Morning note from Cormark SecuritiesThis company will not stay at 30 cents for much longer - us longs will be richly rewarded in the not-to-distant future. Today's prices could very well be a steal...
- MM
Talking Points For Sales/Trading - Not Intended As A Research Report NioGold Mining NOX-V
Buy (S) - C$0.90 Target
Event: Column tests offer alterative processing route
Impact: Positive - improves negotiating position
Background To Results: *Recall that NioGold is weeks away from publishing an updated reserve , following a 70,000 m drill program (NioGold has been putting out great results this summer incl 4.47 g/t over 22.0m).
*We believe that once the current 2.0 MMoz Marban resource is upgraded it will offer a very logical and synergistic target for the Canadian Malartic JV(Yamana (YRI:T, Buy, C$4.75 target) & Agnico Eagle (AEM:T, Buy, C$45.00 target).
*Synergies are driven by the softer (BWI of 11 kWh/t vs 16 at Malartic), higher grade Marban rock that can take the pressure off the crushing circuit at Malartic (ore hardness has been an ongoing issue & is really hard on the equipment). Malartic is also exploration constrained and will need external growth to fill the mill.
*Recall that we believe the Malartic JV could pay up to $3.16/sh (at $1,200/oz) for NioGold before the transaction becomes dilutive given the immense synergies on offer. Capex would be limited to pre-stripping and either a haulage road or conveyor (~10 km from Malartic).
*Having a "stand-alone" heap-leach alternative to processing Marban ore will be important to NioGold in negotiations and that is where these column tests come in.
Column Test Results:
*Scoping level tests (2 columns) confirm that despite conventional wisdom, recovery for agglomerated Abitibi material crushed to 1/8" is >65%.
*The 2 samples graded 1.11 & 1.00 g/t Au respectively with recovery of 65.8 & 65.4 % Au over 91 days.
We continue to expect that NioGold is ultimately acquired by the Yamana/Agnico JV to take the pressure off the Malartic crushing circuit and extend the mine life at the flagship asset with softer, higher grade ore. We look forward to the next major catalyst, being an updated reserve (Q4/15) which should allow negotiations to commence. Recall that Osisko Royalties (OR:T, Market Perform, C$16.00 target) owns 18% of NioGold and is essentially in control of the Company.
Tyron Breytenbach, P.Geo
Equity Research - Mining
Cormark Securities Inc.
200 Bay Street, Suite 2800
Royal Bank Plaza, South Tower
Toronto, ON M5J 2J2