GREY:VITFF - Post by User
Comment by
MVargason May 15, 2019 10:26pm
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Post# 29750718
RE:St Barbara to acquire Atlantic Gold
RE:St Barbara to acquire Atlantic Gold hcarbon wrote: Atlantic Gold with 80 - 100 K oz/y at low aisc. Planing for 200 k oz/y
Peer with Vit.
When Vit can prove that the production and aisc will match the numbers in the guidance buy out will be possible
Yes, Atlantic Gold produced just over 19,600 oz in Q1 and had earnings of just over C$5 million. Their forecast for this year is about 95,000 oz. and Atlantic is not expected to reach 200 k oz/yr until 2023. They have about $120 million in debt and the expansion to 200 k oz/yr will require substantial additional capital.
VIT will start producing at the rate of 200,000 oz/year next year. The project is fully financed. They have significantly more gold reserves and resources than Atlantic and have considerable exploration upside.
Atlantic's current AISC costs are about $200/oz less than VIT's, but the future ounces (if developed) will be more expensive. There is also considerable local opposition to the satellite expansion and trucking of ore to the existing plant.
Yet Atlantic attracted a takeover offer of C$722 million. If VIT can meet its forecasts for production and cost of production, then it should receive a higher valuation as it would be generating much higher cash flows in the 2020 - 2022 period.
A C$722 million offer for VIT would equate to a share price of 84 cents. Therefore a $1 share price, when in full production, is not unrealistic, and would equate to a market cap of about US$ 640 million. I am not aware of any 200 k oz/yr low-cost producers with lower market caps, especially in safe jurisdictions.
The bashers will continue to assert that cash costs will be much higher, or that more construction funds (and dilution) are needed or that the work is behind schedule – all without a scrap of proof to back up their claims. It is reasonable to expect some escalation of cash costs due to inflation from the 2016 FS, but the current price of gold is higher than the FS estimate of $1250 too, and is likely headed higher.
Anyway, Time Will Tell and after all these years, we don’t have much longer to wait.