Leagold Mining Corp. (LMC:TSX.V; LMCNF:OTCQX) announced on May 24 that it has closed its acquisition of Brio Gold. This is a major milestone in the company's goal to become a mid-tier gold producer with a focus on Latin America.
The Brio acquisition brings three operating mines, a near-term gold mine restart project and two development projects, all located in Brazil.
Neil Woodyer, Leagold CEO, stated: "We are very excited about Leagold's new position as a mid-tier gold producer with the growth of our production rate to over 400,000 ounces per year. Our business and market profiles are strengthened by our diversification in both Mexico and Brazil and across four operating mines. Leagold's measured and indicated resources have increased to 16.4 million ounces and proven and probable reserves have increased to 5.6 million ounces."
The company's original project is Los Filos, where it is operating two open-pit mines, Los Filos and Bermejal, and one underground mine. Leagold acquired Los Filos from Goldcorp in 2017.
Leagold is continuing exploration activities at the Los Filos Underground Mine and earlier this month announced high-grade drill results of 24.2 grams per tonne (g/t) over 4.10 metres, 23.6 g/t over 6.95 metres, and 9.1 g/t over 8.69 metres. The company has stated that the goal of the drill program is to "identify additional resources to replace reserves and extend the overall mine life. The program is on track with over 12,000 metres of step-out drilling completed to date and the majority of the exploration drilling to take place in the second half of this year."
The company plans to incorporate the drill results into a final resource estimate by the end of the year.
Peter Marrone, CEO of Yamana Gold, has accepted a position on Leagold's board. Yamana holds a 20.5% stake in the company.
Leagold has gained the attention of industry analysts. CIBC just initiated coverage of Leagold with an Outperformer rating and a 12- to 18-month target price of $5 per share. Leagold's shares are currently trading at around $2.87.
Analyst David Haughton of CIBC wrote on May 29 that "an experienced operating and development team backed by a solid balance sheet should offer investors greater assurance that Leagold can achieve the full potential of the Brio assets and Los Filos." He sees the company having a strong platform for growth, noting that the firm expects Leagold to "produce ~365koz in 2018 and potentially over 700koz by 2020E. The near-term focus is to improve each operation, to redevelop Santa Luz, and to complete the Bermejal underground at Los Filos. Upside of the possible Los Filos CIL development could offset any changes in outlook for the higher-risk Santa Luz project."
"Leagold provides an attractive combination of a better-than-average growth profile and value amongst mid-tier gold producers. The P/NPV of just 0.5x at spot reflects the legacy issues at Brio that Leagold has the opportunity to improve," Haughton concluded.
Jamie Spratt, an analyst with Clarus Securities, noted on May 4 that Leagold "currently trades at a ~50% discount to peers on a P/NAV basis and in our view, this provides a deep value re-rating opportunity with continued management execution and a successful integration of the Brio assets."
Clarus has a target price of $6.24 and gives Leagold a Buy rating.
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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from CIBC, Leagold Mining Corp., May 29, 2018
Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
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Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.
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Important Disclosure Footnotes for Leagold Mining
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Disclosures from Clarus Securities, Leagold Mining Corp., May 4, 2018
The analyst has visited the Company's mining operations in Mexico. Partial payment or reimbursement was received from the issuer for the associated travel costs.
The research analyst and/or associates who prepared this report are compensated based upon (among other factors) the overall profitability of Clarus Securities and its affiliate, which includes the overall profitability of investment banking and related services. In the normal course of its business, Clarus Securities or its affiliate may provide financial advisory and/or investment banking services for the issuers mentioned in this report in return for remuneration and might seek to become engaged for such services from any of such issuers in this report within the next three months. Clarus Securities or its affiliate may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. Clarus Securities, its affiliate, and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities discussed herein, or in related securities or in options, futures or other derivative instruments based thereon.
Each Clarus Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about the Company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
