RBC increases target to $18 from $12What do you think of this one, roundtrip?
Alacer Gold Corp. (ASR C$10.91†)
Aug 24, 2011
ALACER GOLD CORP
Company Profile
Alacer Gold is a new Tier II gold producer created from the merger of Anatolia Minerals and AvocaResources. Alacer has interests in three producing gold mines in Australia and a new gold mine approaching commercial production in Turkey. We forecast the company to produce close to 350Koz in 2011 and 450Koz in 2012. Alacer's internal growth target is 800Koz/yr by 2015.
Investment Rationale
New Tier II Producer With Growth - The combination of Anatolia and Avoca to create Alacer results in a solid platform for growth with 400-450Koz/yr of gold production from existing mines, and organic projects with potential to deliver growth to 750-800Koz/yr.Solid Management Team – Senior management has experience in doing business in Turkey and Australia, as well as managing much
larger mining companies.Share Re-rating Potential Is Real - ASR shares are trading around the peer group of Tier II Producers, but we believe further re-rating can occur as the company demonstrates a successful ramp-up of new mine in Turkey and delivers further details on the scope and timing of future growth prospects later this year.
Valuation
Our 2012 NAV for Alacer is US$8.50/sh. We are increasing our 12-month target price from $12 to $18/sh, which reflects fair values generated using P/NAV and forward looking P/CF multiples. For Alacer, we employ 1.75x NAV and 15x forward P/CF target multiples (reduced from 2.0x and 17.5x previously), which are at or slightly above our midpoint target multiples for the peer group of Tier II golds (1.0-2.5x NAV and 10-25x P/CF). We believe Alacer Gold can become one of the higher growth names in the Tier II space.