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North American Palladium Ltd.
C$0.30 target price
2Q14 - Costs Trend Higher; Thesis Unchanged
2Q14 results did not make us change our view on PDL shares. We still see very little margin for operating error at LDI due to the high interest burden on its debt load (combined negative ~$2 mln FCF over the next 6 quarters) and project its cash balance declining to sub-$10 mln by year-end (potentially re-introducing further financing risk), unless current strong PGM prices stay steady or improve amid the work resumption at South African PGM mines. Even if PGM prices continue to cooperate with PDL, the presence of prohibitively-high-cost Brookfield debt and its maturity in 2017 will continue to hover over the equity and serve as a major headwind for the stock, in our view.
- Production of 39.2 koz Pd was fairly in-line with RJL estimate of 39.6 koz Pd, as lower-than-expected U/G production rates were offset by better ore grades (Exhibit 1). LDI averaged 2,900 tpd during 2Q from U/G, slipping from its growth pace observed over the past three quarters and highlighting the fact that reaching 5,000 tpd by 2014-end may prove to be challenging (although not impossible), especially with the fatality at LDI impacting July production rates.
- EPS loss of ($0.03) missed our forecast of ($0.02) on higher production costs (up 16% vs. RJL and up 4% q/q on a per-tonne basis), which were impacted by continued reliance on bringing some ore up the ramp, as PDL was upgrading the ore handling system (completed at June-end) and dealing with oversized muck that had to be hauled up via trucks (Exhibit 2).
- Positive U/G grade reconciliation could serve as a tailwind towards PDL reaching its 170-175 koz guidance for the year. After the head grades surprised to the upside (vs. our estimates) twice this year already, averaging 4.9 g/t Pd in 1H14, we have revised our U/G grade forecast up by 12% to 4.4 g/t over 2H14 ....
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Asanko Gold Inc.
DYNAMITE HILL METALLURGICAL RESULTS
Asanko Gold announced metallurgical results for the recently discovered Dynamite Hill deposit on the Asanko Gold Mine. Results were not materially different than our forecast and we are maintaining our Speculative Buy recommendation and C$3.15 target price. Upcoming significant catalysts include ground breaking in August 2014, definitive project plan (Phase 1) in late Q3/14E-Q4/14E and a scoping study for Phase 2 (Q1/15E).
- The company announced metallurgical test work results for the near surface Dynamite Hill Deposit located 7 km from the proposed processing facility for the Asanko Gold Mine. The company reported averages between 93.2% and 96.2% across the various mineral types which is slightly higher than our forecasted 92% recoveries for that deposit.
- We have already incorporated Dynamite Hill into the fully funded and permitted Phase 1 of the Asanko Gold Mine and are maintaining our forecast of ~200koz Au being mined for The Dynamite Hill deposit starting in 2017.
Our valuation is primarily influenced by the valuation (NPV8%, 1.0x, C$704 M, C$4.08, 2016 start-up) of the combined Obotan and Esaase gold projects (Phase 1 and 2, respectively), known as the Asanko Gold Mine (AGM). We have netted our asset valuation (C$4.08) against negative balance sheet items (Dec 31, 2015, C$0.47) and corporate G&A and interest expense (C$0.46). Our valuation assumes a financially diluted share count of 175.5 M shares.
We anticipate an updated plan of operations for Phase 1 in Q4/14. At our LT gold price curve, the Asanko Gold Mine generates a 24% internal rate of return with a 6.3 year payback, which falls within the Phase 1 mine plan. The project still generates a 16-18% return at a gold price curve (-10%, LT US$1298) below our forecast with a
Here are some more recent Asanko Gold Inc. analyst reports:
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Vancouver, British Columbia, July 29 2014 - Asanko Gold Inc. ("Asanko" or the "Company") (TSX, NYSE MKT: AKG) is pleased to announce positive results from the metallurgical test work program conducted on the Dynamite Hill deposit. Dynamite Hill is a recently discovered near surface deposit located 7 km from the processing facility, set to begin construction next month, at the Company's flagship Asanko Gold Mine ("AGM" or the "Project") in Ghana.
The metallurgical test work program, conducted by Metallurgy Pty Ltd in Western Australia, was undertaken to assess the gravity and cyanide leach amenability of the oxide, transitional and fresh material from the Dynamite Hill deposit, as well as the comminution characteristics.
The results have confirmed that the material from the deposit presents consistent and similar leach kinetics to the other deposits which make-up the Project. It is expected that the Dynamite Hill material will blend well with the ore from the other four Phase 1 Project pits; Nkran, Adubiaso, Abore and Asuadai and confirms that the standard gravity and Carbon-in-Leach processing facility designed for Phase 1 is appropriate for treating material from Dynamite Hill.
Results of metallurgical testing show that the gold recovery averages between 93.2 and 96.2% across the various mineral types with an average of 95%. Gravity gold separation test work indicates that approximately 50% of the gold is expected to be recovered in the gravity circuit. Comminution testing indicates that the Bond work index varies between 10 kWh/t for softer oxide ore and 16 kWh/t for the harder fresh material, which is a similar range as the other deposits at the Project.
A maiden Mineral Resource Estimate ("MRE") for Dynamite Hill is currently being compiled by the Company and is expected to be published in September 2014, along with a definitive mine plan which will be included as part of the overall Definitive Project Plan for Phase 1.
Here are some recent Western Lithium USA Corporation analyst reports by Dundee Capital Markets:
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Flickr: Rubicon Minerals' Photostream:
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Rubicon Minerals' albums on Flickr:
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DragonWave Inc. Prices C$25 Million Public Offering of Units
OTTAWA, ONTARIO--(Marketwired - July 25, 2014) - DragonWave Inc. (the "Company") (TSX:DWI)(NASDAQ:DRWI), a leading global supplier of packet microwave radio systems for mobile and access networks, announced it has priced an underwritten public offering (the "Offering") of 13,850,000 units (each a "Unit") at a price to the public of C$1.80 per Unit, for gross proceeds of approximately C$25 million. CIBC is acting as the sole book-runner for the offering and H.C. Wainwright & Co., LLC is acting as lead manager (together, the "Underwriters"). The Company has also granted the Underwriters an option, exercisable at the offering price for a period of 30 days following the closing of the Offering, to purchase up to an additional 15% of the issue to cover over-allotments, if any.
The Company intends to use the net proceeds from the Offering to strengthen its balance sheet, to fund working capital and for general corporate purposes.
Under the terms of the Offering, each Unit consists of one common share (each, an "Offered Share") and one half of one warrant (each whole warrant, a "Warrant"). Each whole Warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of C$2.25 for a period of two years from the closing date of the Offering, subject to acceleration and adjustment. The Offered Shares and Warrants are immediately separable. The Company intends to apply to list the Warrants on the NASDAQ Stock Market ("NASDAQ") and the Toronto Stock Exchange ("TSX"). There is no guarantee that the Warrants will be listed on NASDAQ or the TSX. The Company expects that any exercise of the Warrants will result in the cash proceeds from the exercise of such Warrants being paid to the Company.
According to TD Securities:
is (dot) gd/lpPQrG
Rubicon Minerals Corp.
Recommendation: SPEC. BUY
12-Month Target Price: C$2.25↑
Resuming Coverage Post-Financing
We are resuming coverage of Rubicon Minerals following the close of a bought deal financing. The company sold a total of 7.1mm flow-through common shares at a price of $1.70 to raise gross proceeds of $12mm.
We estimate that the company now has approximately $241mm in available funds, comprised of $180mm in cash on hand, $50mm in proceeds from the sale of a gold stream to Royal Gold, and $11.4mm in net proceeds from this offering.
The company has suggested that it has $168mm in capex remaining to complete its Phoenix Gold Project in the Red Lake camp of Ontario. In addition to the project capex, we believe that the company requires working capital and corporate expenses of $30mm–$40mm and that it intends to spend an additional $14mm on exploration for total capital requirements of $212mm–$222mm.
Impact: SLIGHTLY POSITIVE
We believe that Rubicon has the funds to cover its capital requirements, as noted above, while leaving a buffer of $19mm–$29mm. Raising additional funds for a more aggressive exploration program is appropriate, in our view, given the encouraging exploration results reported to date.
Although the company has not confirmed that it will do so, we believe it is possible that it could complete a resource update in Q4/14 or Q1/15 (with an updated mine plan to follow) and we see potential for a resource expansion of up to 500koz Au at slightly higher grades.
After making adjustments for the closing of this financing, the company’s working capital position, and for our precious metal price-deck update (July 10), our corporate NAV5% increases to $2.29/share (from $2.11/share) and our target price increases to $2.25 from $2.00.
DragonWave announced a proposed public offering of units for an expected C$21.5 million with a 15% over-allotment available. The offering is expected to price before market open on 25 July 2014. Each unit will consist of one common share and one half warrant exercisable for a period of two years. Additionally the company announced an $80 million mixed shelf following the public offering which provides the company with flexibility to raise additional capital as required.
Cash squeeze position comfortable, for now. The company reported its Q1/F15 results on 10 July 2014 and ended the quarter with US$15.6 million in cash. For Q2 (Aug), management expects cash to exit at $12-13 million considering an additional $2.5 million from the credit line and ignoring any additional cash raised. We also note that a key covenant on an existing credit line, which remains in place, has been a $10 million minimum cash balance held with the creditors. Management previously indicated it expects to turn cash flow positive in F2015 but would not provide further granularity. With an uncertain timeline, an injection of cash should ease concerns that the company could face a cash squeeze.
Waiting for the turning point. In our view the master agreement with Reliance to support its 4G/LTE deployment in India was a milestone agreement for the company. We believe that the contract win could be a turning point for DragonWave if the company can turn the initial order into a long-term opportunity though clarity on timing would provide better visibility. We suspect a better balance sheet would help progress through diligence checks that large carriers (like Sprint and Reliance) perform on vendors.
Mixed shelf could be viewed as an overhang. Though the cash position appears more stable if the C$21.5 million offering closes, an $80 million mixed shelf could pose an overhang as investors could face further dilution if equity rather than debt is raised.
Here are some recent Rubicon Minerals Corporation analyst reports:
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Here are some recent Asanko Gold Inc. analyst reports:
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According to Canaccord Genuity:
Green light given. Asanko Gold announced that their board of directors has approved the construction of Phase 1 (Obotan) of the Asanko Gold Mine (AGM) in Ghana. As Canaccord Genuity Mining Analyst Joe Mazumdar expected the decision in July 2014, this is in line with his forecasts. Next significant potential catalysts include ground-breaking in August 2014, definitive project plan (Phase 1) in late Q3/14E-Q4/14E and a scoping study for Phase 2 (Q1/15E). Mazumdar forecasts commercial production in H1/16, in line with company estimate, for Phase 1 but a slower ramp up to full capacity (3.0 Mt/y) by H1/17 (vs. H2/16, company estimate). His AGM mine plan (which includes Phase 1 and 2) delivers an average production profile of 216 koz/y over a 21-year mine life at a C2 cash cost of US$874/oz, requiring US$321 M of upfront capital including US$106M for the Nkran pre-strip with an additional US$208M required for sustaining and reclamation capital. With Asanko’s current cash position (Q2/14, US$231M) plus the recently successfully executed US$150M secured debt facility from Red Kite, the company is well capitalized to fund the development of Phase 1.
According to Dundee Capital Markets:
Uranerz Announces US$10 Million Financing
Uranerz Energy (URZ-T)
Sell, High Risk, C$1.40 Target
Impact: Neutral. URZ announces marketed $10 MM public offering.
Deal details: Unit at $1.25, with ½ warrant at $1.60, exercisable for 30 months. This is a marketed deal. Offered at a 13% discount to last close.
URZ announced intentions to sell up to 8 MM units priced at US$1.25 for gross proceeds of $10 MM. Proceeds will be used for development of mining facilities, and general working capital purposes.
We recently downgraded URZ to SELL given its exposure to current uranium spot prices and relative valuation to peers. Current plans suggest the company will sell partially into spot, which would be unfavorable given above average total cash costs of ~$35/lb. We expect 47% of its production to be hedged this year and 33% next. We sense it possible that should low spot prices persist, URZ won’t charge ahead at full speed developing and permitting its pipeline in Wyoming. A lower production profile than its peers already means that there is less cash available to cover corporate costs, pay down debt or finance completion of its Nichols Ranch ISR plant. Despite remaining a market favorite for years, in our view it has become overvalued. Positively, the company recently hired two key personnel and operations remain on track with first production expected shortly (see note).
Valuation: URZ trades at a premium to peers on essentially all metrics.
• P/NAV of 1.32x vs. 0.88x for peers
• EV/lb of $6.38 vs. $3.95 for peers
• 2015 EV/EBITDA of 23.4x vs. 15.5x for peers
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Uranerz Announces US$10 Million Financing
CASPER, WYOMING--(Marketwired - July 16, 2014) - Uranerz Energy Corporation ("Uranerz" or the "Company") (TSX:URZ)(NYSE MKT:URZ)(FRANKFURT:U9E) is pleased to announce that it intends to offer and sell to the public in the United States and Canada an aggregate of up to 8,000,000 units of the Company at a price per unit of US$1.25 ("Units") for gross proceeds of up to US$10,000,000, before deducting the placement agents' fees and estimated offering expenses (the "Offering"). Each Unit will be comprised of one share of the Company's common stock ("Common Share"), and one half of one common share purchase warrant, with each whole warrant ("Warrant") exercisable to purchase one additional Common Share for a period of 30 months following the closing of the Offering at an exercise price of US$1.60, subject to adjustment and acceleration provisions. The Warrants will be transferable, however, the Company will not apply for listing of the Warrants on any securities exchange.
Haywood Securities Inc. and Cantor Fitzgerald Canada Corporation have agreed to act as co-lead agents in relation to the proposed Offering of the Units ("Lead Agents") on behalf of a syndicate of agents (the "Agents"). All offers of Units in the United States will be made by U.S. registered broker-dealers.
Closing is anticipated to take place on July 25, 2014, subject to satisfaction of the conditions to closing set forth in an Agency Agreement, including receipt of approval of the NYSE MKT LLC and the Toronto Stock Exchange. Upon mutual agreement between the Company and the Lead Agents, the Agents may place up to an additional 1,600,000 Units at the same price as the offering price to the public, such mutual agreement to be made at any time up to four business days prior to the closing of the offering.
According to Dundee Capital Markets:
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Two Kyushu Reactors Meet Safety Requirements - But Hurdles Remain
Japan's nuclear watchdog, the Nuclear Regulatory Authority (NRA) has approved a 400-page Draft Safety Report for Sendai Nuclear Power Plant Reactors No. 1 and 2 in Kagoshima Prefecture. These reactors were on shortlist for priority screening by the Japanese Nuclear Industry and the NRA due largely to Kyushu Electric Power's positive attitude towards implementing safety measures. The new safety standards are widely considered some of the strictest globally. They include safeguards against various natural disasters, and almost any other type of nuclear accident.
NRA commissioners agreed to provide for a 30-day public comment period that will last until August 15th. A final draft report would be issued regarding the safety and technical merits of the plant. Kyushu Electric must garner local support for political sign off from both local and Prefecture levels of Government. We aren't sure how long this process might take, however industry chose these reactors due to the expectation of fewer hurdles. With two applications completed, we certainly hope it sets a precedent for the other 17 applied reactors in the application pipeline (see Table 1 for a full list).
Today's safety approval marks a major step towards eventual restarts. It is probably the most significant since formation of the NRA itself. We see this as positive for the equities but not necessarily for the uranium price yet. This psychological barrier should help in the short term, however, only when a number of reactors in Japan actually get back to consuming uranium, do we expect the nuclear industry to resume contracting and sourcing uranium. This would be expected to drive uranium prices higher. As we have said - this industry needs higher prices in order for any sustainable rally in the stocks to persist (see 14-July-14 note).
According to Dundee Capital Markets:
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Uranium Market Panic Over, Now Just Malaise; Price Deck Revision
Uranium stocks have undergone a turbulent H1/14. Strong start, then collapse and now listless. Uranium prices were flat, then tanked and now have stabilized below US$29/lb U3O8 with no indication that prices will rise or fall in the near term. Prices are obviously below sustainable levels required, not only to incentivize the sector, but keep projects going as demonstrated by ongoing mine closures. Japanese restart timing remains a complete wildcard and no other catalysts appear in sight. As low prices and weak trading volumes have translated into a lack of enrichment service requirements, underfeeding continues to provide more uranium to the market than it can handle. We lower our U3O8 price forecasts to US$31/lb for 2014; US$40/lb for 2015; and US$55/lb for 2016. We also believe financing hurdles have become a major development issue, so either deferred projects or modeled dilutive equity raises.
We are taking stock of 2014. Six month performance of uranium stocks recently fell into negative territory for the first time this year. Although prices were flat early, the stocks had a great run through March 12th due to the significant positive fundamental news from the sector (mainly supply disruptions), and hope that Japan reactors would come back online by summer. Then reality set in. Uranium prices fell 18% over nine weeks and the stocks followed suit. Since mid-May uranium prices are again flat - and the stocks have started skating sideways (Figure 1). In fact, the explorers and almost half the developer stocks are actually treading above water again. But investors aren't paying much attention, trading volumes are down and malaise has set in. Most believe in uranium's long term fundamentals, but consensus is that there is too much physical supply available and prices could stay down for some time.
According to Dundee Capital Markets:
is (dot) gd/QLFJh2
July 14, 2014
NEUTRAL, High Risk
Dundee target: C$1.60
New Personnel A Strong Signal For Future Growth
Conclusion: We recommend URZ as a NEUTRAL with a C$1.60 share price target.
Uranerz Energy announced a personnel and operations update this morning. While today’s operations update is welcome news, it is also expected. Uranium is now being delivered regularly to Cameco (CCO-T, Neutral, C$24.50 Target), flow rates are high and uranium concentrations in the plant are increasing. This is helping de-risk the company from both financial and technical viewpoints.
But the important take home from today’s press release is that Uranerz is growing up. It has added two new key personnel - Mr. James Doug Norris, P.Eng. as Senior Process Manager and Mr. Robert Blackstone, P.G. as Senior Geologist. While many companies are pulling tighter on purse-strings, URZ is building for the future (and possibly covering key positions before retirements set in). Doug Norris is one of the pre-eminent ISR engineering experts in the US. He helped build both of CCO's Wyoming ISR plants and Mestena’s Alta Mesa mine in South Texas. His appointment would help the company immensely should it decide to finish its own ISR plant and stop toll milling. It should also help improve efficiencies within the front end of the ISR plant. Robert Blackstone has extensive geological experience in the US and his well field design background makes him ideal for drilling out the many well fields that Uranerz expected to design over the coming years.
Mitigating risks. Today’s appointments will help with what we believe are the most important risks standing in front of the company: Increasing production to a meaningful level and sustaining that production over the long term. Unlike other ISR companies, Uranerz has more of a hand-to-mouth approach through the advancement of several smaller deposits at the same time.
According to GMP Securities:
is (dot) gd/EBnV1C
Platinum Group Metals
July 14, 2014
Financials in line and WBJV build on-track; BUY
Financials as expected, remains funded
Cash reported of C$161m is in line with our forecast C$160m as spend of C$33m on WBJV matched our C$32m estimate, with a further C$3.6m spent on exploration. This brings the WBJV spend to date up to ~US$306m vs. capex of US$506m. Conservatively assuming the US$75m cost overrun facility is used, we estimate a residual ~US$275m is needed to complete the build. Net of cash this gives ~US$125m and with the proposed US$195m debt facility implies ~US$70m of headroom should be available to cover exploration, financing costs and overheads until break-even point.
WBJV build progressing well and on schedule
At WBJV the North Decline has now progressed 1,364m to a depth of 233m, with over 1,708m of ancillary development. Around 175m of reef has now been developed, with raise development of 288m into mining blocks and 75kt of development ore stockpiled thus far. The south decline has 541m of development in with rates improving thanks to more competent ground conditions. The company noted that civil engineering work is on, or ahead of schedule with deliveries for all major components expected on time.
Options on debt for WBJV
BEE is required ahead of debt approval, and we believe potential exists for a funded partner, perhaps even PTMs own BEE group. Thereafter, the proposed US$195m debt package with requisite funded US$75m cost over-run facility, Waterberg northern extension lien, and hedging (potentially of palladium only) remains a low-risk backstop. However, we think non-traditional, potentially strategic, funding with reduced hedge requirements shouldn't be ruled out. With six months before hitting critical path we think that evaluating alternatives remains the best course of action for shareholders.
Valuation update: Maintain BUY and C$1.55/sh price target
is (dot) gd/SIMJgE
VANCOUVER, BRITISH COLUMBIA and JOHANNESBURG, SOUTH AFRICA -- (Marketwired) -- 07/11/14 -- Platinum Group Metals Ltd. (TSX: PTM)(NYSE MTK: PLG) ("Platinum Group" or the "Company") reports the Company's financial results for the nine months ended May 31, 2014.
At Waterberg the Company is drilling with a total of 20 drill rigs and engineering is in progress for a Pre-Feasibility Study on the Waterberg Joint Venture. Seven drill rigs are located on the Waterberg Joint Venture completing in-fill drilling with the objective of converting inferred resources to the indicated category. Results to date have been consistent with the deposit model. Thirteen drill rigs are working on the Waterberg Extension permits with the objectives of in-filling and expanding this portion of the deposit.
Results For The Period
The Company's cash position at May 31, 2014 was $161 million.
The Company's key business objectives and milestones for the next twelve months are:
- to build the WBJV Project 1 platinum mine safely and in accordance with the planned schedule and budget;
- to close a planned US $195 million new project loan facility or an alternate financing for Project 1 by the end of 2014 in order to secure all funding required for the completion of Project 1, including mill, underground development and the establishment of sustained operations;
- the completion of a pre-feasibility study on the initial Waterberg Joint Venture deposit during calendar in early 2015; and
- to continue exploration and definition drilling on the Waterberg Joint Venture and Waterberg Extension with eight or more drill rigs during 2014.
is (dot) gd/v0IQiI
After obtaining a U.S. Nuclear Regulatory Commission permit to mine for uranium at Nichols Ranch Site in the Powder River Basin, Uranerz is already planning to expand their mining area in the near future.
In April, company officials announced the Nichols site, located in Johnson County, was officially in production after receiving the go ahead from the regulatory commission.
Recently, company officials have applied for a mining license amendment through the regulatory commission once again to include uranium rich land south of the site referred to as the Jane Dough Permit Area.
Manager of Investor Relations Derek Iwanaka said the amendment will add the Jane Dough land to their existing license for the Nichols Ranch, which includes the ranch area and the Hank area located northeast of the ranch.
He said the regulatory commission makes sure that numerous tests on the property are made to ensure that the land will be returned to the way it was before mining—especially the water supply.
For the amendment to be official, he said, they must also receive approval from the Wyoming Department of Environmental Quality.
Because the permit areas are so close together, he said, the company expects to install only well fields at the Jane Dough prospective site and use the plant on the Nichols site for processing purposes. He said this should make the project more cost effective.
Currently the company employs 50 people in Wyoming with 30 working at the Nichols site, he said, and the company will expand if they receive approval to mine at the Jane Dough site.
Though, he said, they do not have an exact time line.
The expansion to the Jane Dough site should create more jobs in the county, he said, and eventually increase taxation revenue. He said the company expects to have an update on initial production at the Nichols site by the end of the month.