CORMARCK report on Luna Gold
here´s the summary of Cormarck Securities report on Luna Gold (july 12) :
"Investment Thesis:
Luna is an underfollowed gold producer with an impressive production and
cash flow growth profile that is not reflected in the current share price. The
Company’s main asset is the Aurizona open-pit gold mine in Maranhao state,
Brazil, which it advanced from exploration and development to production.
Highlights:
• Q2/12 Production Beats Our Estimate
Luna reported Q2/12 production from the Aurizona mine of 17,269 oz, which
outperformed our 15,641 oz estimate. The beat is attributable to higher than
expected throughput, partially offset by a lower grade and recovery rate. YTD
production totals 33,331 oz, indicating Luna is well on its way to attaining 2012
production guidance that Management has maintained at 60,000 oz.
Management has also indicated it is on track for production of 100,000 in
2013.
• Sale Of Non-Core Cachoeira Project
A definitive agreement was announced with Brazil Resources (BRI-TSXV, not
covered) which will pay Luna a total of $3 MM in cash and shares plus
additional contingent milestone payments of $7 MM. Cachoeira is an
exploration-stage property in the Gurupi Greenstone Belt in Brazil that was a
secondary asset for Luna in recent years behind the flagship Aurizona mine.
Cachoeira was only 3% of our NAV estimate.
• Maintaining Buy Rating; Revising Target To C$5.50 (From C$6.25)
A combination of model changes and valuation inputs (discussed within) has
resulted in a modestly lower NAV and target price. We continue to believe
Luna represents good value (0.35x P/NAV) that is underpinned by a best-inclass
growth profile as the Aurizona operations are expanded to exploit the
long-life resource base. We look to the upcoming economic study as a major
derisking event"
Personal Note: Potential resources and production from the Maranhao/Luna Greenfields
have obviously not been taken into account for this valuation since drilling for resouces is
just getting started (Q3). Based on the above and if they are able to find in Luna
Greenfields the same amount of resources during the next 18 to 24 mths as in Aurizona
then the overall LUNA valuation could/should more then double since production in this case
won´t be tied to the Sandstorm financing deal!.