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Wednesday, March 15, 2017 Derek Macpherson

AuRico Receives Positive EA Decision for Kemess

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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. read more


Tuesday, March 07, 2017 Derek Macpherson

Kiska Shareholders Approve AuRico Acquisition

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Last week, Kiska Metals Corp. (TSXV:KSK) announced its shareholders approved the planned acquisition by AuRico Metals Inc. (TSX:AMI) and that it has received the final court order approving the plan of arrangement. The transaction is expected to close on March 8, 2017. We continue to view this tuck-in transaction positively as it highlight’s AuRico’s focus on building out its royalty portfolio. Looking ahead, we believe the completion of the Environmental Assessment (expected in Q1 2017) is likely to be a key catalyst for AuRico to unlock the value of Kemess which appears to be undervalued by the market. read more


Wednesday, February 15, 2017 Derek Macpherson

AMI's 2017 Guidance Highlights Royalty Value

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Yesterday, AuRico Metals Inc. (TSX:AMI) released its Q4 and 2016 financial results and provided guidance for 2017. The company has guided for royalty revenues of US$8.0-8.4 million in 2017, a slight increase over 2016. The company recognized 2016 royalty revenues of US$8.1 million, reaching the top end of 2016 guidance (US$7.7-$8.1 million). At US$2.2 million, Q4 2016 revenues increased by 47% over Q4 2015, primarily driven by a production increase at Fosterville and a higher gold price. AuRico also reaffirmed that it expects the Environmental Assessment for Kemess to be completed by the end of Q1 2017, which we believe to be the key catalyst for unlocking the project’s value. This should allow AuRico to decouple its royalty and development assets and enable the company to unlock value for shareholders. read more


Wednesday, January 18, 2017 Derek Macpherson

AMI's Royalties Perform Well in 2016

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AuRico Metals Inc. (TSX:AMI) provided an update on its royalty portfolio and continues to expect royalty revenues for 2016 to be at the higher end of the US$7.7 - US$8.1 million guided range as result of recently released production results. The majority of royalty revenue is expected to come from Young-Davidson (US$3.3M – US$3.4M) and Fosterville (US$3.4M-US$3.5M), with the remainder from Hemlo and Eagle River. In 2016, production at Young-Davidson was 170,000 oz Au, and is forecasted to increase by 6% in 2017. Fosterville produced record annual gold results of 151,755 oz in 2016 and is expected to produce 140–145k oz Au in 2017. In addition, AuRico announced it expects to close the Kiska Metals transaction later in Q1, growing its royalty portfolio. AuRico’s current Enterprise Value (EV) is sitting at ~C$154 million, which implies an EV/EBITDA for royalties only (excluding Kemess costs, annualizing Q3 results) of ~23.6x. This is higher than the EV of royalty peers at 18.7x, which implies that the market currently allocates a value of ~C$32.0 million to Kemess. Similar stage development peers trade at 0.54x NAV or C$50/oz which suggests Kemess could easily be ascribed a value around C$115-120 million. This suggests to us that as permitting advances for Kemess Underground and AuRico continues to grow its royalty portfolio, it should enhance value for shareholders. read more


Sunday, January 15, 2017 Derek Macpherson

AMI Grows Kemess East; Adds Long-term Value

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AuRico Metals Inc. (TSX:AMI) released an updated resource estimate for Kemess East and has grown the overall resource and the high-grade core of the deposit. The overall tonnage increased by 19% and with grades seeing a very minor decrease, metal content has increased a similar amount (Figure 1). We view this as mildly positive since it enhances the long-term value of the Kemess project. The Kemess Underground project currently has a 12 year mine-life based on current reserves. This update, in-particular the high-grade core at Kemess East, along with the resources excluded from reserves at Kemess Underground, suggests this could be an exceptionally long-life mine, which would be attractive to larger mining companies. While this update adds long-term value to Kemess, in our view the key catalyst for unlocking this project’s value is the completion of Kemess’ Environmental Assessment expected in Q1 2017 and mine permit expected in H2 2017. These catalysts should allow AuRico to decouple its royalty and development assets and enable the company to unlock value for shareholders. read more


Sunday, January 15, 2017 Derek Macpherson

RCKS Drilling Deeper Lunch Features Three Royalty Companies

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Last week, Red Cloud Klondike Strike Inc. (RCKS) hosted another installment as part of our Drilling Deeper lunch series, this time featuring three companies that own and are unlocking royalty value in unique ways. The presenting companies were AuRico Metals Inc (TSX:AMI), Marlin Gold Mining Ltd (TSXV:MLN) and Maverix Metals Inc (TSXV:MMX). We believe all three presenters have the potential to unlock value for investors through each company’s royalty and streaming assets. read more


Thursday, January 12, 2017 Derek Macpherson

Permitting Catalysts on the Horizon for AuRico

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AuRico Metals Inc. (TSX:AMI) provided a permitting update for the Kemess Underground project which continues to suggest the Environmental Assessment decision will be made shortly. The process has now entered the final stages with the Assessment Report and conditions being made available to the public for a month long public comment period. The company expects a final ministerial decision regarding the EA certificate by the end of Q1. We view this positively as in our opinion the receipt of environmental assessment is a key catalyst to unlock the value Kemess and its royalty assets. Based AuRico’s current EV of ~C$149 million implies an EV/EBITDA for royalties only (excluding Kemess costs, annualizing Q3 results) of ~23.1x. This is higher than the EV/EBITDA of royalty peers at 18.7x, which suggests the market currently allocates a value of ~C$28.4 million to Kemess. Similar stage development peers trade at C$49/oz and 0.53x NAV which implies Kemess could easily be ascribed a value between C$115-120 million. This suggests to us that with the completion of the Environmental Assessment (Q1 2017), followed by the mine permit (H2 2017), AuRico should be positioned to decouple its royalty and development assets in 2017, allowing it to unlock significant value for shareholders.  read more


Friday, December 30, 2016 Derek Macpherson

AuRico Adds Royalties with Kiska Acquisition

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AuRico Metals Inc. (TSX:AMI) and Kiska Metals Corp. (TSXV:KSK) announced last week that they have entered into a definite arrangement agreement whereby AuRico will acquire Kiska. With the proposed transaction AuRico expects to add six North-American non-producing royalties as well as wholly-owned exploration properties, including the Kliyul gold-copper project which is in the vicinity of AuRico’s flagship Kemess gold-silver-copper project in BC. The proposed transaction consists of a combination of ~C$2 million cash and ~8.2 million AuRico shares (at C$0.93/sh), implying a total value of C$9.6 million and is expected to close in Q1 2017. We view this tuck-in transaction positively as it highlight’s AuRico’s focus on building out its royalty portfolio. In our view, the completion of Kemess’ Environmental Assessment in Q1 2017 should allow AuRico to decouple its royalty and development, assets allowing it to unlock significant value for shareholders.  read more


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