Casimir raises target price to $8.50
Casimir Capital raised its price target on Guyana Goldfields Tuesday after the gold company released a long-awaited feasibility study update for the Aurora project in Guyana late last week. Casimir Capital raised its price target on () Tuesday after the gold company released a long-awaited feasibility study update for the Aurora project in Guyana late last week.
The Tetra Tech Inc.-led study estimated the after-tax internal rate of return (IRR) at 38% and the net present value, at a 5% discount rate, at $800 million, assuming a base-case gold price of $1,300 per ounce.
Casimir analyst Stuart McDougall notes that the results marked a "significant improvement" over the feasibility study last February, which estimated a base-case after-tax IRR of 12.7%.
Among the key differences, the analyst took note of a 45% decrease in life-of-mine capex, including a 61% decline in initial capex.
Although the NI 43-101 report is pending, around $72 million in savings were won with the use of "fewer and smaller surface trucks", and around $200 million from the elimination of a vertical shaft and backfill plant, as well as about $46 million from the removal of SAG milling and tailings thickening.
The latest report also saw a 19% decrease in life-of-mine average cash costs, reflecting a tighter mine site, a 49% reduction in the stripping ratio, and a 49% decline in underground unit costs.
Life-of-mine average recovery rates were basically unchanged, but processing unit costs fell almost 19% on lower power consumption rates. The company also increased its peak processing rates by 25%, helping to keep life-of-mine production rates within 2% of the original feasibility study - at 194,000 ounces per year.
"Following yesterday’s technical session and our own subsequent review of the old study, we have decided to adopt the changes in our model ahead of the full report’s publication later this month," McDougall writes.
"Accordingly, we are raising our target price to C$8.50/share from C$5.75/share and reiterating our speculative buy recommendation."
Shares in Guyana were lately trading at $4.12, leaving plenty of room for upside.