RCKS Talk

20-Dec-2018

Aquila Resources Inc

Progressing Towards Production

Impact: Mildly Positive

Aquila released a positive permitting update, as one of the legal challenges for its permits was dismissed. While the legal challenge of permits is normal course in the U.S., this result acts as another positive step to advancing Back Forty towards production. We view Aquila as an undervalued take-out candidate on the verge of a re-rating through the development of the high-margin Back-Forty polymetallic project; the backdrop of a tightening commodities market should underpin the strategic value.

Highlights:

  • Back Forty prevails. The Federal Lawsuit against Aquila’s Wetland Permit was dismissed putting the company one step closer to being able to start construction at its Back Forty project in Michigan. The company is currently fully permitted for construction and commencement of operations and is waiting on the resolution of two other contested permit cases, both of which we expect to be resolved in 2019.  
  • Pre-construction work continues. Backed by a recent US$7.4M streaming payment (an advance on the total US$55M agreement) from Osisko Gold Royalties and with a total US$10.5M in cash, the company is funded to continue advancing the Back Forty Project. Besides permitting updates, the next key catalyst is likely to be an update on project financing (likely a combination of debt, stream and equity).  
  • Adding value with Wisconsin assets. Aquila has two 100% owned exploration projects in Wisconsin and with mining moratorium recently removed in this state, these projects could add some exploration sizzle to Aquila. The Reef project (Au) is the nearest at 85 km west from Back Forty and Bend is a Cu-Au project also located in Wisconsin 135km away from Back Forty. Both projects provide significant exploration potential and Aquila has a first mover advantage in a good jurisdiction.  
Valuation:
Further de-risking and the roll-out of Wisconsin should drive the share price higher. Aquila currently trades at 0.41x consensus NAV, a slight premium to developer peers at 0.40x (Figure 1). We believe that as Aquila progresses down the path to production it should re-rate with Wisconsin likely providing additional value. Upcoming Catalysts include 1) Permitting Updates (2019), 2) PEA Update (2019) and 3) Surfacing Wisconsin assets (Q1/19). 

 

01-Aug-2018

Aquila Resources Inc.

Positive Feasibility Study Follows Recently Received Permits

Impact: Positive

Following the receipt of permits, Aquila has announced the results of an open pit only feasibility study (FS) for its Back Forty project in Michigan, which demonstrates positive economics for a low-cost polymetallic open pit mine. Considerable upside remains for the project with the potential addition of an underground operation that was previously outlined in a 2014 PEA.
  • Feasibility Study is in line with our expectations
  • Potential addition of an underground expansion provides material upside to the FS mine plan
  • With permits in hand and a positive FS released, focus now shifts to the pre-construction phase
We expect Aquila to continue trading at a premium to zinc explorers and re-rate towards a valuation comparable to that of zinc developers and producers in North America.

04-Jun-2018

Aquila Resources Inc.

Final Major Permit Received for Back Forty

Impact: Very Positive

Aquila has received its wetlands, lakes and streams permit from the Michigan Department of Environmental Quality and has now received all the major permits required for construction and commencement of operations at the Back Forty Project in Michigan.

  • With all required major permits in hand, pre-construction activities will begin immediately
  • Back Forty open pit Feasibility Study, which has been nearing completion, is expected to be published in the coming months
  • In addition to pre-construction activities, we expect to see finalized plans for an exploration program to test additional targets at Back Forty
Now that Aquila has received its final permit for Back Forty, we believe the company is well positioned to complete the feasibility study and start construction with funding in place to support pre-construction activities. We expect Aquila to continue trading at a premium to zinc explorers and approach a valuation comparable to that of zinc developers and producers in North America.

04-May-2018

Aquila Resources Inc.

Final Permit for Back Forty Moving Towards Resolution

Impact: Neutral

Aquila continues to work towards receiving the company’s final permit, the wetland/stream/floodplain permit, in order to commence construction at Back Forty.

  • Certain EPA objections have been resolved, and have been conveyed to the Michigan Department of Environment Quality (MDEQ)
  • Aquila and the MDEQ have until June 6, 2018 to resolve remaining objections to confirm the proposed permit conditions comply with the EPA
  • Recall, as of the December 2017 the permit was deemed administratively complete, Aquila assures the remaining issues should be resolved, and conditions met
Upcoming permitting news will be an important near-term catalyst for the company, we believe Aquila is well positioned to complete the feasibility study and start construction once the final permit has been granted, with funding in place to support pre-construction activities.

 

01-Jan-2018

Aquila Resources Inc. (TSX:AQA)

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