I take back my $1.50...this is getting to big to imagine must put MOA at over $2.00 now...!!!!
MAR with same share float as MOA just got raise $1.00 to $2.75 by TD///this would then also add $1.00 to MOA...!!!
C. Gert
Metals & Minerals
Recommendation: SPEC. BUY
Unchanged
Risk: SPECULATIVE
12-Month Target Price: C$2.75?
Prior: C$1.75
12-Month Total Return: 46.3%
Marathon PGM Corp.
(MAR-T) C$1.88
Newfound Momentum with Leprechaun Gold Exploration
Event
Marathon released the final 7 holes of the winter drill program from the
Leprechaun Gold Deposit, highlighted by the near surface intersection of 38.3 g/t gold over 9.0 m. The company intends to recommence drilling in May.
Leprechaun is part of the Valentine Lake Gold Project which covers approximately 30 km of the Cape Ray fault zone in Central Newfoundland.
Infrastructure in this area is excellent and there are a number of mills nearby.
The company is earning a 50% interest in the project through a joint venture agreement which requires $3 million in payments and $3 million in exploration and development work over the next three years.
The deposit is defined by an underground inferred resource (January 2005) of 443,000 oz grading 10.5 g/t over a strike length of approximately 600 m. The zone is open in both directions (with gold occurrences over 1 km in total) and open to depth. Almost all of the drilling is within 300 m of surface.
Impact - POSITIVE
Marathon’s drilling is aimed at: (1) defining mineralization up dip of the inferred resource where a crown pillar would have been modeled previously,
(2) extending the resource along strike in both directions, and (3) infilling gaps and adding confidence to the widely-spaced historic drilling pattern.
Given open pit parameters and a modeled gold price we would assume to be US$850/oz, we believe the company may be able to define a resource of 1mm oz in Q3/10 of which Marathon’s equity interest would be 0.5mm oz. To account for the potential value of this resource we introduce a $50 million credit which equates to $100/oz.
We make minor changes to our valuation of the Marathon PGM-Cu project, and our corporate NAV10% increases to $2.66/share (from $2.07). In view of the company’s newfound momentum, we are raising our target multiple to 1.0x (from 0.8x). Our 12-month target price increases to $2.75/share (from $1.75). We maintain our Speculative BUY recommendation
Details
Valentine Lake Gold Project
• The Valentine Lake Gold Project is being explored under an option and joint venture agreement between Marathon and Mountain Lake Resources Inc (MOA-V).
• Marathon has been granted an option to earn a 50% interest in the Valentine Lake property by funding MOA's option to purchase the remaining 70% of the property (MOA currently owns a 30% interest) from Richmont Mines for $3 million and commit to a total of $3 million in exploration and development expenditures over the next three years.
• The project is located 55 kilometres south of the town of Buchans, in Central Newfoundland. The Leprechaun deposit currently hosts an NI 43-101 compliant underground inferred mineral resource of 1,314,780 tonnes grading 10.50 g/t gold using a 5 g/t cut-off grade and a 3 metre minimum width for a total estimated mineral resource of 443,000 ounces of gold.
Outlook
We would expect the next phase of drilling at the Leprechaun deposit to commence in May with results in June. We believe the company could complete a resource estimate in Q3/10. Meanwhile, permitting work at the Marathon PGM project is ongoing with full permits expected next year.
Valuation
Marathon is trading at 0.71x our fully financed corporate NAV10%, which compares favourably with its peer group of base metals companies in our coverage universe that trade at an average of 0.80x NAV10%.
Justification of Target Price
Our target price is based on a 1.0x target multiple to our fully-financed corporate NAV10% of $2.66/share, which incorporates assumed dilution of $100mm in equity financing at the company’s current trading level of $1.75/share. We believe the use of a 10% discount rate appropriately reflects the high degree of financial risk that attends to our valuation.
Key Risks to Target Price
Gold, copper, platinum and palladium price risk; forecast risk relating to deposit size; foreign exchange rate risk; financial and market risk; technical risk; capital and operating cost risk; timing risk; political risk, including risks related to indigenous peoples; permitting risk; environmental risk; and staffing and key personnel retention risk.
Investment Conclusion
We have updated our valuation to reflect Marathon’s interest in the Valentine Lake Gold Project and made minor adjustments to our Marathon PGM-Cu project model. As a result, our 12-month target price rises to $2.75/share. We reiterate our Speculative BUY recommendation.
Market Data (C$)
Current Price $1.88
52-Wk Range
.41-$1.99
Mkt Cap (f.d.)($mm) $63.5
Mkt Cap (basic)($mm) $56.8
EV ($mm) $88.5
Dividend per Share --
Dividend Yield --
Avg. Daily Trading Vol. (3mths) 75,401
Financial Data (C$)
Fiscal Y-E December
Shares O/S (f.d.)(mm) 33.8
Float Shares (mm) 19.5
Net Cash ($mm) $10.0
Net Debt/Tot Cap --
NAVPS (current)(f.d.) $2.66
All figures in C$, unless otherwise specified.