Confidence in the exploration potential around and under a seemingly robust looking Lamaque gold project, and in further potential cost cuts, could be the trigger for a more imminent move on circa-C$380 million takeover target Integra Gold (TSXV: ICG).
The Quebec-focussed gold developer’s share price is not exactly on fire at present, reaching C87c earlier this month and currently at 79c. It was trading at 52c back in December when the sector took a pre-Christmas break. Integra has since bounced up like others and reaction to this week’s updated Lamaque preliminary economic assessment (PEA) could strengthen ahead of a further resource “update” that takes into account 105km of drilling last year.
Multi-national gold miner Eldorado Corp bought 15% of Integra at C28c/share back in August, 2015. It has interests in Turkey, Greece, Serbia, Romania and Brazil, but is missing a decent gold asset in its backyard.
“The location of the Lamaque project along the eastern end of the prolific Abitibi gold belt could make ICG an attractive takeover candidate for a company looking to add to/enter the region,” RBC Capital Markets said this week.
“We believe ICG shares are currently priced at a discount based on precedent transaction multiples.”
RBC, and Integra itself, see re-rating catalysts including the upcoming resource update, ongoing exploration (six rigs on site at the moment), and development milestones on the path to production. The PEA spotlights an expected 43% IRR on a C$111 million (US$84 million) project (including pre-production revenue) producing at least 123,000ozpa over more than 10 years on current reserves.
Sans permitting and infrastructure risk the key hurdle for Integra is finance, with RBC declaring C$80 million of debt/equity would be needed to complete development of Lamaque. Integra already has a right-size mill plus about C$55 million of cash and investments.
RBC highlighted the cost/associated risk of a plus-$30 million mining equipment fleet could also be shifted to a contractor, something one of Integra’s Australian peers probably wouldn’t think twice about.
A better mining plan – to be firmed up by ‘trial mining’ later this year off a new decline – and the growing reserve/resource base seem to highlight ongoing refinement of the Integra value case.
“With only a marginal increase in total capital compared to the 2015 PEA, the project is now able to demonstrate substantially higher economic returns, a much longer mine life, more than double the amount of recovered ounces, and a material increase in the annual production profile while still managing to operate with all-in sustaining costs of less than US$650 per ounce,” Integra president and CEO Stephen de Jong said this week.
“With an industry leading total capital to NPV ratio, this study further demonstrates Lamaque’s extremely rare positioning as a project in a safe jurisdiction with high grades and high margins, with the potential to be up and running in less than two years.
“The study also outlines several opportunities to further enhance project economics which we will continue to assess as we move closer to the completion of a bulk sample, which we are aiming to complete in Q3.”
All of which seems to say the timing must be just about right for a bigger player to make a move into the Valley of Gold.