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Positive Analysis for Sandstorm
Sandstorm announced that it intends to proceed with a normal course issuer bid (NCIB) and may purchase up to 5,882,879 of its common shares, representing 5% of the company's issued and outstanding common shares of 117,657,587 as of December 11, 2014. Daniel Earle reviewed the bid and sent out the following analysis:
Political News have not Impacted Timeline
Daniel Earle is providing an update on the El Limon-Guajes project and providing his near-term outlook for the company
According to the Mexican attorney general, 43 student teachers participating in a protest in the nearby town of Iguala were abducted by local police in late September and subsequently murdered. While searching for their remains in the area, a number of mass graves were discovered and in the resulting protests a further six people were killed. Authorities believe Iguala's mayor and his wife were behind the atrocity – they subsequently fled, as did the town's police chief.
This incident and related protests did blockade the project briefly but have not impacted the project timeline, accordingly to the company; however, these security issues have reportedly made it more difficult to ramp-up the number of contractor employees on site that are required to meet the construction schedule. Should staffing challenges continue, the company suggested that non-critical work for the ramp-up would be postponed to after the first gold pour.
Daniel Earle calculates that Torex is currently trading at 1.03x, the corporate NAV5%; this is above both the junior producers and its development-stage peers in the coverage universe, which trade at an average of 0.77x and 0.56x NAV5%, respectively
Overall construction of the El Limon-Guajes project was approximately 20% complete (as of September 30) and the project appears to be on schedule for initial production in H2/15. Daniel Earle would suggest, however, that timeline and capex creep occur regularly in the construction of mining projects and particularly ones that are technically challenging (grade/strip ratio risk, metallurgy, topography, etc.), as Daniel Earle believe this one is. These delays and cost overruns are typically disclosed in the later stages of construction, in Daniel Earle's view.
Daniel Earle likes the Morelos project. However, before recommending the stock, Daniel Earle would look for either reduced risks via project advancement or a more attractive valuation relative to producers to compensate for the elevated level of risk at the current stage, with commercial production being approximately a year and a half away. Daniel Earle maintains his HOLD recommendation and his target price remains unchanged at $1.75.
Financing Completed, Exploration Ramping Up!
Equity Research from analyst Daniel Earle regarding recent financing.
Daniel Earle is resuming coverage of Lake Shore Gold following the close of a bought deal financing. The company sold a total of 12.9mm flow-through common shares at a price of $1.17 to raise gross proceeds of $15mm
Daniel Earle estimates that the company now has approximately $77mm in available cash (and $115mm in debt) and the company suggested that it will use the funds for general exploration in the 144 area, including the 144 Gap Zone discovery
Daniel Earle believe raising additional funds for a more aggressive exploration program is sensible, in his view, given the encouraging exploration results reported to date and the need to build resources/reserves to extend the mine life at Timmins West
Daniel Earle calculates that Lake Shore is currently trading at 0.67x to the corporate NAV5%. This is a slight discount to the emerging and mid-tier gold producers in the coverage universe, which trade at an average of 0.83x NAV5%
Daniel Earle believes the company's valuation is compelling, particularly so in terms of its free cash flow yield, which is the highest in the coverage universe (13.8%). Daniel Earle will re-iterate his BUY recommendation and $2.00 target price
More on Royalty Legislation (Negative)
Tahoe announced that the Guatemalan Congress had passed legislation that would see the net smelter return (NSR) royalty on mining projects increased to 10%.
Analyst Daniel Earle notes that the Guatemalan President, Otto Molina, has approximately two weeks to exercise his veto power to block the legislation before it will become law. Daniel Earle views the proposed fiscal regime as being one of the most punitive in the world
Escobal currently pays a 5.5% royalty (including a 0.5% voluntary royalty to local landowners) – the 7% 'tax' (also an NSR royalty) that the project is subject to would be unaffected, bringing the total royalty burden on the project to an eye-watering 17%
As an exceptionally low-cost operation at the start of its mine life with the highest grades, Daniel Earle believes Escobal can withstand the higher royalty and continue to generate strong free cash flow in the short and mid-term
However, incorporating the royalty our 2015E CFPS decreases by 11%, the change in royalty itself responsible for 11% and the balance from reducing the value of the exploration upside associated with the large (~2,000 sq. km) and prospective land package surrounding Escobal to zero as, on a risk-adjusted basis, Daniel Earle don't see the merit in further exploration in Guatemala outside of Escobal given the odds against finding a deposit that would be economic in the potential new royalty regime
Tahoe's shares closed down 8%, while its precious metals peers traded up 8-10% on average so the stock may be due for somewhat of a rebound
Daniel Earle estimates that the company trades at 1.49x he is maintaining his BUY recommendation, but reducing his target price to $22.00 (from $27.00)
Royalty Legislation a Significant Negative
Daniel Earle released a progress report on the recent legislation made to raise royalties on the precious metal industry.
The Guatemalan Congress passed legislation that would increase royalties on mining projects if enacted:
President Otto Molina must sign off on the legislation for it to become law
The legislation requires a total royalty rate of 10% – 9% to the federal government and 1% to local municipalities
Tahoe currently pays a 5.5% NSR (0.5% being a voluntary royalty to land owners) and a 7% NSR'tax'
Daniel Earle notes that Tahoe Resources CEO Kevin McArthur said, "It is unfortunate that Congress wants to raise royalties on precious metals at a time when the industry is struggling and facing the lowest metals prices in four years. In addition to voluntary royalty payments, the Escobal mine has been supporting a number of national, regional, and local community programs that we would expect the higher royalty payments to fund in the future."
Daniel Earle would go further and suggest that a combined 17% NSR royalty/tax structure would be among the most burdensome anywhere in the mining industry globally. For reference, Argentina's Santa Cruz Province, which Daniel Earle views as one of the most expensive jurisdictions in the world, currently applies royalties of 8% with an additional 35% income tax.
Continental reports incorrect numbers?
Mike Hocking says that the latest numbers in Continental Gold do not add up.
Read more at:
www.miningfeeds.com/2014/11/27/scotias-mike-hocking-calls-out-continental-gold-with-bad-math
Negative rating for FR
Analyst Daniel Earle has released his views on First Majestic. First Majestic reported adj. Q3/14 EPS of -$0.04/share, below consensus of $0.04 and Daniel Earle's estimate of $0.05 with the miss due to higher costs and slightly lower realized prices
Production was pre-released October 14, with production of 2.68 Moz Ag (3.52 Moz AgEq); Total cash costs were reported this morning at $10.41/oz (AISC of $19.89/oz), significantly higher than Daniel Earle's forecast of $8.60/oz due to higher unit costs at all mines
As previously announced, the company suspended silver sales during the quarter; subsequently, it sold all 934 koz of inventory at an average price of $17.29/oz (the Q3/14 spot price averaged roughly $19.71/oz for reference)
The company's current total cash cost guidance range of $8.67-$9.12/oz would require major cost improvement in Q4 to be achieved, in Daniel Earle's view
Daniel Earle has lowered his 12-month target price to C$7.50 from C$10.00, reflecting lower multiples across the sector and the challenging silver price for the company and maintains his HOLD recommendation.
Neutral impact for SLW
Daniel Earle has sent out an analysis report on SLW. Silver Wheaton reported Q3/14 EPS of $0.20, which was slightly below both consensus of $0.22 and Daniel Earle's estimate of $0.23, due to a lower realized silver price and higher depreciation
Silver-equivalent production totaled 8.4 Moz at cash costs of $4.59/oz (Daniel Earle had forecasted 9.1 Moz at $4.65/oz); The company will need to produce 10.2 Moz in Q4/14 to meet its annual guidance of 36.0 Moz
The company declared a quarterly dividend of $0.06/share, as expected and the company’s cash position increased by approximately $94mm to $233mm in the quarter
Daniel Earle forecasts the company's operating cash flow to be in the range of $420mm to $540mm per year over the next few years (at $15.50/oz silver) and he currently only model $230mm of capex payments for the remainder of 2014 and 2015
Silver Wheaton is currently trading at 1.21x NAV5% and 13.8x 2015E CFPS, which is a meaningful discount to what Daniel Earle views as its closest peer, Franco-Nevada Corp. (FNV-T), which trades at 1.78x NAV5% and 20.8x 2015 CFPS
With SLW's strong balance sheet and access to capital, the company is well positioned to continue to complete attractive transactions and further its business model, in Daniel Ear;e's view. Daniel Earle maintains his BUY recommendation.
PAAS - Negative Impact
Daniel Earle released new analysis stating Pan American reported adjusted EPS of -$0.09 below both consensus and his estimate of $0.02, with the difference resulting from fewer sales and lower realized prices.
Production of 6.2 Moz was also below Daniel Earle's estimate of 6.5 Moz, due to less production at Alamos Dorado, Manantial Espejo and San Vicente, while net cash costs of $12.29/oz were largely in line with his forecast of $12.12/oz
Full year production guidance was maintained at 25.75–26.75 Moz at net cash costs of $11.70-$12.70/oz and Daniel Earle continues to forecast the company beating its cost guidance
However, at current market prices, the company's balance sheet may begin to be eroded quickly and that its growth prospects may be muted, in his view
The company’s balance sheet remains strong with $377mm in cash and short-term investments, $607mm in working capital, and only $57mm of total debt
Daniel Earle's 12- month target price remains unchanged at $12.00 and he maintains his HOLD recommendation.
Negative Impact for SSL.
Some recent analysis from Daniel Earle shows negative impact from SSL.
Sandstorm's quarterly results were a slight positive from Daniel Earle's perspective, with the company reporting higher attributable ounces sold from its royalties and the financial results were roughly in line with both his estimates and consensus.
More important than the Q3/14 financial results, in Daniel Earle's view, was the 2017 guidance cut to 45 koz (down from 60 koz previously), due to the concern at Aurizona; Sandstorm is now assuming no attributable production from Aurizona in 2017.
Additionally, Luna Gold reported its Q3/14 financial results after-market yesterday; the company tightened 2014 guidance again and mining activity will be reduced from February 2015 onwards, according to the company.
Luna also announced all non-essential capital programs have been halted, includes the tailings dam raise, completion of Work Packages 1 and 2 of the Phase 1 expansion and refurbishment of mining equipment.
Daniel Earle has lowered his 12-month target price to C$4.25 from C$6.00 and he maintains his HOLD recommendation.
PEA Beats on Almost All Metrics
Here's some recent analysis from Daniel Earle:
Continental Gold released the results of the much-anticipated Preliminary Economic Assessment (PEA) for its Buriticá gold project (100%) last night.
The PEA represents the first engineering/economic study for the multi-million ounce, high grade, gold project and is a major milestone in its ongoing advancement, in Daniel Earle's view
The study details what Daniel Earle views as a robust gold project at current gold prices, with almost all of the key metrics beating his expectations
Daniel Earle had forecasted a mine plan of 4.5 Moz at 7.5 g/t producing 242 koz at US$625/oz cash costs – the study came in at 4.8 Moz at 7.8 g/t with annual production of 265 koz at US431/oz cash costs, with the higher production coming from the combination of higher grades and throughput
At a gold price of US$1,200/oz, the PEA calculated an after-tax project NPV5% of US$1,080mm and a corresponding after-tax IRR of 31.5%. This was significantly ahead of Daniel Earle's calculated project NAV5% of US$680mm (calculated at US$1,250/oz)
Daniel Earle has raised his target price to $7.00 (from $6.00); he is maintaining his SPECULATIVE BUY recommendation
Mining Rate Going Forward a Question Mark
There has been mixed impact on Detour Gold Corp, according to analyst Daniel Earle.
In Q3/14, mining rates averaged 206 ktpd, which was the sort of depressed rate that Daniel Earle had expected given the elevated level of overburden, till and other difficult mining the company was doing in the quarter. Daniel Earle expected to learn the mining rate for October, after this difficult mining had been completed, as that would give us a read on 2015. The company did note that after opening up the pit this year, it only needed to mine an average of 245 ktpd to achieve gold production of 540 koz in 2015 – Daniel Earle would suggest this was previously known.
While the company did not disclose the mining rate for October, it did suggest that following the significant overburden and till removal program that ended in July, mining rates did not improve as expected, primarily due to low drilling productivity and delays in explosive loading, which impacted shovel productivity and utilization. To a lesser extent, shovel availability also contributed to lower mining rates (availability of 81% versus 85% target).
The company went on to say that it is working towards a step-up phase to gradually improve mining rates, which includes improving quality assurance and controls for drilling and blasting procedures. Daniel Earle believes additional improvement is needed to average 245 ktpd next year. Finally, Daniel Earle note that the colder temperatures over the next two quarters should help mining rates.
Negative Financial Results for Endeavour
Endeavour Silver reported what Daniel Earle views as negative Q3/14 financial results yesterday morning – operating results were pre-released October 9.
EPS of -US$0.11 versus consensus of -US$0.05 and Daniel Earle's estimate of -US$0.04 and CFPS of US$0.04 versus consensus of US$0.11 and Eadinel Earle's estimate of US$0.09 on sales lagging production and lower realized prices.
Production was pre-released; cash costs of US$10.70/oz were above Daniel Earle's forecast of US$9.58/oz and AISC were reported at US$20.18/oz due to higher costs at Bolanitos and sales lagging production, which resulted in lower by-product credits.
The company carried 557 koz Ag and 1.5 koz Au in inventory with a quoted market value of US$9.5mm and US$1.8mm, respectively, as of the end of Q3/14. However, Daniel Earle notes spot prices have significantly declined since then.
Mine plan reviews have commenced for each operation, including the possibility of reducing production to optimize their short and long term viability.
Daniel Earle is maintaining his HOLD recommendation, but lowering his target price to $4.25 from $5.50, reflecting lower multiples on the back of the challenging silver price and weaker market sentiment.
Thank you, Robby. This is all good news. Please release the PEA when it is released in the next few weeks.
Some recent equity research
I found some recent equity research from an analyst named Daniel Earle.
He found Exeter is expanded water drilling program at its Caspiche project in Chile aimed at proving up the aquifer discovery made earlier this year. Validating the potential water source for various mining scenarios at Caspiche would be a major step in de-risking the project. Daniel Earle calculates Exeter had a market cap of $53mm, no debt and cash and equivalents of approximately $33mm.
The expanded 2014 water exploration program includes completing two additional large diameter water bore holes and a series of smaller diameter water monitoring holes. Down hole pump testing and water level measurements are expected to quantify for permitting purposes flow rates and aquifer recharge rates.
Daniel Earle expects that preliminary testing earlier this year suggested potential rates of over 200 L/s would eventually be possible, which would provide sufficient water for any of the options outlined in the May 2014 PEA for Caspiche – the standalone oxide/heap leach option, the immediate focus of the company, would require less than 50 L/s.
You can expect more water drilling campaign results in Q4/14E.
The Optimized oxide gold project study should come out in Q4/14E.
Additional information
Rubicon provided an update from its ongoing Infill Drilling Program, at its Phoenix (100%) gold project in Red Lake, Ontario.
Daniel Earle believes that there is additional growth potential with economic intercepts having been encountered outside of existing stope blocks in the upper levels of the deposit. He has made no major changes to his estimates and maintains the SPECULATIVE BUY recommendation.
Rubicon Minerals Equity Research
I found some recent equity research conducted by Daniel Earle.
Rubicon provided an update from its ongoing Infill Drilling Program, at its Phoenix (100%) gold project in Red Lake, Ontario.
Daniel Earle suggests that addition growth potential exists with economic intercepts having been encountered outside of existing stope blocks in the upper levels of the deposit.
The company has completed 124 holes or 22 km of the 38 km of the program, drilling at 25m spacings to upgrade Inferred resources to Indicated in the upper part of the deposit. The company believes grade and continuity continue to meet expectations and suggested a conversion rate of 85% to Indicated as from its prior infill program is possible.
Some recent key results found that sparsely drilled areas contained
244L-69: 136.5 g/t Au over 4.0 m and 244L-83: 61.2 g/t Au over 2.6 m
244L-63: 34.8 g/t Au over 2.5 m and 244L-39: 20.6 g/t Au over 5.0 m (including 32.7 g/t Au over 3.0 m)
You can expect final infill drilling results in late 2014E/early 2015E, mechanical completion and commissioning in early 2015E, as well. There will be first gold production in mid-2015E.
Some equity research on Pan American Silver...
Daniel Earle has updated his view on Pan American Silver to HOLD. The company is believe is most-sensitive to the metal price and yet, even after a recent pullback, its share price has significantly outperformed the silver price over the last year.
The target price comes down to $15.00 (from $19.00) on lower multiples reflecting negative free cash flow and muted growth potential at spot silver prices, so he is downgrading our recommendation to HOLD (from BUY)
The impact is slightly negative.
The reduced target multiples are in line with those Daniel Earle used for First Majestic Silver, which he believe is the company’s closest peer. He had used premium multiples previously to reflect what he viewed as an attractive combination of free cash flow in Q2/14, some growth potential, a strong balance sheet, and the highest dividend in our precious metals coverage universe at ~4.1%.
Daniel Earle's analysis suggests that if the silver price does not rebound, the company's balance sheet may begin to be eroded quickly and that its growth prospects may be muted. For example, he expect the company to burn cash before paying its dividend in Q4/14 and 2015 at $18.00/oz silver and he would suggest its Dolores expansion, where a construction decision is expected within 9-12 months, may continue to be delayed.
Big news for CNL-T equity
Daniel Earle expects the resource to form the basis of the PEA in Q4/14, with the results of the Phase V drill program and important underground sampling to possibly be included in a subsequent economic study.
It's no surprise since the company's database included 578 surface and underground drill holes (203 km of drilling) and 3.7 km of channel sampling.
Underground development is still on track. Yaraguá Ramp will be completed by year-end, with the company having completed 91m out of 380m planned.
Approximately 245m of the planned 350m Veta Sur deposit is complete. The progress is ahead of schedule.
There are some critical results for de-risking the resource estimate in mid to late Q4/14E.
According to the company, vein locations observed in the Veta Sur cross-cut appear to reconcile well with the vein locations in the current mineral resource estimate.
In regards to Yarugua, the company has four rigs operating from the Higabra Tunnel assigned to infill drilling the deeper portion of the resource envelope. In addition, 650m program of short cross-cuts was initiated in the upper part of Yaragua in September..
Daniel Earle reported big news coming in Q4/14E:
Development Update, including Yaraguá and Veta Sur
Completion of Preliminary Economic Assessment
Furthermore, find updated resource estimate in H2/15E and completion of permitting in Q3/15E.
Some production results...
Daniel Earle reports that production is a at 43.3 koz as result of higher throughput, but below Q2/14 production of 52.3 koz due to lower grade – this was expected due the higher grade of 5.4 g/t in Q2/14, in his view.
The company has produced 142.5 koz and has suggested that it would likely meet or exceed the top end of its 2014 production guidance of 160–180 koz. Debt is also being paid off quickly as during the first nine months of 2014 were ~$20mm (up from $17mm at the end of H1/14) and the company previously stated it expected to repay an additional $5mm of debt in Q4/14
In Q2, the company ended the quarter with $67mm in cash and has approximately $120mm of debt.
The impact has been slightly positive, according to Daniel Earle.
The reason behind this is that production and throughput were better than we anticipated, while grades were slightly lower and mill recoveries were in line.
Further research Daniel Earle found on the company shows that the company's guidance for the year is 4.5 – 5.0 g/t and the reserve grade is 4.6 g/t. The company ended the quarter with $67mm in cash (up from $53mm at the end of Q2/14) and total debt repayments in Q3/14 were approximately $3mm. To meet the company's full year target, it would need to repay an additional $5mm of debt in Q4/14.
Some things to look forward to include Preliminary Costs Estimates in early October 2014E.
Additional Drilling Results will be released at the end of 2014E.
For an Updated Reserves and Resource Estimate check back at the End of 2014E
Good luck, folks.
Some big equity news today that I found from Daniel Earle.
The main mineralized zone now reportedly extends over 1,200 m in length by up to 450 m vertically and to some extent down dip. Daniel Earle reports that drilling highlights from the Villalpando and Asuncion veins (since April) include 200 g/t Ag and 5.49 g/t Au (530 g/t AgEq)
There are currently four drill rights out of twelve working in Mexico and drilling along the V-Asuncion area at its El Cubo mine in Guanajuato State, Mexico continues to intersect high grade, silver-gold mineralization.
Some further research from Daniel Earle, in regards to the El Cobo mines:
Proven and Probable resources of 1.4 Mt grading 135 g/t Ag and 2.16 g/t Au (5.9 Moz Ag and 96 koz Au or 11.7 Moz AgEq)
Indicated resources of 2.2 Mt grading 102 g/t Ag and 1.77 g/t Au (10.6 Moz Ag and 165 koz Au or 20.5 Moz AgEq)
Inferred resources of 2.5 Mt grading 143 g/t Ag and 2.77 g/t Au (7.7 Moz Ag and 130 koz Au or 15.5 Moz AgEq)
Until next time, folks.
Techsonian reports Wi-Lan is a stock to watch this quarter:
Loving these settlement updates coming in as the worries of the Apple trial begin. Good luck to all. Lets see the stock price soaring at the end of this road.
Wi-Lan mentioned in the Marshall, Texas newsletter where the trial is being held. A good, quick update of what has happened thus far in court.
http://www.marshallnewsmessenger.com/news/patent-trial-of-apple-wi-lan-continues/article_ae2b0652-ac48-5ef4-adfa-27edd9421ebc.html
Alvarion Ltd : Alvarion (in Receivership) Requests Court to Approve Sale of Certain Assets and Controlling Interest of the Company.
Wi-Lan is said to have put an offer to purchase Alvarion patents for $0.6 million.
Canaccord Genuity targets Wi-Lan at $6.60
View the full detailed report here:
https://research.canaccordgenuity.com/_layouts/researchnoteviewer.aspx?pubid=95086
The analyses takes into account income and expenses, as well as upcoming highlights and key variables.
Insider ownership recently updated on Wilan website.
An extremely large number of shares bought by Michael Vladescu, Chief Operating Officer, at Wi-Lan.
Wi-Lan provides litigation update and is optimistic about the markman results.
Wi-Lan beat estimates and increased forward guidance. This is a very positive Q2.
A bullish day for Wi-Lan. The positive news has driven up the price of the stock today.
Maybe a target of $4.00 tomorrow is not out of range?
Wi-Lan is litigating an additional 5 cases in 2013.
The negative ruling was unfortunate, but many analysts are calling the drop in stocks an over-reaction.
Although, some think the truthfulness of that statement is debatable, the stock is bouncing back quite rapidly.
The biggest upcoming case is one against Apple in October. Now that Wi-Lan has had more experience in court, it may go more smoothly than the last.
My previous post was regarding the latest news conducted a week ago.
Has anyone found anything else?
Anyone else excited about the pending litigation against HTC and Sony?
Latest news say that Wi-Lan damages specialist, John C. Jarosz, was ordered to adjust the royalty amount he previously calculated to further comply with the Entire Market Value rule. I'm very interested to see the case after the amended analysis is turned in. Once the damages are calculated specifically to the Entire Market Value rule, I expect Alcatel-Lucent, HTC, and Sony to pay royalties for the damages.