Scotia Coverage Arizona's flagship Kay Mine in Arizona is “highly compelling because of its strong exploration results to date, location in an attractive jurisdiction (Arizona), exploration upside, and proximity to existing infrastructure and mining districts, according to Scotia Capital analyst Eric Winmill.
“Unlike the legendary showdown at the O.K. Corral in Arizona, we believe that grade and tonnage can both be winners at this deposit,” he said.
Initiating coverage with a “sector outperform” recommendation on Wednesday, Mr. Winmill said the Toronto-based company “remains well funded for ongoing exploration,” pointing to working capital of $61-million through June.
“Exploration to date has been focused on the main Kay Mine; however, Versatile Time Domain Electromagnetic (VTEM) surveys have outlined several compelling nearby targets, including the undrilled Central Zone and West Zone, located 600 m and 1.6 kilometres (km) east of Kay, respectively,” he added. “Drilling recently started at the Central Zone with first results expected soon. Drilling at the West Zone is expected to start later this year, pending permitting, along with testing of other nearby high-priority targets.
Mr. Winmill set a $7.50 target, below the $8.81 average.
“Most of our valuation is attributed to the Kay Mine using a discounted cash flow (DCF10%) approach based on a range of scenarios and our assessment of a target resource to be defined alongside a valuation component to capture exploration upside,” he concluded. “AMC’s non-core wholly-owned Sugarloaf Peak gold project also factors into our valuation on an EV per ounce (/oz) basis. We ascribe a blended 1.0-times multiple to NAV for our price target, as we believe that AMC shares can re-rate higher as the company continues to expand and upgrade the resource at the flagship Kay Mine project and further advances the project.”
“We believe that AMC shares should trade at a premium valuation given the location in an attractive jurisdiction (Arizona), compelling exploration upside, proximity to existing infrastructure and mining districts, potential as a merger and acquisition target, and strong working capital position to fund ongoing project advancement. We expect an active year of news flow as drilling results are released, leading to an updated resource (likely in 2023).”