TICKERS: VIT

Yukon Gold Developer 'In a Good Position to Scale Up Construction'

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This Canadian miner broke ground on development of its flagship gold project, paving the way for commencement of production in 2019, and also has stepped up exploration on a neighboring prospect.

Victoria Gold Corp. (VIT:TSX.V), which holds 100% ownership of the Eagle property, located 375 kilometers north of Whitehorse in Yukon Territory, announced the onset of Phase 1 construction on Aug. 21. The CA$40 million first phase will include "road upgrades, camp expansion, and detailed engineering" as well as "critical path earthworks, including earthwork at the toe of the in-valley leach facility, and cut and fill of the crusher foundation," according to the company press release.

John McConnell, Victoria's president and CEO, called the start of construction "an exciting milestone in the ongoing development of the Eagle Gold Project. The Phase 1 construction program will set us up for an efficient, low-risk construction program in 2018."

In an Aug. 21 research report, PI Financial's Adam Melnyk wrote that, in light of the onset of construction, his firm expects production at the Eagle mine "to commence in 2019 and average 183,000ozs Au at C$720/oz cash costs. This will place Victoria in a good position to scale up construction in 2018 as some of the construction work is limited to only the warm and dry months of the year."

Melnyk also noted that "on July 31st Victoria Gold (VIT) received commitment from BNP Paribas (BNPP) that they would underwrite 100% of the planned C$275M (US$220M) project finance facility for the construction of the Eagle Gold mine."

In conclusion, Melnyk wrote, "Victoria controls what we consider to be a strategic asset: a sizeable gold development project (~200koz/y), which can be developed for a reasonable initial capital expenditure (~C$400m), located in a toptier political jurisdiction (Yukon), with full permits for construction in hand (received December 2015). We expect Victoria will garner interest from a variety of gold producers as an M&A target."

PI Financial has a Buy rating and $1.10 target price on Victoria. The shares are currently trading at around $0.52.

On Aug. 28, Victoria released exploration results for its Olive-Shamrock zone, located near the Eagle property, noting that results yielded "39.6m of 1.04 g/t Au in drillhole DG17-818C, 22.5 metres of 2.78 g/t Au in hole DG17-848C and 16.5 metres of 2.24 g/t Au in drillhole DG17-845C." Based on what a company official calls "a very exciting exploration season," Victoria Gold's "2017 exploration budget has been more than doubled, from $6.2M to $12.5M."

Ryan Walker, an analyst with Echelon Wealth Partners, noted in a Aug. 28 report that "the results continue to suggest the potential for relatively quick mine-life additions, while demonstrating the substantial exploration potential remaining along the 18km-long Potato Hills Trend at Dublin Gulch."

Walker also commented that "all Dublin Gulch exploration targets in 2017 have thus far returned significant mineralization that may be potentially accretive to the Eagle Gold project's economics – though considerably further drilling and metallurgical test work will be required before an impact can be estimated."

The Echelon analyst concluded that "our positive bias towards VIT shares reflects the project's strategic size, fully permitted and shovel-ready status, district-scale land package with substantial exploration potential near excellent infrastructure, and situation in Canada."

Echelon has a Speculative Buy rating on Victoria and a target price of $0.90.

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Disclosure:
1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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