2015
--Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the past 12 months.
--Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months.
--The analyst has a family relationship with an Officer/Director of subject company.
The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report.
National Bank Financial, Victoria Gold Corp., Sept. 12, 2015
The Research Analyst(s) who prepare these reports certify that their respective report accurately reflects his or her personal opinion and that no part of his/her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies.
--National Bank Financial Inc. has acted as an underwriter with respect to this issuer within the past 12 months.
--National Bank Financial Inc. has provided investment banking services for this issuer within the past 12 months.
--National Bank Financial Inc. or an affiliate has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months.
--National Bank Financial Inc. or an affiliate has received compensation for investment banking services from this issuer within the past 12 months.
--The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
Red Cloud Klondike Strike Inc., Victoria Gold Corp., Sept. 12, 2016
Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
--A member of Red Cloud KS team has visited/viewed material operations of the issuer.
--In the last 12 months, Red Cloud KS has been retained under a service or advisory agreement by the subject issuer.
--Red Cloud KS or a member of the Red Cloud KS team or household has a long position in the shares and/or the options of the subject issuer.
Echelon Wealth Partners, Victoria Gold Corp., Sept. 13, 2015
Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients.
I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
--Is this an issuer related or industry related publication? Issuer
--Does the Analyst or any member of the Analyst's household have a financial interest in the securities of the subject issuer? No. If Yes: 1) Is it a long or short position? Yes; and, 2) What type of security is it? Common shares
--Does the Analyst or household member serve as a Director or Officer or Advisory Board Member of the issuer? No
--Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No
--Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer? No
--During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes
--During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes
--Has the Analyst had an onsite visit with the Issuer within the last 12 months? Yes
--Has the Analyst been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No
--Has the Analyst received any compensation from the subject company in the past 12 months? No
--Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No
Cormark Securities, Victoria Gold Corp., Sept. 13, 2015
We, Richard Gray and Graeme Jennings, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject company(ies) and its (their) securities. We also certify that we have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
--During the last 24 months, has Cormark provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes
--During the last 24 months, has Cormark received compensation or is expected to receive compensation for having provided investment banking or related services to this Issuer? Yes
--During the last 24 months, has the analyst of this company received compensation from a pool that included investment banking revenue from this issuer earned by Cormark or entities affiliated with it? Yes
--Does the analyst, associate or any individual responsible for the preparation of this research, or a member of that person's household, have a financial interest in the securities of this company? Yes. Is it a long or short position? Richard Gray: Long. What type of security is it? Richard Gray: Common.
Does Cormark and / or one or more entities affiliated with Cormark beneficially own common shares (or any other class of common equity securities) of this company which constitutes more than 1% of the presently issued and outstanding share of this company? No
Does the analyst or Cormark and/or one or more entities affiliated with Cormark have any other material conflict t of interest with the issuer? No
Has any partner, Director, officer or employee of Cormark or any analyst involved in the preparation of this report provided services to the issuer (including acting as Officer, Director or employee of the issuer or providing advisory services to the issuer) with or without remuneration, other than normal course investment advisory or trade execution services? No
