AR takeover candidate 10:10 AM EST, 12/15/2021 (MT Newswires) -- Argonaut Gold Inc. (AR.TO) declined approximately 7% on Wednesday, after an even steeper loss the previous day, after it announced that its initial capex estimate for the Magino project in Ontario has increased to $800 Million.
Desjardins analyst John Sclodnick lowered his price target on Argonaut shares to $3.50 from $4.25, and maintained a Buy.
Sclodnick said this capex increase creates a funding gap to complete development that he estimates at US$100 Million.
"However, with the stock down 25% (on Tuesday) and closing below our DCF value for Magino alone, the valuation remains attractive to both investors and potential acquirers," the analyst said in a note to clients.
"The M&A market for Canada-based assets is hot, and we believe that a number of larger companies are circling Argonaut and had been waiting and hoping for a stumble on development at Magino," Sclodnick said. "This is potentially the opportunity they were looking for to acquire a long-life asset in Canada, with $342 Million of capital sunk and a highly derisked remaining capital spend."