RE:RE:RE:RE:NFG ATM newsMarathon Gold: maintain BUY rating, PT lowered from C$3.40/sh to C$2.80/sh
Marathon is a tale of two halves – firstly permitting is now in the bag just this week, putting the name probably 2-3 years ahead of scale peers in Canada.
With Sabina now funded, this leaves Marathon in a very select group. The downside of delays now behind the company is inflation, offset by subsequent ounce growth. We previously modelled C$349m DFS capex +15% for C$400m, but lift this to +20% in line with industry peers for C$420m capex. We didn’t previously inflate opex, so lifting mining and processing from C$3.32/t and C$14.39/t in the DFS by 15% with potential economies of scale in an upcoming DFS revision.
We already include Berry in our DCF (as a post-production expansion), with positive recent development that an updated DFS due this half (to incorporate inflation since 1Q21 DFS), should also include Berry, for a DFS-on-DFS net improvement we hope.
We lift debt from US$185m (agreed with Sprott) to US$200m, and lift equity from C$120m to C$130m.
We lower our 1xNAV multiple to 0.8xNAV (domestic construction multiple) as a reflection of sector compression, based on 1Y forward fully-funded (equity at 0.4xNAV) fully diluted (342m FD shares) basis.
Looking forward, we are expecting both the FS update and financing, including finessing the timing of equipment lease facilities, incorporating inflation, with NAV multiples hopefully expanding as a result of that.
Ridgey says who Knows?