Canaccord raises target to $8Daily Letter Summary
21 April 2011
METALS AND MINING
Canaco Resources Inc. |
Nicholas Campbell, 1.604.643.7027
CAN : TSX-V : C$4.90 | C$938.1M | Speculative Buy , Target C$8.00
Raising peak gold price to $1600/oz; increasing target price of C$8.00 from
C$7.75
Investment recommendation
We maintain our SPECULATIVE BUY recommendation on the shares of Canaco
Resources with a target price of C$8.00, up from C$7.75.
Investment highlights
New Forecasts: Our new gold estimates are as follows: US$1525/oz (from
US$1450/oz) in 2011; US$1525/oz (from US$1450/oz) in 2012; US$1400/oz
(from US$1300/oz) in 2013; US$1250/oz (from US$1150/oz) in 2014;
US$1100/oz (from US$1000/oz) in 2015 and US$1000/oz long term (2016
and beyond) from US$950/oz. Our peak gold price increases to US$1600/oz
Au (from US$1500/oz).
Canaco announced that it intends to spin out in 70%-owned Harvest coppergold-
silver VMS project in Ethiopia into Tigray Resources. Canaco intends to
distribute 100% of the common shares of Tigray to Canaco shareholders on a
pro rata basis. Tigray is expected to apply for a listing on the TSX Venture on
completion of the spin out, which is expected to close by the end of June
2011.
Valuation
We have increased our peak gold price to US$1600/oz Au (up from
US$1500/oz). We now estimate a peak gold price NAVPS (10%, US$1600/oz
Au) of C$8.09, up from C$7.65. We continue to value the shares of Canaco
based on a 1.0x multiple to our peak gold price estimate of NAVPS.