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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (9459)	10/1/2014 5:07:58 PM
From: caliche	Read Replies (2) \| Respond to of 202784

i heard this email was bounced around the big boy world today NY London Geneva TO.. must have opened some peoples eyes.. the valuation is very low.. i think the takeout valuation from national?... was 1.99 i think the game started today.. we bought more What If Torex Gold Acquired Newstrike? EVENT We currently believe the M&A market represents the best opportunity to advance projects held by junior developers. Even with depressed gold prices, acquisitions have continued unabated this year. Following the release of Newstrike’s PEA, we contend that it could join the select club of acquiree. HIGHLIGHTS · Newstrike’s Ana Paula combines many attractive features to producers including: a high head grade (ensuring project robustness; 2.24g/t), low OPEX (ensuring project survivability; $566/oz Cash+Sustaining) and strong production to CAPEX leverage (ensuring growth for acquirer at reasonable cost; $170/oz). · Of all possible acquirers, Torex Gold is stands out. Torex controls the largest gold mine under construction not held by a major. The mine is expected to produce an average of 337koz (peak at 491koz/annum) over an 8.5 years mine life with commercial production expected in 2016. · We strongly believe that Torex could be a net winner if it acquired Newstrike and incorporated Ana Paula’s high grade core into the Morelos mine plan. We see two scenarios for a post-acquisition Morelos: focus on increasing the mine life or focus on increasing production. · Scenario 1 would extend the mine life by 4 years while maintaining a similar LOM average production. This scenario also benefits from lower CAPEX and improves ore versatility. Scenario 2 instead assumes Torex increases the mill size to accommodate more ore. Morelos would now produce over 500koz for 3 years (peak at 600koz/annum). RECOMMENDATION The potential merger is positive owing to the strong synergy potential. By avoiding construction of a mill (single largest CAPEX in Newstrike’s PEA), support buildings, tailings facility among others, Torex focuses only on the mine and maximizes the value of Ana Paula; Torex effectively gains over 1Moz of production at a low development cost; it strengthens Morelos immediately with minimal exploration risk or metallurgical risk (Media Luna). For both scenarios, we believe the acquisition could return a high after-tax IRR (20+%) and an important jump in after-tax NPV ($150M) using conservative commodity pricing ($1,200/oz Au and $15/oz Ag). VALUATION We are affirming our Speculative Buy rating and the 12 month target price of $1.30. Our target price is based on a 0.25x multiple of Newstrike’s NAVPS. The NAV is comprised of our preliminary DCF ($1,250/oz, 7% discount rate) of the Ana Paula deposit. Importantly, we currently ascribe no value to the other assets under Newstrike’s control.