From Daniel Earle on Jan 24/12 I realize this is old news - but it is the last report (that I am aware of) given from TD Securities, Daniel Earle, and may be helpful to some who haven't seen it.
Canaco Resources Inc. (TD Securities Action Notes / Jan 24, 2012)
(CAN-V) C$1.35
2012: A Defining Year for the Company
We believe 2012 will be a defining year for Canaco. The company expects to complete infill drilling at Magambazi in January; publish its maiden resource estimate in March; submit its application for a mining license in Q2/12; and complete a Preliminary Economic Assessment mid-year. We expect this to establish Magambazi as one of a small number of high grade open pit gold development projects of a significant size that exist globally. After reviewing drilling results reported in the period since our July 13, 2010 resource forecast of 3 million oz, we are cutting this estimate to 2 million oz to reflect lower grades in the Central and North zones relative to the Main zone.
The company has nine drill rigs on site and by the end of January we expect that all of these rigs will have been re-allocated to drilling aimed at expanding the resource at Magambazi where it remains open at its margins and, perhaps more significantly, to testing targets near Magambazi (Kuta, Magambazi Deep, Magambazi North) and along the MK Trend in an effort to identify a new discovery.
Even absent success with the drill bit, we expect the stock to re-rate higher with the release of its maiden resource marking the end of a long period of infill drilling, drawn out by slow assay turnaround and an inability to source an adequate number of drill rigs, and the beginning of a period of revaluation with project advancement.
Impact –NEGATIVE (but we still see a lot of catalysts and value) With these changes, our NAV5% estimate declines to $5.16/share (from $6.30) and we are trimming our 12-month target price to $4.00 (from $5.00). Given a steeply discounted valuation at 0.3x NAV5% (its peers in our coverage universe trade at an average of 0.6x NAV5%) and a series of potential catalysts
Outlook. We anticipate the following developments over our 12-month target price horizon:
? Infill drill results from Magambazi – Ongoing
? Initial drill results from near Magambazi targets – Q1/12
? Initial diamond drill results from targets along the MK Trend – Q1/12
? Initial resource estimate at Magambazi – Q1/12
? Preliminary Economic Assessment – mid-2012
Valuation
We calculate that Canaco is currently trading at 0.3x our corporate NAV5%. This represents a steep discount to its development
Key Risks to Target Price
Key risks include: gold and fuel prices; foreign exchange risk; financial risk, including risks to the cost and availability of financing; forecast risk, including capital and operating cost risks, risks related to deposit size, grade and mineability, and risks to production levels; timing risk; technical risk; infrastructure risk, including the availability of power and its reliability; political risk, including the potential for resource nationalization and changes to the legal and fiscal regimes; permitting risk; community relations risk, including risks related to indigenous people; labour relations risk; illegal mining risk; risks related to the cost and availability of equipment and consumables; environmental risk; title risk; litigation risk; accounting risk; access risk; and key personnel retention risk.
Investment Conclusion
We believe Canaco may be on the cusp of re-rating to higher valuation multiples with the release of the maiden resource estimate for its Magambazi discovery in Q1/12. This may mark the end of a long period of infill drilling that was drawn out by slow assay turnaround and an inability to source an adequate number of drill rigs in Tanzania and may mark the beginning of a period of revaluation with project advancement in our view.