AuRico Metals Inc. (TSX:AMI) announced today it has obtained a positive environmental assessment (EA) decision for its Kemess Underground project in
British Columbia. We view this very positively as we believe it is an important catalyst for AuRico to unlock Kemess’ value. AuRico’s current EV of
~C$157.8 million implies an EV/EBITDA for royalties only (based on 2017 guidance) of ~22.0-23.7x, which is slightly higher than royalty peers that
trade at 19.2x (2017e EV/EBITDA). This suggests the market currently allocates a value of ~C$20-30 million to Kemess. However, similar development
stage peers trade at 0.56x NAV or C$48/oz, which suggests that Kemess on its own could be ascribed a value of ~C$115 million. In our view, with the
completion of the Environmental Assessment, AuRico should now be positioned to unlock this value, providing investors the potential for meaningful
near-term upside as the market prices in the viability of Kemess.
Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
Red Cloud Klondike Strike Inc.
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AuRico Metals Inc. - TSX:AMI - 1, 2
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