PI Financial Research: Treasury Metals mit Preisziel 1,20 CAD
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Unlocking a Goliath Treasure in Ontario
EVENT: We are initiating coverage of Treasury Metals highlighting its Goliath project, which possesses attractive economics (IRR 25%), achievable initial capex (C$133M) and annual gold production of 87,850oz making the project viable for a junior operator to advance through construction.
DISCUSSION: The recently updated PEA for the Goliath gold project was a building block for Treasury moving forward. The past economic study was dated (2012), lacked infill drilling and had a new resource update completed since the last evaluation.
Canada’s depleted development landscape: Due to extensive M&A across the sector, Canada currently has only four mines in construction with a limited pool of attractive development projects in the pipeline. As Treasury continues to define and advance Goliath through its feasibility stage, we expect Treasury to emerge to the forefront of development companies in Canada – if not already.
Outstanding infrastructure: Goliath lies just 2km from the Trans- Canada highway just 20km east of the city of Dryden, Ontario. The project benefits from established site facilities including offices, shops and storage units that can easily be updated to standard mine site buildings. Furthermore, an existing power line crosses the property and edge of resource outline while a natural gas pipeline lays just 6km away.
New management: Late in 2016, Treasury brought over Chris Stewart as its new President & CEO. Mr. Stewart brings an extensive track record in operations where most recently he guided site operations for Kirkland Lake as its VP Operations where the company amassed an incredible turnaround. As Treasury’s new President and CEO, Mr. Stewart will be instrumental in contract negotiations as the project moves into production.
FORECAST/OUTLOOK: With a recent C$8M financing providing an influx of new capital and shareholders, Treasury now has to begin Phase I of a planned 30,000m infill drill program which is expected to support geologic model definition and metallurgical work for Goliath’s feasibility study with a mid-2018 targeted completion date.
VALUATION/RECOMMENDATION: We are initiating coverage of Treasury Metals with a BUY rating and $1.20/sh target price. Our target is generated using a 1.0x NAVPS multiple based on a LT $1,350/oz gold price and 8% discount rate. We are confident that as the Goliath project advances through its various stages of development, that market recognition of a valuation gap compared to its peers will begin to close and Treasury will begin to approach and/or exceed our target price.