RE:RE:RE:wt. consolidation Thanks for the clarification on the warrants. It was a surprise to see them not consolidated, but I assumed the case was what you explained (needing 10wt to exercise 1 share).
As for TD, I had fat fingers, they upgraded TMM to $1.15 May 12th, so post-conso would be $11.50 rather than $12.50. That said, I wonder if the IRR and NPV of the new PFS will have any impact. Doubt it.
Impact: POSITIVE
We have incorporated the Q1 results and updated our forecast for the revised San
Francisco LOM plan which sees production increasing by 20% in 2017 (based on the
mid-points of the new guidance). Our NAV increases to C$0.98/share from C$0.87/
share previously, reflecting the new LOM plan.
Adjusted EPS
of $0.02 was slightly above our estimate and consensus of $0.01
with the higher-than-expected costs offset by lower depreciation. CFPS (pre-
working capital) of $0.02 was slightly below our estimate of $0.03 reflecting the
higher costs but in line with consensus of $0.02.
Free cash flow:
The company generated ~$3.2mm of FCF (OCF preworking
capital changes less total capex) in Q1.
Updated LOM plan:
The updated plan is based on $1,200/oz gold price and looks
to extend production for a further six years compared to the current 3-4 year plan.
The new plan is in line with our previous forecasted timeline, however, assumes
higher production. We had previously forecast LOM production of 383k oz, well
below the new plan which calls for 694k oz. We have updated our forecast and
now model LOM production in line with the new plan.
The updated LOM plan provides a robust cash flow profile of ~$34mm per
year (assuming $1,250/oz gold) which should go a long way in facilitating the
development of the Ana Paula project, in our view.
We continue to view the Ana Paula project favourably given its low initial capex,
low operating costs and a robust 43% IRR under a $1,200/oz gold price.
TD Investment Conclusion
We are maintaining our BUY recommendation and increasing our target price
to C$1.15 from
C$1.00 previously.
With the optionality of the producing San Francisco mine and the new management's focus on surfacing value for Ana Paula, which has favourable economics, we continue to believe that there is value to be surfaced.
We view the company as a potential acquisition target.