Source: Streetwise Reports 05/31/2018
A Vancouver-based miner diversifies by adding a Brazilian portfolio to its Mexican project.
Leagold Mining Corp. (LMC:TSX.V; LMCNF:OTCQX) announced on May 24 that it has closed its acquisition of Brio Gold. This is a major milestone in the company’s goal to become a mid-tier gold producer with a focus on Latin America.
The Brio acquisition brings three operating mines, a near-term gold mine restart project and two development projects, all located in Brazil.
Neil Woodyer, Leagold CEO, stated: “We are very excited about Leagold’s new position as a mid-tier gold producer with the growth of our production rate to over 400,000 ounces per year. Our business and market profiles are strengthened by our diversification in both Mexico and Brazil and across four operating mines. Leagold’s measured and indicated resources have increased to 16.4 million ounces and proven and probable reserves have increased to 5.6 million ounces.”
The company’s original project is Los Filos, where it is operating two open-pit mines, Los Filos and Bermejal, and one underground mine. Leagold acquired Los Filos from Goldcorp in 2017.
Leagold is continuing exploration activities at the Los Filos Underground Mine and earlier this month announced high-grade drill results of 24.2 grams per tonne (g/t) over 4.10 metres, 23.6 g/t over 6.95 metres, and 9.1 g/t over 8.69 metres. The company has stated that the goal of the drill program is to “identify additional resources to replace reserves and extend the overall mine life. The program is on track with over 12,000 metres of step-out drilling completed to date and the majority of the exploration drilling to take place in the second half of this year.”
The company plans to incorporate the drill results into a final resource estimate by the end of the year.
Peter Marrone, CEO of Yamana Gold, has accepted a position on Leagold’s board. Yamana holds a 20.5% stake in the company.
Leagold has gained the attention of industry analysts. CIBC just initiated coverage of Leagold with an Outperformer rating and a 12- to 18-month target price of $5 per share. Leagold’s shares are currently trading at around $2.87.
Analyst David Haughton of CIBC wrote on May 29 that “an experienced operating and development team backed by a solid balance sheet should offer investors greater assurance that Leagold can achieve the full potential of the Brio assets and Los Filos.” He sees the company having a strong platform for growth, noting that the firm expects Leagold to “produce ~365koz in 2018 and potentially over 700koz by 2020E. The near-term focus is to improve each operation, to redevelop Santa Luz, and to complete the Bermejal underground at Los Filos. Upside of the possible Los Filos CIL development could offset any changes in outlook for the higher-risk Santa Luz project.”
“Leagold provides an attractive combination of a better-than-average growth profile and value amongst mid-tier gold producers. The P/NPV of just 0.5x at spot reflects the legacy issues at Brio that Leagold has the opportunity to improve,” Haughton concluded.
Jamie Spratt, an analyst with Clarus Securities, noted on May 4 that Leagold “currently trades at a ~50% discount to peers on a P/NAV basis and in our view, this provides a deep value re-rating opportunity with continued management execution and a successful integration of the Brio assets.”
Clarus has a target price of $6.24 and gives Leagold a Buy rating.
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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. 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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Disclosures from CIBC, Leagold Mining Corp., May 29, 2018
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From:: The Gold Report