CIBC UpdateFinancing Secured For Valentine Gold Project; Price Target Revised To $1.75
Current Price (9/27/22): C$0.88
Price Target (12-18 mos.): C$1.75
Previous: C$2.30
Company Profile
Marathon Gold is a junior gold developer advancing its Valentine Gold Project in Newfoundland, Canada through project permitting. With a Feasibility Study (FS) published in early 2021 confirming the project’s robust economics, Valentine Gold is one of the most advanced development projects in Canada and is on track for first production in 2024.
Investment Thesis
The Valentine Gold Project represents a comparatively high-grade gold project in a Tier 1 jurisdiction with the potential to deliver nearly 175koz in average annual production over the project’s first 10 years. We expect the company to re-rate as it progresses towards first production in 2024.
Price Target (Base Case): C$1.75
Our price target is derived by applying a multiple of 1.0x to the company’s net asset value (NAV) based on our price deck.
Upside Scenario: C$4.31
Our upside scenario is based on a US$2,500/oz gold price.
Downside Scenario: C$0.49 Our downside scenario is based on a US$1,200/oz gold price and reduced multiples.
Key Points
Changes To Our Model: We have updated our equity financing assumption from 103M shares at $1.55/share for $160M to 136.36M shares at $1.10/share for $150M to align with the financing deal. We have also modelled in 68.18M shares, representing the exercise of the one-and-a-half warrant included in each unit, at $1.35/share over the next 24 months for an additional $92M. All in, we forecast net proceeds from financing of $234M. Our initial capital cost estimate remains unchanged at $490M with total available financing of ~$582M plus a cash balance of $62M as of Q2/22.
Denver Gold Forum Presentation Highlights Milestones Achieved: Marathon Gold’s Matt Manson, President & CEO, presented, and highlighted the milestones completed on the Valentine Gold Project over the last few months – notably, the EA approvals (provincial and federal), the well-advanced site-specific permitting and the release of an updated cost to complete of $470M-$490M. Management is expecting to release an updated feasibility study in Q4/22, which will include a new LOM plan contemplating a three-pit mine and updated cost and gold price assumptions. Early site works began in September 2022, with full mobilization expected by year-end. The focus of the exploration work is in the Berry and Victory deposits, with the goal of bringing in additional near-mine ounces. The Berry addition has added 26% to ounces, 10% to grade and 14% to tonnage so far. The new study will incorporate no change to the overall footprint or mill size.