RCKS Talk

Tuesday, February 06, 2018 Derek Macpherson

Anaconda Mining: Squeezing Value Out of Atlantic Canada


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We recently took the time to dig deeper into Anaconda Mining Inc. (TSX:ANX, $0.395) and are publishing our initial estimates. We came to the conclusion that Anaconda is an undervalued Canadian producer with significant medium-term cash-flow growth on the horizon and near-term catalysts that should close the valuation gap to peers. A summary of our work can be found in this video or below, and our full report can be downloaded here.


Conclusion:

An undervalued Canadian producer with significant medium-term cash-flow growth on the horizon and near-term catalysts that should close the valuation gap to peers.

 

Estimates:


Key Reasons We Like Anaconda:

Get 2 Projects for the Price of 1
• Our estimates suggest that at the current EV of $41M investors are paying for either Point Rousse ($58) or Goldboro ($116)
• For Point Rousse, we assume no upside beyond Argyle – although resource growth potential exists both at Argyle and other targets
• For Goldboro, we have based our estimate on the conservative PEA – room for resource growth as well as operating and capital cost improvements

Production Expected to Grow to 55 koz per year by 2021 – Positioned to Further Consolidate
• We forecast production growing from 18 koz in 2018E at US$1,335/oz All-In Cash Costs* (AICC) to 55 koz per year by 2021E at US$915/oz
• As well, the company is well positioned to add additional assets in Atlantic Canada

Proven Track Record in a Tier 1 Jurisdiction
• Current management has demonstrated an ability to generate cash from the small-scale Point Rousse, allowing it to repair the balance sheet while growing the company
• Newfoundland and Nova Scotia have proven themselves to be two of the better mining jurisdictions in the world

Upcoming Catalysts:

• Ongoing drill results from Goldboro & Point Rousse
• Increased production & cash flow in H2 2018
• Ongoing development activities from Goldboro
• Ongoing review of Atlantic Canada consolidation opportunities
 

Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate, Mining Analysis
Alex Pitcher | Associate, Mining Analysis
 
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
Toronto ON, M5C 1G6
 
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Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This publication should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not undertake to advise the reader of such changes. This publication does NOT take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud KS will not treat recipients of this publication as customers or clients by virtue of having viewed this report.

Company Specific Disclosure Details
Anaconda Mining Inc. - TSX:ANX - 1,3,4

1) A member of Red Cloud KS team has visited/viewed material operations of the issuer.
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5) Red Cloud KS or a member of the Red Cloud KS team or household, has a short position in the shares and/or the options of the subject issuer.
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7) A member of Red Cloud KS team or a member’s household serves as a Director or Officer or Advisory Board Member of the subject issuer.

 

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