Scotia increases AUQ target to $8.00 Recent Update Text as of 10OCT12
AuRico entered into an agreement to sell its Ocampo mine to Carlos Slim's
majority-owned Minera Frisco SAB for $750 million in cash. The transaction includes a 50% JV interest in the Orion advanced explorationproject and is expected to close in December 2012. The deal values Ocampo at a slight discount to our net asset valuation (NAV3%) of $881 million (or $2.95/share). It would be in line with our NAV using about 6% discount rate. Accordingly, our NAV3% decreases 5% to $7.86 per share. On a gold-equivalent basis, we calculate Ocampo is being sold for $315/oz ofreserves or $258/oz of measured and indicated resources. AuRico's rationale includes wanting to repay debt ($288 million), fund future
programs, and return a "significant amount" of capital to shareholders by about
Q1/13. This could be through dividends or a share buyback. We view the deal as a net positive and accordingly we are increasing our target multiple to 1.00x our NAV (from 0.71x) with the Ocampo risk removed and converting to cash. Our one-year target increases to $8.00 per share.
| V9 | AuRico Gold Inc. changed its corporate name from Gammon Gold Inc. (Gammon) to AuRico Gold Inc. in June 2011. A class action lawsuit was commenced in February 2008 in Ontario, Canada, against Gammon and others by a purchaser of Gammon common shares pursuant to an April 2007 public offering. The lawsuit is still pending. Members of the underwriting syndicate, which includes Scotia Capital Inc., are among those named as defendants in the lawsuit |