This is the press release announcing the Northern Securities Buy recommendation of Metanor. It is a nice description of where the company stands right now.
The analyst report keys off of two important scheduled milestones: (1) ramping up the Bachelor Lake mill from 800tpd to 1,200tpd later this year and, (2) running the high-grade Bachelor Lake ore through the mill next summer.
Gold producer Metanor Resources Inc. (TSXV:MTO)(MEAOF)is identified in newly issued analysts report by Northern Securities ashaving significant upside market valuation justification including a‘speculative buy’ recommendation with a 12-month price target ofCDN$1.00.
A full copy of the qualified analyst's report is available via at https://sectornewswire.com/MetanorReportMay09.pdf
Report Highlights:
1)Investment Conclusion: Based on a 1.1× multiple of 7% NAV, we value theshares of Metanor Resources at $1.03 per share. Given our continuedbelief that the average gold price will remain at or above $750/oz, weare initiating coverage of Metanor Resources Inc. with a SPECULATIVEBUY recommendation and 12-month target price of $1.00 per share.
2)Looking forward twenty-four months, we expect production to ramp-up by104% (from 2009 production) to ~66,000 ounces at a cash cost of~US$452/ounce. Given that the grades and thicknesses drilled to datehave been notable, we believe we have been conservative in our model.We believe the market has failed to fully appreciate these operationalupsides and expect the share price to improve in lockstep withproduction and cost improvements at the mine over the next twelvemonths.
3) Adding higher-grade ounces adjacent toexisting infrastructure. Systematic drill programs in place toexpand/upgrade current resources (~1.0 million ounces of Au). Newdiscoveries open potential for additional mineralization near theBachelor Mill.
4) Pending catalysts for the stockinclude: 1) results expected throughout the year from 2008 and ongoingdrill programs on three projects; 2) resource updates from BachelorLake/Hewfran as well as the Barry deposits by the end of 2009; and 3)Progress reports on (a) the underground development at BachelorLake/Hewfran and (b) ramping-up of operating capacity at the BachelorMill from ~800 t/d to ~1,200 t/d.
5) Well-financed foraggressive exploration and development/expansion programs in 2009.Approximately $13.0 million in working capital is expected to providefor substantial development of the projects in the next twelve months.The 2009 development/expansion program at the 100% Bachelor Lake Mineand Mill is expected to generate continuous news flow throughout2009-2010.
The following ‘Investment Thesis’ was provided in the report:
Webelieve the solid experience of Metanor’s management team, united withthe tremendous exploration potential of its assets, will enable theCompany to execute its growth plans and transform into a profitablegold producer. Metanor Resources Inc. is a Canadian-based gold miningand exploration company focused on developing its property portfolio inmining-friendly Quebec. The Company plans to develop the higher gradeBachelor Lake/Hewfran property by mid 2010, to blend the ore with thatof currently producing Barry open pit, at its 100% owned Bachelor mill.
Metanoris expected to follow-up with its systematic 2008 drill program toexpand/upgrade current resources. The Company plans to expand andupgrade current resources (~1.0 million ounces of Au) on its keyprojects to increase the mine lives as well as delineate additionalmineralization by drilling new potential targets. Encouraging resultsfrom the 2008 drill programs on the Bachelor Lake/Hewfran as well asthe Barry property have resulted in the discovery of new gold bearingzones and expansion of known resources along strike as well as atdepth. We believe the success of the 2008 exploration program,amalgamated with the ongoing drill program in 2009, have the potentialto increase Metanor’s resources by at least 50% (in the next 12-18months).
Re-rating through operational improvementsshould boost shares in the next twelve months. The operating team atMetanor is applying its efforts on efficiently ramping up the Bachelormill, currently running at ~800 t/d, to ~1,200 t/d by Q3-09. The millis currently being charged with lower-grade ore from the Barry open pitmine and the plan is to blend it with higher-grade (6.0 g/t-7.0 g/t)ore from the Bachelor Lake/Hewfran by mid-2010. For 2009 we estimatethe Company will produce ~32,000 ounces of gold at a cash cost of~US$629/ounce. Looking forward twenty-four months, we expect productionto ramp-up by 104% (from 2009 production) to ~66,000 ounces at a cashcost of ~US$452/ounce. Given that the grades and thicknesses drilled todate have been notable, we believe we have been conservative in ourmodel. We believe the market has failed to fully appreciate theseoperational upsides and expect the share price to improve in lockstepwith production and cost improvements at the mine over the next twelvemonths.
Reason to invest in Metanor shares now.Near-term/recurring catalysts for the price of Metanor include resultsexpected throughout the year from 2008 and ongoing drill programs onthree projects. Medium-term catalysts consist of: 1) resource updatesfrom Bachelor Lake/Hewfran as well as the Barry deposits by the end of2009; and 2) Progress reports on (a) the underground development atBachelor Lake/Hewfran and (b) ramping-up of operating capacity at theBachelor mill from ~800 t/d to ~1,200 t/d.
We areinitiating coverage of Metanor Resources Inc. with a SPECULATIVE BUYrating and a 12-month target price of $1.00. The improved productionrates, coupled with the updated resource estimates and a favorableoutlook on gold equities in 2009-2010, should help Metanor’s sharesre-rate higher. We arrive at our 12-month target price by applying a1.10× multiple to our estimated 7% NAVPS of $0.93, based on a long-termgold price of US$750/oz.
This release may containforward-looking statements regarding future events that involve riskand uncertainties. Readers are cautioned that these forward-lookingstatements are only predictions and may differ materially from actualevents or results. Articles, excerpts, commentary and reviews hereinare for information purposes and are not solicitations to buy or selland of the securities mentioned. Readers are referred to the terms ofuse, disclaimer and disclosure located at the above referenced URL.
Contact Information:
Fredrick William, Managing Director
Market Equities Research Group
editor@marketequitiesresearch.com
866.620.9945