Scotia maintains AR Sector Outperform & C$3.00 targetVery low volume today
Recent Update Text as of 17SEP15 . Argonaut released new economic parameters for the Magino project. . The updates were applied to the Dec. 2013 Pre-Feasibility Study (PFS) to reflect current market rates. Changes included a new USD:CAD F/X rate of 0.80 (vs. 0.95), a fuel price of $0.74/L (vs. $0.90/L), and a cyanide price of $2.40/kg (vs. $2.97/kg). Cyanide consumption was also reduced to 0.50 kg/t (vs. 0.75 kg/ t), and mine fleet costs were reduced to reflect market conditions. Other parameters were unchanged. . The net impact of the changes resulted in LOM cash costs of $564/oz (vs. $693/ oz), initial capex of $302M (vs. $356M), after-tax NPV5% of $235M (vs. $199M), and after-tax project IRR of 21% (vs. 18%). . Argonaut is currently updating the project resource and plans to release a fully updated PFS in late 2015. Of note, potential exists to increase the total mineable gold ounces as the Dec. 2013 PFS resource was constrained by land boundaries (now resolved) and excludes recent drilling. As such, only 50% of the M&I tonnes were used in the PFS. . While we are encouraged by the latest Magino update, we will await the full PFS report (due Q4/15) and further clarity on project funding strategy prior to revising our model and valuation. Currently we use EV/oz for Magino, representing ~6% of our Asset NAV (C$0.17/sh). . We maintain our Sector Outperform rating and C$3.00 target.
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