Palisade Research October 10, 2017 Category: Research
Current Price: C$0.63
Shares Outstanding: 172.7 million
Market Capitalization: C$108.8 million
52-Week Range: C$0.35-C$0.70
Cash: ~C$20 million
This morning Northern Vertex released its PEA of the Moss Gold Mine Expansion and confirmed our assumptions in our last price upgrade.
The original FS was purposefully restricted by keeping the heap leach pad and waste dump on patented land. As a result, the reserves were physically defined, not economically defined. The Moss mine PEA now includes a realistic resource that can be accessed by the future expansion of operations onto the adjacent mining claims. As a result, the life of mine was increased from 5 to 10 years.
By eliminating the constraints, and increasing production to a peak of 60,000 gold equivalent ounces in year four, the economics are greatly improved. Still, we believe the updated economics to be very much on the conservative side. We cannot forget, the PEA only contained 10% of the inferred resource that is on NEE's total land package.
A district-wide exploration program will commence in the next six weeks and is expected to further grow the size and scope of the Moss Mine Project. Management will continue to explore and expand the resource during the first two years of Phase II production.
Also included in the economics is grid power, which replaces the diesel powered gensets. Due to the listed changes, the after-tax NPV5 of Moss increased from US$60.3 million to US$93.0 million, with the AT-IRR improving from 48% to 53%.
Since our last upgrade, Northern Vertex's market capitalization has doubled from C$54.4 million to C$108.8 million. In this time span, we saw an impressive US$20 million equity financing, and the closing of a US$9 million equipment finance facility from Caterpillar. To date, NEE has also drawn down US$15 million of its US$20 million Sprott Credit Facility.
We were fairly inline with our original projection; however, we have since been on site and the company has progressed incredibly. Moss is fully funded, and Northern Vertex has significant cash reserves. Taking all this into consideration, we are increasing our intrinsic valuation of NEE from $114 million to $156 million. This equates to C$0.90 per share, or a gain of 43% from current levels.
Northern Vertex remains one of the premier gold developers in our portfolio. They tout themselves as the next US gold producer, we believe they are the next US gold acquisition.
Palisade Global Investments Limited holds shares of Northern Vertex. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.