Scotiabank's coverageScotiabank’s Daily Edge came out with a Buy recommendation today, with a $7.00 target
https://www.investorvillage.com/uploads/8056/files/Scotia31212.pdf
Reservoir Minerals Inc. (RMC-V C$4.30)
Not a "BORing" Discovery
Mike Hocking, MSc, P.Geo. - (416) 945-5228
(Scotia Capital Inc. - Canada)
mike.hocking@scotiabank.com
Patricia Cernes-Banner, CPA, CA, CBV - (416) 862-3875
(Scotia Capital Inc. - Canada)
patricia.cernes-banner@scotiabank.com
Rating: Sector Outperform Target 1-Yr: C$7.00 ROR 1-Yr: 62.8%
Risk Ranking: Speculative
Valuation: 1.0 x NAV
Key Risks to Target: Joint venture relationship, mineral resource estimate, metallurgy, financing, commodity pric e
Event
■ We have initiated coverage on the common shares of Reservoir Minerals Inc. with a Sector Outperform rating and a one-year target price of $7.00 per share. Please see ScotiaView for the full report.
Implications
■ Our valuation is based on a fully funded DCF model for the Timok Cu-Au JV project. Freeport-McMoRan Exploration Corp. has earned a 55% interest in the project and we assume will earn into 75%.
■ We view the discovery as a high-grade and potentially high-margin discovery that is located within 6 kilometres of a smelter complex. The Timok project is a blind copper-gold discovery made in the Bor district of eastern Serbia. The project is at an early stage. At a 1.5% CuEq cut - off, it has a size of approximately 22.4 Mt at a grade of 3.7% Cu and 2.4 g/t Au, for a CuEq grade of 5.2%.
■ We forecast annual consolidated production of 157 Mlb Cu and 103.4 koz Au for 11 years at an average operating cost of $0.69/lb Cu, net of gold credits. Our DCF mine model generates an after-tax NPV of $349 million and an IRR of 40% for Reservoir's 25%.
Recommendation
■ We rate RMC Sector Outperform with a one-year target of $7.00 per share. Our DCF model is very preliminary and relies on a number of assumptions. This project has no public reports outlining the size and grade of the mineral resource or any economic parameters for excavation of the mineralized zone.
Capitalization
Shares O/S (M) 41.8
(Basic)
Market Cap (M) $179.6
Float O/S (M) 38.6
Float Value (M) $166.0
NAV: $7.04
P/NAV: 0.61x | |