Globe and mail Inside the Market Blog Raymond James analyst Tara Hassan expects Integra Gold Corp. (ICG-X) to continue its “aggressive” exploration approach at its Lamaque project in Val-d’Or, Que., which she called “one of the most productive mining jurisdictions in Canada.”
Also foreseeing key project updates in 2017 that will “confirm the potential for a larger, longer life and more economics operation” at the facility, Ms. Hassan initiated coverage of the stock with an “outperform” rating.
“Although Integra has adopted an aggressive approach to exploration over the last 36 months, the bulk of these efforts have been focused on expanding the resource at Triangle and satellite deposits that form part of the Lamaque South zone,” she said. “With Triangle now well defined and reaching a critical scale to support a construction decision, Integra is now able to shift some of its exploration focus and dollars to satellite targets and the deep potential at Lamaque. As a result, we expect 2017 could be a pivotal year to demonstrate the potential of the larger property package.
“In 2016 Integra began to undertake a number of initiatives to highlight this potential and we expect to see results from these efforts beginning in 1Q17 when the company releases an updated resource focused on the upper 400 metres of the historic Sigma mine.”
Citing its “sizable resource already defined, a permitted mill on site, significant exploration upside remaining and the potential for near term production,” Ms. Hassan sees Integra as a prime takeover candidate going forward.
“Layering in the increased focus and premium for Canadian acquisitions, we believe Integra could attract a valuation well above what we model. Comparing Integra to producing gold mines in Canada, we note that it compares favourably on both grade and scale for assets with grades greater than 2 grams per tonne gold,” she said. “Lamaque falls in the top 30 per cent on grade and top 40 per cent on scale when the base 3 g/t Au cut-off resource is considered. If the higher grade 5 g/t Au cut-off is considered, Lamaque would move up one ranking on grade to sixth in Canada.”
“Over the last 2 years, acquisitions of North American, and in particular, Canadian assets, have picked up. In 2016 alone, companies with assets in Canada represented 41 per cent of the transactions and 74 per cent of the transaction value. Analysis of these acquisitions shows that there has been an average acquisition P/NAV [price to net asset value] multiple of 1.1 times with a range of 0.49x-1.86x and an average EV/oz [enterprise value per ounce] takeout valuation of approximately $65 U.S./oz with a range of $19/oz-$110/oz. These takeout valuations are well above what we consider to reach our target price and compare favourably to global takeout valuations which have averaged 0.81 times NAV and $54/oz.”
Ms. Hassan set a price target of $1.15 for the stock. Consensus is $1.17.
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