Amarillo Gold (AGC.V) Message Board

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Gold/Mining/Energy : Amarillo Gold (AGC.V)

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From: TheSlowLane	1/19/2012 1:43:24 PM
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PI Financial Initiates Coverage Beginning to Feel the Samba Beat Amarillo Gold has assembled a highly prospective portfolio of gold exploration and development assets in Brazil benefiting from superior infrastructure. Brazil is a superb host for gold exploration and investment given its strong geological endowment, experienced exploration and mining community, welcoming business environment and political stability. The Company is led by an experienced management team with demonstrable project generation and development talents. We expect the Company's marquee Mara Rosa gold project to enter into production in H214. Over the first five full years Mara Rosa is forecast to produce an average of 119,000 oz gold per annum at cash costs averaging US$495/oz or US$641/oz after royalties. Our model yields an after-tax NPV(10%) of $449M. The pipeline Lavras do Sul project consists of 19,000 ha of exploration permits centered over a +100 sq. km granitic intrusive that hosts 19 known garimpos that have produced from near-surface gold oxide deposits since the 1780s. We believe that the Lavras do Sul project has the potential to host 2 million oz or more in multiple deposits. Amarillo Gold is trading at 2.3x P/E and 0.6x EV/EBITDA, which compares favourably to small precious metal producers peers. In terms of enterprise value per in situ ounce, Amarillo is trading at $57 and $60 for measured plus indicated and global resources, respectively, which represent significant and unwarranted discounts relative to peers. We are initiating coverage of Amarillo Gold Corporation with a $3.75 price target. This price target generates a robust 232% 12-month projected return, and a BUY rating. Our price target is based upon a 1.0x target P/NAV multiple applied to a fully-financed $3.76 NAVPS estimate. We recommend purchase to risk-tolerant investors seeking exposure to exploration-leveraged future gold production.

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