United States

Analyst Research Report Snapshot


PMI Gold Corporation




Jennings Capital Inc.


14 Nov 2013





Companies referenced:


Available for Immediate Download

Q3 2013 FINANCIALS OBOTAN PERMITTING COMPLETED, BUT PROJECT DELAYED PENDING REVIEW  Cash remains a high 76% of market cap. As at September 30, 2013, PMI’s cash was C$100.5M, down from C$107.8M last quarter. However, it would not be sufficient to fund the equity portion (we estimate $170-$200M) of an overall Obotan Project cost of ~$380M, as per the September 2012 DFS.  New management has initiated a review of the Obotan Project to minimize equity dilution, by reducing or deferring upfront capex and by considering alternative funding sources. The review will consider the following: o Revised resource estimate to potentially be more conservative. The Bank lending group engineers proposed using a different resource modelling technique (multiple kriging constrained by wireframes versus ordinary kriging inside a Leap Frog envelope), to presumably take a more conservative approach. Some feel Leap Frog can overstate resource estimates by 10-20% unless carefully used. Higher cut-off grades may also be examined to assess the possibility of a smaller, higher grade deposit. The revised resource estimate should be ready in Q1 2014. o Lower upfront capex through re-tendered contracts. Management is undertaking a re-tendering of major contracts to assess whether capex costs could be lower in the current less frothy environment. Savings could be anywhere from nil to 10%. o Defer a portion of upfront capex by: a) re-engineering the pits to stage pre-stripping; b) initially displacing Nkran pit ore with nearby near surface oxide deposits, such as Dynamite Hill. The revised resource estimate will include a maiden resource estimate for Dynamite Hill, which we estimate could be in the 75,000-150,000 oz range. o Alternative funding options are being considered to reduce equity dilution, such as JVs and Asanko’s recent Red Kite financing. o All permitting (environmental and mining) received, but project review delays project. Therefore, we have pushed out the start date one year to Q1 2016. Valuation: We are revising our recommendation to SPECULATIVE BUY from BUY and lowering our 12-month target price to C$0.65 from C$1.25 per share, reflecting the negative effect of the 1-year delay to project start-up and financing risk in a difficult capital markets environment. Our valuation is based on a 0.5x P/NAV multiple.

Why buy analyst research?

  • Institutional quality research
  • Available for Immediate Download
  • Detailed company or industry insight
  • Print or save
  • 24 hour customer support
Return to previous page without adding this item to your cart.
Email Customer Support.

About Analyst Research

Analyst research reports are available for immediate download after purchase. You will have unlimited access to the report for 24 hours after purchase, to download, print or save it as many times as you wish. Analyst Research provided by Reuters does not constitute investment advice, and is not endorsed by Reuters Research. This information is protected by copyright and intellectual property laws. More information on Analyst Research.