We  are initiating coverage of GoldMining Inc. (TSX: V.GOLD, OTC QX: GLDLF, Forum) with a Buy rating and C$4.50 per share price target. The company is focused on acquiring gold projects with existing resource bases at a price below the cost of discovery.
Utilizing this business model, Goldmining has made seven acquisitions since 2012. Goldmining owns a portfolio of assets including Titiribi and La Mina in Colombia, Whistler in Alaska, Yellowknife in Canada, and a suite of assets in Brazil, anchored by the development-stage São Jorge Project. |
|
|
We believe Goldmining has a significant resource base that is set to expand.
The company’s acquisition-based strategy has resulted in Goldmining accumulating a significant global resource base totaling 29.9 million gold equivalent ounces ounces since the company’s first acquisition in Brazil in 2012. In our view, management should continue to focus on expanding the company’s resource base through additional acquisitions in the Americas, with a focus on gold projects that host resource bases above 1.0 million ounces.
Achieving district scale in Colombia. Goldmining currently owns the Titiribi and La Mina projects located along the Mid-Cauca belt in Colombia. Together, the two projects host 11.1 million AuEq ounces in a country where mining activity is beginning to ramp up. Newmont Mining (NEM – NC) recently invested $109 million for a 19.9% interest in Continental Gold (CGL – NC) and its Buriticá Project in Colombia. In our view, a major’s interest in the country bodes well for Goldmining, as we believe the potential to consolidate Titiribi and La Mina into a single project could exist.
Providing investors leverage to a rising gold price. In our view, Goldmining's strategy of consolidating assets with existing resource bases should provide investors with strong leverage to gold prices. We expect the company to maintain an acquisitive stance with a disciplined focus on expanding its resource base going forward.
Valuation. Our valuation is based on a sum-of-the-parts methodology including NAV analysis at São Jorge using a 10% discount rate and an in-situ valuation method for the remainder of Goldmining's assets. We assign a $25 per ounce in-situ valuation for Measured and Indicated gold equivalent resources and $10 per ounce in Inferred resources. In total, we arrive at a final valuation of C$716.9 million or C$4.49 per share, which we round to arrive at our price target of C$4.50 per share. |
|
|
SUMMARY
VALUATION
|
Valuation. Our valuation is based on a sum-of-the-parts method including NAV analysis at São Jorge using a 10% discount rate and an in situ valuation method for the remainder of Goldmining's assets. As mentioned, we assign a $25 per ounce in-situ valuation for M&I gold equivalent resources and $10 per ounce in Inferred resources. In total, we assume a pro forma fully diluted share count of 159.7 million and arrive at a final valuation of C$716.9 million, or C$4.49 per share, which we round to arrive at our price target of C$4.50 per share.
We believe our in-situ valuation metrics have room to move higher.
In our view, our in-situ valuation metrics applied to Goldmining's resource base could prove conservative. We point towards Goldcorp's takeover of Kaminak Gold in 2016 at an in-situ valuation of approximately $100 an ounce. While Kaminak's Coffee Project was admittedly at a more advanced stage than Goldmining's current asset base, we believe that major mining companies may continue to seek out acquisitions with proven up resource bases. We think this shift in sentiment from focusing on internal exploration to acquiring de-risked projects at major companies could play well into Goldmining's strategy. In short, we expect the company's focus on 1.0 million-plus ounce deposits in stable jurisdictions to garner attention from majors in the future.
Factors that could impede Goldmining's ability to reach our price target include, but are not limited to: Declines in gold prices, inability to bring Crucero and Yellowknife historic resources current, unexpected dilutive capital raises, and unfavorable acquisitions in the future. |
|
RISKS |
- Political risk. Natural resource companies are subject to significant political risk. Although most mining jurisdictions have known laws, potential exists for these laws to change. Given that Goldmining's assets are located in North and South America, we view political risks related to the company's asset base as moderate.
- Commodity price risk. All natural resource companies have some form of commodity price risk. This risk is not only related to final products but can also be in regards to input costs and substitute goods. Goldmining's largest commodity price risk is gold, but the company also has significant exposure to copper prices as well.
- Operational and technical risk. Natural resource companies have significant operational and technical risks. Despite Goldmining having NI 43-101 compliant resource estimates for the majority of its projects, deposits can still vary significantly from expectations. Additionally, numerous unforeseeable issues can occur with respect to exploration activities. This risk is particularly relevant to Goldmining, as the company's business model depends on establishing a large NI 43-101 compliant resource base.
- Market risk. Although most natural resource companies are more closely tied to individual commodity price performance, large business cycle forces or economic crises can impact a company's valuation significantly. Goldmining has similar market risk to other exploration and development stage mining companies.
- Pre-Revenue risk. Goldmining is a pre-revenue company and it is likely they will need additional capital before achieving revenue. There is no guarantee that they will achieve revenue or become cash flow positive.
Cautionary Note to US Investors: Estimates of Measured, Indicated and Inferred Resources
“Measured Mineral Resources” and “Indicated Mineral Resources.” US investors are advised that although these terms are required by Canadian regulations, the US Securities and Exchange Commission (SEC) does not recognize them, and describes the equivalent as “Mineralized Material.” US investors are cautioned not to assume that these terms are any form of guarantee.
“Inferred Mineral Resources.” US Investors are advised that while this term is required by Canadian regulations, the SEC does not recognize it. “Inferred Mineral Resources” are not delineated with a great deal of certainty and should not be considered likely to be brought into production in whole or in part. |
|
COMPANY DESCRIPTION |
GoldMining Inc, formerly Brazil Resources Inc, is a Canada-based mineral exploration company. It is focused on the acquisition, exploration and development of projects in Colombia, the United States, Brazil, Canada and other regions of the Americas. Among others, its projects include Sao Jorge Project, Cachoeira Gold Project, Titiribi Gold-Copper Project, Whistler Gold-Copper Project and Rea Uranium Project. Its Sao Jorge and Cachoeira Gold Projects are located in Para State, Brazil. Its Sao Jorge Project covers an area of over 48,000 hectares and Cachoeira Project covers over 5,000 hectares. Its Titiribi Gold-Copper Project covers an area of approximately 40 square kilometers and is located approximately 70 kilometers southwest of Medellin, Colombia. Its Whistler Gold-Copper Project covers an area of over 160 square kilometers and it is located over 150 kilometers northwest of Anchorage, Alaska. Its Rea Uranium Project covers an area of approximately 116,000 hectares in the western Athabasca Basin. Source: Eikon 10/16/2017. |
|
|
| Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. |
| Disclosures: |
|
Shares of Goldmining, Inc., Trilogy Metals Inc. and Uranium Energy Corp. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH makes a market in shares of Trilogy Metals Inc. and Uranium Energy Corp. and as such, buys and sells from customers on a principal basis. |
Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first note written during the past three years. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month.
| Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target. |
|
Ratings System Definitions - ROTH employs a rating system based on the following:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months.
Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between negative 10% and 10% over the next 12 months.
Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
|
| ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2017. Member: FINRA/SIPC. |
|
|
|
|
Please access the attached hyperlink for an important electronic communications disclaimer:
https://www.roth.com/main/Page.aspx?PageID=1070 |