The Investor’s Digest of Canada, in its regular ‘Views of Leading Analysts’ feature, recently noted three Canadian junior gold stocks favored by Toronto-based PI Financial analysts, Brian Szeto and Philip Ker.
Jaguar Mining Inc. (TSX—JAG) is a Toronto-headquartered gold mining company engaged in the acquisition, exploration, development and operation of gold producing properties in Brazil. Its projects are Pilar, Turmalina, Paciência, Caeté, Gurupi and Pedra Branca.
Jaguar made an aggressive $10-million exploration investment during 2017 in its operations in Brazil. It was done to test and expand on their key operating ore bodies.
Now the gold explorer has announced a positive resource/reserve update for its Pilar operation and a resource update at Turmalina where they added 542,000 ounces, collectively. Notably, inferred resources grew by 104 per cent (now 925,000 ounces) and 158 per cent (now 725,000 ounces) at Pilar and Turmalina, respectively.
“Jaguar now has a firm resource base to continue building on and further increasing its mine lives in Brazil,” says PI Financial analyst Philip Ker. “With this key catalyst now achieved, the company will demonstrate positive operating results and free cash flow. We realize a positive impact on our net asset value per share (NAVPS) leading to an increased target price from $0.70 per share to $1.
“Our valuation is based on a multiple of one to our NAVPS (discounted at five per cent, and assuming a long-term gold price of US$1,350 per ounce).
“We continue to maintain our ‘buy’ recommendation, and ‘speculative’ risk ratings for Jaguar Mining.”
Toronto-headquartered Wesdome Gold Mines Ltd. (TSX—WDO) is a gold producer engaged in mining related activities including exploration, processing and reclamation in Ontario and Quebec.
Wesdome’s reserves have increased by 21 per cent; and the reserve grade increased by 32 per cent to 12.2 grams of gold per tonne of ore at its Eagle River underground mine.
PI Financial analyst Brian Szeto views the update as positive. “Our new net asset value estimate is $4.01 per share (was $3.60). We continue to apply our multiple of 1.3 to arrive at our new target price of $5.10 per share (was $4.50). We maintain our ‘buy’ recommendation and ‘above-average’ risk rating,” the analyst states.
“In the past, the Eagle River mine always had access to the two higher grade zones and two lower grade zones. However, starting in late 2018, it will have access to four higher grade zones at the same time. As a result, we believe investors will likely see the best grades from the mine relative to recent years.”
However, he has pushed back his expectations for the expansion of the mill at Eagle River to 2021 (was 2019), as he believes the near-term focus of the company will be on the exploration front.
Atlantic storms have delayed production
Vancouver-headquartered Atlantic Gold Corporation (TSXV—AGB) is a gold stock engaged in the development of its its Nova Scotia properties, including the Beaver Dam and Fifteen Mile Stream gold projects.
The company says commercial production has begun at its flagship Moose River Consolidated (MRC) project in Nova Scotia. Commercial production was effective at the open-pit project as of March 1, 2018.
“The company has achieved yet another important milestone at its MRC project, a big accomplishment,” says Mr. Szeto.
“The mine had its first gold pour in October 2017 and the operation has been ramping up to a steady state. The ramp up was a little slower than expected due to power outages from Atlantic storms in late fourth quarter of 2017 and early 2018, which resulted in production losses (e.g. there were five production days lost in January).
“However, the operation is now running at a steady state and the company continues to guide towards its 2018 forecast of 82,000 to 90,000 ounces of gold with operating cash cost of US$400 to US$448 per ounce and all-in sustaining cost of US$540 to US$588 per ounce.
“Our assumptions at MRC remain unchanged. We maintain our ‘buy’ recommendation, ‘speculative’ risk rating, and $3 per share target price.”
This is an edited version of an article that was originally published for subscribers in the April 6, 2018, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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