In an April 15 research note, BMO Capital Markets Analyst Brian Quast advised that the firm is initiating coverage of Corvus Gold Inc. (KOR:TSX) with an "Outperform (Speculative)" rating and a price target of CA$3.50/share. The shares are currently trading at around2.50. CA$
BMO Capital Markets believes that Corvus Gold's senior management team has demonstrated its capabilities of making highly prospective discoveries as evidenced at its properties. BMO Capital anticipates that continued drilling will serve to expand the resource base and therefore drive an increase in NAV and expand the share price multiple to levels similar to other small producers operating in top-tier jurisdictions. The analyst noted that Corvus presently trades at around 0.8x P/NAV, which is comparable to several other project developers covered by BMO Capital Markets.
""We assert that a premium valuation is warranted given Corvus's highly prospective properties in the world's leading mining jurisdiction, Nevada," Quast wrote, adding, "We believe that exploration and infill drilling will expand Corvus' resource base further, driving the company's NAV higher and that the stock will experience multiple expansion as its projects advance toward production."
The analyst pointed out that the financial projections prepared for the company were based primarily upon the November 2020 Preliminary Economic Assessments (PEAs) for both the North Bullfrog Project (NBP) and Mother Lode Project (MLP). Using what it called fairly conservative metal price estimates of US$1,400/oz Au, BMO assigned NBP a value of US$387 million and MLP a value of US$139 million.
Corvus is expected to fund construction and development of each project utilizing a combination of both debt and equity and will be able to leverage cash flow from NBP in order to finance mine construction at MLP.
BMO stated that "to finance the US$167 million of initial capital for NBP, we assume that Corvus will raise approximately CA$220 million, CA$120 million of equity and CA$100 million of debt."
"The prime location of Corvus' assets in Nevada along a known occurrence of mineralization — the Walker Lane Trend — is a definite positive for the company," Quast wrote. "So far, 80 Moz gold and 700 Moz silver have been discovered in this trend, and Nevada is one of the world's best-known mining jurisdictions."
Quast noted that key catalysts for Corvus will be derived from successful exploration drilling at high priority targets, positive results from expansion and infill drilling and the firm's performance in achieving various development milestones at NBP.
Corvus Gold is a precious metals exploration and development company based in Vancouver, B.C. The analyst stated that Corvus has a large Measured and Indicated resource totaling 3.7 Moz gold and 11.8 Moz silver at its two primary assets.
The analyst noted that Corvus' Board of Directors and management team are composed largely of former AngloGold Ashanti (AU:NYSE) operations managers and executives.
BMO advised that according to the data included in the respective PEAs, NBP offers a 15-year mine life with life-of-mine (LOM) gold production of 1.46 Moz and LOM silver production of 3.20 Moz, and MLP includes a 9-year mine life with LOM gold production of 1.35 Moz and LOM silver production of 626 Koz.
Corvus Gold has a market cap of about CA$300 million with 127 million common shares outstanding.
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Disclosures from BMO Capital Markets, Corvus Gold, April 15, 2021
IMPORTANT DISCLOSURES
Analyst's Certification
I, Brian Quast, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. 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.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Corvus Gold.
Disclosure 6C: Corvus Gold is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 18: A redacted draft of this report was previously shown to Corvus Gold (for fact checking purposes) and changes were made to the report before publication.
