FRP vs KNB (MPartners)MPartners comparison between FRP offer and KNB (Kinbauri Gold)
• Yesterday Eldorado Gold (ELD-TSX) announced that it intends to make an offer for all of the outstanding shares of Frontier Pacific Mining (FRP-TSXV)
• FRP holds a number of assets in Europe and South America, however, it is our view that its gold asset in Northern Greece is what makes it attractive to ELD
• The Perama Hill deposit in N. Greece contains 1.36Moz of Indicated Resources and 27Koz of Inferred Resources and will undergo a feasibility study shortly
• Early indications from FRP suggest the deposit could be mined as a low strip open pit mine with good processing recoveries and could incorporate a silver revenue stream
• It is our view that this proposed takeover represents a very interesting data point for Kinbauri Gold (KNB-TSXV), who is currently developing a similar sized asset in Northern Spain
• In general the projects have a large number of similarities (as shown in the table below), with the exception of different mining methods (underground vs. open pit)
• Despite this, KNB is trading at a significant discount to the proposed offer for FRP (valued at 3.5X KNB’s EV/oz value), signaling that there is substantial upside for a quality asset like the one KNB is developing
• Based on the implied market cap for FRP ($156.7M based on $0.90 share price) and the short term investments currently on its book ($18M) the EV/total oz valuation for FRP is $100/oz
• Applying this valuation to KNB results in a share price of $2.99, 251% higher than its current value
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KNB
Before After
Shares (M) 43.5
Warrants (M) 21.8
Options (M) 3.7
Share Price ($) 0.84 0.70 0.90
Financial Info
Market Cap ($M FD) 58.0 121.8 156.7
Enterprise Value ($M FD) 58.0 103.8 138.7
Short Term Investments
Valuation Info
EV/Reserve+M&I $ 59 $ 76 $ 102
EV/Total Ounces $ 28 $ 75 $ 100
Price @FRP Offer $ 2.99
Production Info
AuKoz/year 125
Op. Ex ($/Auoz) 425
Capital Cost ($M) 60
Start of Production 2010
Mining Method UG
Location N. Spain
Reserves + M&I
Tonnes (000t) 8,830
Au (g/t) 3.48
Au Koz 989
Inferred Resources
Tonnes (000t) 5,950
Au (g/t) 5.61
Au Koz 1,074
Source:
KNB
Website, M
Partners
Share Structure and Info
1 1,700
131
171
97
2010?
2.58
2 7
FRP website, ELD PR,
M Partners