Leagold Mining: Woodyer & Giustra Are Building Endeavour ... · PDF fileLeagold Mining:...
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Leagold Mining: Woodyer & Giustra Are Building Endeavour Mining 2.0 Los Filos Mine; aerial view heap leach pads 1. Introduction Sometimes it happens that an asset can benefit from a new set of eyes looking at it from a different perspective. That is exactly what seems to be happening at the Los Filos mine in Mexico. Goldcorp (GG, G.TO), the previous operator of this mine, decided to focus on other projects due to its new 20/20/20 strategy (in the next five years achievement of 20% growth in gold production, 20% growth in gold reserves and a 20% reduction in our all-in sustaining costs) put in place by new CEO Garofalo, and put the mine up for sale. Several parties were interested, but Leagold Mining Corp. (HTXFF, LMC.V) made the winning bid. Leagold appeared to be a special purpose vehicle; created for the sole purpose to acquire this mine in Mexico’s Guerrero Gold Belt but it is meant for much more. Looking at the company’s management team, built around well-known founders Neil Woodyer and Frank Giustra, the Los Filos mine is the very first step of Leagold Mining. This company is destined to achieve great accomplishments, and the current valuation of the company is definitely just the beginning.
Transcript of Leagold Mining: Woodyer & Giustra Are Building Endeavour ... · PDF fileLeagold Mining:...
LeagoldMining:Woodyer&GiustraAreBuildingEndeavourMining2.0
LosFilosMine;aerialviewheapleachpads1.Introduction
Sometimesithappensthatanassetcanbenefitfromanewsetofeyeslookingatitfromadifferentperspective.ThatisexactlywhatseemstobehappeningattheLosFilosmineinMexico.Goldcorp(GG,G.TO),thepreviousoperatorofthismine,decidedtofocusonotherprojectsduetoitsnew20/20/20strategy(inthenextfiveyearsachievementof20%growthingoldproduction,20%growthingoldreservesanda20%reductioninourall-insustainingcosts)putinplacebynewCEOGarofalo,andputthemineupforsale.
Severalpartieswereinterested,butLeagoldMiningCorp.(HTXFF,LMC.V)madethewinningbid.Leagoldappearedtobeaspecialpurposevehicle;createdforthesolepurposetoacquirethismineinMexico’sGuerreroGoldBeltbutitismeantformuchmore.Lookingatthecompany’smanagementteam,builtaroundwell-knownfoundersNeilWoodyerandFrankGiustra,theLosFilosmineistheveryfirststepofLeagoldMining.Thiscompanyisdestinedtoachievegreataccomplishments,andthecurrentvaluationofthecompanyisdefinitelyjustthebeginning.
Allpresentedtablesaremyownmaterial,unlessstatedotherwise.
Allpicturesarecompanymaterial,unlessstatedotherwise.
AllcurrenciesareinUSDollars,unlessstatedotherwise.
2.Thecompany
LeagoldjustfinalizedthefinancingwhichwascompletedsimultaneouslywiththeacquisitionoftheLosFilosmine.Asthecompany’smanagementteamisoneofthemainpartsoftheinvestmentthesis,Iwilldiscusstheexecutiveslaterinthisarticle.
TradinginLeagoldiscurrentlystillhalted(howeveritwillresumetradingonMondayApril10)asthecompanyhasjustcompletedtheacquisitionoftheLosFilosprojectfromGoldcorp.TheCompanyisalsoclosingtheconcurrentfinancingstofundthepurchaseandtomakesureithasadditionalworkingcapitaltoensureasmoothtransition.
Afterallfinancings(twoequityfinancingsandonedebtfinancing)willhavebeencompleted,Leagoldwillhave151millionsharesoutstanding,givingitapro-formamarketcapitalizationofapproximatelyC$415M,basedontheC$2.75sharepricelevelthecompanyisraisingmoneyat.Asthisacquisitionwillbeacompletegame-changerforLeagold,whichwasashelluntilnow,theaveragedailyvolumeshouldincreaseprettyfast,makingthisoneofthemostliquidcompaniesontheTSXVenture.Itdoesn’thappeneverydaytoseeashellacquiringaproducingassetwithanaverageannualoutputofinexcessof200,000ouncesofgold,givingitinstantcashflowtoimmediatelypursueitsgrowthplans,toadvancetowardsamid-tierproducer.
Shareprice;1yeartimeframe
Afterthefinancingsmanagementwillownapproximately9%,whichmeansitsinterestsarealignedwiththeinterestsoftheshareholders.WithNeilWoodyerandFrankGiustraasfoundersofLeagold,wehavenodoubtthiscompanyisdestinedtobesuccessful.
OneofthemostimportantaspectsofLeagoldMiningisn’tnecessarilytheasset,butthehumancapitalrunningthecompany.Afterall,agoodorbadmanagementcanmakeorbreakaninvestmentcase.Agoodmanagementcanmakeanaverageprojectgood,butabadmanagementcantotallyruinagoodproject.
ItwouldbeaseriousunderstatementtosayLeagoldisn’tthemanagement’sfirstrodeo.Thecompany’sCEOisNeilWoodyer,amanwehavetheutmostrespectfor.
In2007,WoodyerdecidedtoconvertEndeavourFinancialintoafull-fledgedminingcompany,ratherthanbeingafinancier.EndeavourstartedoffbyacquiringCrewGoldandEtruscanResourcesandcontinuedtogrowatanextremelyfastpaceafteracquiringfiveothergoldcompanies,andappearedtobeverygoodandefficientinintegrating,revampingandoptimizingacquiredoperationsontimeandonbudget.IstilllovethebuyoutstoryofAvionGold,wherethefirstactionsafterthetakeoverweresendingawayandreplacingallcontractors,personnelandminemanagementoftheTabakotomine,asexistingoperationswerehopelesslyinefficient.
Therealapotheosiscamein2015whenEndeavourMiningannouncedtheacquisitionofLaManchaResourcesandtheItymine.ThisimmediatelycatapultedEndeavourMiningintotheranksofmajorproducers,andthepurchaseofTrueGoldMiningforitsproduction-readyprojectinBurkinaFasowasthefinalstepforEndeavourMining,whichaimstoproduceinexcessof600,000ouncesofgoldin2017.Atrueclass-act,whichwasrewardedwithasubstantialincreaseinEndeavour’smarketcapitalization.
EndeavourMining;marketcapgrowth
IhavenodoubttheEndeavourgrowthpatternwillbeusedastheblueprintforLeagold,asthecompanydoesn’thidethefactitwantstogrowthiscompanyintoasignificantgoldproduceraswell,asfeaturedprominentlyonthehomepageandinitspresentation.
ManagementalreadyindicatedthisinthisnewsreleasefromJanuary12,2017whenannouncingtheacquisitionofLosFilosfromGoldcorp:
"Leagoldaimstobuildanewmid-tiergoldproducerwithafocusonopportunitiesinLatinAmerica;LosFilosisthefirstacquisition"
ItwillbeveryclearbynowthattheLosFilosminewillbethefirststeppingstoneandtheincomingcashflowwillthenbeusedtofundtheacquisitionanddevelopmentofnewprojects.
ChairmanFrankGiustraisinaleagueofhisown.Havingfounded5(multi)billiondollarresourcecompanies(forexamplePacificStratusEnergy,thepredecessorofPacificRubialesEnergy,andWheatonRiver,predecessorofGoldcorpandSilverWheaton)andamultibilliondollarfilmstudio(Lionsgate),hebecameabillionairehimselfbecauseofit.Thatwasn'ttheonlymasterstroke,asGiustradidsomeremarkablethingsbeforehestartedfoundingcompanieshimself.Forexample,whenhewasstillwithYorktonSecurities,aninvestmentbank,hefundedsomeofthemostlucrativedealsinthehistoryofmining,ashedidthefirstfinancingofRobertFriedland'sDiamondFields.Itwillbeclearhemadealotofmoneyforhimselfandhisclientsandinvestors,anditlookslikeLeagoldishislargestundertakingatthemoment,afterreturningtominingalmost2yearsago,andhopefullypoisedforlotsofgainsalongtheroadagain.
Thecompany’sflagshipproject,LosFilos,islocatedinMexicowherealotofminingactivitytakesplace,andhasasolidminingculture.AccordingtotheFraserSurveyof2016,Mexicoscores#53outof104jurisdictionsforPolicyPerceptionIndex(PPI),whichisaverageforLatinAmericancountries.However,IwoulddefinitelyliketopaysomeattentiontotheGuerreroregion,wheretheLosFilosmineislocated.
Theregionhasn’tbeenthemoststableregioninMexicoasthereisalotofcrimegoingon,andmostcompaniesoperatingintheregionarereallyinvestinginsafetytomakesuretheirprojectsandtheintegrityofthestaffareensured.GoldcorpandnearbyTorexhavehadsomeseriousissueswithsecurityontheaccessroadstothesites.Whereasthesituationcurrentlyseemstobeundercontrol,Idoliketoworkwithacertainmarginofsafety,andthereforewillapplya10%discountratetothecompany’sproducingminelateron.
Additionally,thefactthecompanyisfocusingonMexicomightbereallyinteresting,consideringPresidentTrump’saggressivestancetowardsthecountry.TheMexicanPesohasregainedsomeofitsgroundafterfallingbyinexcessof20%onthebackofTrump’selection,butthecurrencyexchangeratemightplayanimportantroleinLeagold’sfuture.Afterall,itsmineplansarebasedonanUSD/MXNexchangerateof21Peso’sperUSDollar,butthePesoiscurrentlyapproximately10%strongerthanbudgeted,whichmighthavea(slightly)negativeimpactonLeagold’sNetPresentValue(NPV)andInternalRateofReturn(IRR),whichIwilldiscusslateron.
3.TheprojectTheLosFilosmineisoneofthelargestgoldminesinMexico,andinTheAmericasingeneral.The
openpitmineproducesinexcessof200,000ouncesofgoldperyearonaprettyconsistentbasis(231,000ouncesin2016).Andnotonlyisitalargemine,Goldcorphasalwaysbeenabletokeeptheproductioncostsverylow,andtheanticipatedAISCisjust$850/oz(AISC$878/ozin2016).Thiswasdefinitelyoneofthekeypointstoattractnumerouspotentialbuyers.
LosFilosMine;locationmapThemineislocatedintheGuerreroGoldBelt,approximately225kilometerssouthofMexicoCity,thecapitalofthecountry.Asthepropertyislocatednearamajorhighway,thetripfromMexicoCitytoLosFilosusuallytakeslessthanfourhours,bycar.Thatisamajoradvantageasitisefficienttobringpeopleineitherviathehighway,orthenearbyairstrip.LosFilosalsohasimmediateaccesstowaterandpower,whichimpliesverygoodinfrastructure,abigplusforanyminingproject.
ClaimmapProductionatLosFilosbeganin2008whenminingcommencedattheopenpitmine,andallgoldhasbeenrecoveredthroughasimpleheapleachoperation,followedbyanadsorption-desorption-recoveryprocess.Thecurrentopenpitandundergroundminingoperationsstillcontainsmillionsoftonnesoforeinreserves,ascanbeseenhereinthistablerepresentingReservesandResources:
2016resourcestatement(excludingsilver)ThecurrentmineplanexpectstoceasetheminingoperationsattheLosFilospitin2019.Thisdoesn’tmeantheentireminewillbeshutdown,astheBermejalopenpitisexpectedtobebroughtbackinproductionin2018(miningatBermejaliscurrentlysuspendeduntiltheLosFilosopenpitisminedout).TheLosFilosundergroundminecontinuesoperationsto2023.
AerialviewofoperationsFrom2019to2024,themajorityoftheore(9,000tpd)willbesourcedfromtheBermejalopenpit(90%),whereastheLosFilosundergroundminewillcontributeapproximately1,000tpd(10%).Theundergroundorehasahigheraveragegradeandresultsinacombinedproductionprofileofinexcessof150,000ouncesofgoldperyearuntil2020,whereafterthecombinedoutputwillgraduallydecrease,asshowninthenextimage:
ExistingproductionscheduleLosFilosWithatotalsustainingcapexofUS$79Mandatotalgoldproductionofalmost1.2MozAu,thecapitalefficiencyisveryhighasthesustainingcapexperproducedounceofgoldwillbelessthanUS$65/ozAu,resultinginalowallinsustainingcost(AISC)ofUS$805/ozAu,orC$1073/oz.Andthatisquitelow,consideringthisincludesthecontinuousdevelopmentoftheLosFilosundergroundmine,whichtraditionallyisn’tcheapatall,withAISCfrequentlysurpassingC$1200/ozlevels.
Anindependentconsultants,Stantec,completedatechnicalreportforLeagoldandpresentedaneconomicstudybasedonthemineplanwith1.26MozAubeingproducedfromthetwoopenpitsandtheLosFilosundergroundmine.UsingthebasecasescenarioofUS$1200/ozAu,thecurrentmineplanboastsanafter-taxNPV5ofUS$334M.Thecompany’stechnicalreportalsoprovidesasensitivityanalysis,andIamgladtoseethatevenatanaveragegoldpriceofUS$1100/ozAu,theafter-taxNPV5isstillUS$263MandevenifIwouldapplya10%discountrate,theNPVwouldstillbeinexcessofU$230M.ThisemphasizesthestrongoperatingmarginsatLosFilos.Notwithstandingthis,itisneededtocloselymonitortheUSDollar/MexicanPesoexchangerate.
USD/Pesoexchangerate;sourceStockchartsAnexchangerateof21Peso’sperUSDollarwasused,buttheMexicanPesoiscurrentlyinexcessof10%moreexpensivethanbudgeted(ascanbeseenintheaboveimage).Thiswillverylikelyhavea(modest)negativeimpactontheNPVandproductioncostsasthelocalcostswillbeabit
higherwhenexpressedinUSDollar.Notadeal-breaker,butit’sdefinitelysomethingtokeepinmind,aslocalcostsforoperationslikethisareusually40-50%inlocalcurrencies.4.BermejalUnderground:ExpansionatabargainpriceAtfirstsight,itdoesn’tseemtomakealotofsensetopayUS$350Mforaminewhichhasanestimatedafter-taxNPV5ofjustUS$334M.ButLeagoldisfocusingonthenextphaseattheLosFilosmine.OntopofthetwoopenpitsandtheLosFilosundergroundmine,asecondundergrounddepositwasdefinedclosetotheBermejalopenpitmine.
Schematicmineplan3DLeagoldhasalreadycommissionedatechnicalreportontheBermejalundergroundzone,andtheeconomicsofapotentialundergroundmineseemtobeprettystrongaccordingtoa2017PEA.KeepinmindthecapexandopexestimateswereestimatedbasedonjustaPEAwhichusuallyhasamarginoferrorof25-35%,butgiventheextensiveexperienceintheregionandthefacttwoopenpitminesandoneundergroundminehavealreadybeenbroughtinproduction,IassumethisPEAtobemorecredible,advancedandreliablethanotherPEA’s,whichtendtobejustafirstlookateconomicsandmineplan.TheinitialcapitalexpendituresatBermejalwillbeverylow,asLeagoldthinksitwillneedlessthanUS$50Mtobringtheundergroundmineintoproductionin2019.Ofcourse,asitisanundergroundmine,thesustainingcapexwillberelativelyhighinthefirstfewyearsoftheminelifeasthecompanywillbecompletingasmuchundergrounddevelopmentaspossibletomaketheminingprocessasefficientaspossible.SoontopoftheUS$47Mininitialcapex,theBermejalprojectwillrequireanadditionalUS$106Minsustainingcapex,ofwhichthemajoritywillbespentinthefirstthreeyearsoftheminelife(US$87M)beforealmostbeingnegligiblefromthefourthyearon.ConsideringthetotalamountofgoldtoberecoveredfromBermejalisexpectedtobe1.39MozAu,thetotalcapitalintensity(initial
capex+sustainingcapexdividedbythetotalamountofrecoveredgold)isjustUS$110/ozwhichisextremelylowforaprojectofthissize,asthisusuallyattributestoUS$200-300/oz.
Pit/resourceoutlinesThisshouldn’tcomeasasurprise.Afterall,thesurfaceinfrastructureisalreadypresentanddoesn’tneedtobetweakedinordertoprocesstheBermejalundergroundore.SoLeagoldwillonlyhavetocompletetheundergrounddevelopmentwhichisn’ttooexpensiveconsideringthemineralizationisn’ttoodeep.ThisallowsLeagoldtoreachtheorebyconstructingaramp,ratherthandiggingashaft.
ThePEAhasbeenbasedonaresourceestimateof8.9Mtatanaveragegradeofalmost6g/tgoldand24g/tsilver.Takingtheminingdilutionintoaccount,Leagoldisanticipatingatotalmillfeedof10.5Mtatanaveragegradeof5.15g/t.Thisorewillbeprocessedduringan8yearlifeofmine(LOM)whereinatotalof1.4MozAuwillbeproduced,startingin2019.Theaverageallinsustainingcost(AISC)isexpectedtobelessthanUS$450/ozAu,whichwillmakethisoneofthefewhigh-marginpuregoldminesintheworld.ThischartbasicallytellsitallwhyLeagoldispoisedforgrowth,productionwillriseconsiderablyandtheAISCgoesdownsubstantiallytoo:
Existingvs.Plannedproduction/AISCscenariosThebasecaseusedintheundergroundminescenariocontainsagoldpriceofUS$1300/oz,whichismorethan8%higherthanthemineplanofthecurrentoperations.ThisindicatesLeagoldismoreorlessexpectingahighergoldprice,whichisn'tveryconservative.Toremaincautious,IwillonlylookattheeconomicsusingagoldpriceofUS$1200/oz.Andthankstotheextremelylowinitialcapitalexpenditures,theafter-taxIRRapproaches100%,whereastheNPV5comesinatUS$418M.Usinga10%discountrate(whichmightbeasaferthingtodoinGuerrero),theBermejalundergroundminestillboastsanafter-taxNPV10ofUS$315M.Again,thisscenarioalsousesanUSD/MXNexchangerateof21,versusthecurrentexchangerateof18.75Peso’sperAmericanDollar.
5.ThedealLeagoldfinalizedquiteanarrangement,andwillpayGoldcorpUS$350MwhichconsistsofUS$279MincashandUS$71MworthofsharesofLeagold.Thissharepositionwillincentivize
Goldcorptomakethetransitiongoassmoothaspossibleandallowstheseniorproducertoretainexposuretotheassetaswell.
Thefundingoftheacquisitioncouldbebrokendowninthreemajorparts.Firstofall,LeagoldcompletedaC$179Msubscriptionreceiptoffering,pricedatC$2.75persubscriptionright.TheserightswillbeconvertedintocommonsharesofLeagoldnowthatthetransactioniscompleted.AsecondtrancheisadirectUS$50Mequityplacementattheexactsametermsofthesubscriptionreceiptoffering.OrionResourcespartnerswilltaketheentireUS$50M,toensureanequitystakeofapproximately24%inthecompany.AfinalpieceofthefinancingpuzzleisanUS$150Mloanfacility,providedbyOrionaswell.This5-yearloanwillhaveaninterestrateofthe3monthLIBORinterestrate(or1%,whicheveristhehighest),increasedby700basispoints(7%).Thisisn’tacheaploan(consideringtheinterestratewillbeatleast8%)andasLeagolddoesn’thavetostartrepayingtheloanuntilthethirdyear,theprincipalamountwillhaveincreasedtoUS$175M,whichwillthenhavetoberepaidin12quarterlyinstallments.TheacquisitionfinancingalsoprovidesforagoldofftaketoOrionof50%ofthegoldproductionatmarketpricesfromtheLosFilosMine,untilcumulativedeliveryof1.1millionouncestoOrion.Agoldofftakeisn'tverycommon,itismoreofabasemetal/commoditything,buttoseeOrionbuyingwithoutadiscountatmarketpricesisn'thurtingLeagold'scashflows.Basedontheexpectedcashflowprofileofthecompany,thisshouldn’tbeaproblematall,consideringthehighmarginBermejalundergroundwillstarttoproducegoldin2019atamarginofalmostUS$800/oz(consideringtheBermejalUGAISCislessthanUS$500/oz!).Thisputstheprojectatthebottomquartileoftheproducinggoldminesintheworld,asshownhere:
AISCvs.amountsofgoldpaid/producedWhenallissaidanddone,Leagoldwillhaveapproximately151Msharesout,forapro-formamarketcapitalizationofC$415M.IwilldiscussinthenextparagraphwhyIconsiderthistobeagooddealforLeagold,andalthoughGarofalohasastrongfinancialbackground,itshowsyouitisn'teasytooutsmartguyslikeWoodyerandGiustra.
6.Peercomparison
Oneshouldalwayscompareappleswithapples,andthebestexamplemightbetouseTorexGold(TXG.TO)asmainexampletovalueLeagold.NotonlydoesTorexGoldhavethesameproductionprofile,itisalsolocatedliterallydowntheroadfromLosFilos,intheGuerreroGoldBelt.
AsTorexGoldwillalsoseeitsAISCdropbelowUS$800/ozin2019(whichwillhappenatLosFilosasthehigh-gradeBermejalundergroundminewillberampingupitsproductionrate),thiscompanymightbetheverybestwaytogetanideaofhowLeagold’svaluationcomparestoTorexGold.
NeighboursTorexandLeagold;claimsmap
Theresultsareappealing.Usingadiscountrateof7%andagoldpriceofUS$1300/oz,theNPVoftheMorelosassetisestimatedatjustUS$1.3B(orapproximatelyC$16pershareofTorexGold).ThismeansTorexiscurrentlytradingatmorethan1.5timestheNPVofitsonlyoperatingproject.Torexdoeshavealargedevelopmentprojectwhichmightbeincorporatedinthemineplanlateron,butsodoesLeagold.Ihavecompiledatablewithsomeother,moreorlesscomparablecompanies,basedonpubliclyavailabledata,aswellastheresearchreportsfromcolleaguesatCanaccordandRBC.
Pleasenote,whereasLeagoldappearstobeprettycheapbasedontheEVormarketcapperounceinthegroundofTorexandAlamos,notallofLeagold’souncesarepartofthemineplan.AlargerBermejalopenpitminewouldhaveastripratioof5:1,buttheredefinitelyneedstobeahighergoldpricebeforetheseadditionalounceswouldbeaddedtothemineplan.
TheproformacashflowforLeagoldiscalculatedlikethis:EBITDAUS$113M-US$43Mdepreciationetc-US$10Moverhead=US$60Mnetincome.Corptaxesareabout30%includingMexicanroyalties,resultinginUS$18M.OperationalCFisEBITDA-G&A-taxes=US$85M=C$113M.Thisdoesnottakeexpensedexplorationactivities,currencyfluctuationsandchangesinworkingcapitalintoconsideration.
Basedonoperationalcashflow,Leagoldappearstobereallycheap,althoughithasamuchmoreprofitableassetthanforexamplePrimero's.SoifwewoulduseaconservativeMC/CFmultipleof5,thiswouldimplicateasharepricetargetofC$3.75.AndthisisstillhalfofTorex'smultiple,operatinginthesameregionwiththesamekindofassets.AndofcoursethereistheexpansionscenariowithBermejalUnderground,commencingin2019,increasingproductionfrom260kozto360koz,andloweringAISCfromUS$861/oztoUS$673/oz.Aquickbackoftheenvelopecalculationgeneratesalmostdoublethecashflow,implyingalmostapossiblefurtherdoublingoftheshareprice,ifthecurrentmultiplewouldstaythislow,whichIfindabithardtobelieve.Sothereisplentyofupside,anditwillbeclearbynowthatIviewaC$2.75sharepriceasundervalued.
It’snoteasytocrystallizethevalueofMexico-focusedgoldminersfromaglobalpointofview,asthereareveryfewpurelyMexico-focusedgoldproducers.Thatbeingsaid,LeagoldistradingsubstantiallylowerthanTorexGold,whichmightbethebestcompanytocompareitwithbothonaP/NAVbasisaswellonanenterprisevalueperounceinthegroundbasis.
UsingagoldpriceofUS$1200/ozAu,theafter-taxNPV10ofLosFilosandBermejalisaboutUS$612M.ThismeansLeagoldacquiredtheLosFilosdistrictforjust0.6times(andeven0.5timesatcurrentgoldprices)theNPVoftheassetswhichcanbeseenasastagedproducingassetwithverylowcapexneeds,andthatisquiteagooddeal.GoldcorpwasnolongerinterestedindevelopingLosFilosduetotherelativelyshortminelifeofthedepositsandthenew20/20/20policy,butthisacquisitionwasarealopportunityforLeagold.
Afterdeductingthenetdebtandtheestimatedtotalcostofthisdebt,IendupwithanestimatedfairvalueofC$545MforLeagoldwhichisapproximatelyC$3.60pershare.Keepinmindthisisbasedonadiscountrateof10%,andifIwouldapplyalowerdiscountrate,theNAV/shareincreasestowelloverC$4.
Thisonceagainemphasizes,thatLeagoldmanagementhasdoneagreatjobinitsnegotiationswithGoldcorp.TherelativevaluationofLeagold(basedonthecapitalraise)seemstobeconsiderablylowerthanthevaluethemarketisgivingTorexGold,theonlyotherrealpeerproducerintheGuerreroGoldBelt.Buttherealvaluewillcomefromfutureexpansionprograms.Consideringa
muchhighersharepriceatthestart,whichcouldlimitdilution,andamuchbetterassettobeginwith,IfancythechancesofLeagoldtobecomeanother$2BmidtierproducerlikeEndeavourMiningevenfaster,dependingonthepriceofgoldandstockmarket/miningsentimentofcourseasalways.AndalthoughitisGuerrero,IpreferthisjurisdictionovertheevenmoreadventurousWestAfricanjurisdictionsofEndeavourMining.
7.Conclusion
GoldcorpwasnolongerinterestedindevelopingLosFilosduetothenew20/20/20policyofnewCEOGarofalo,butthisacquisitionwasarealopportunityforVenturejuniorLeagold.NotonlycouldrainmakersWoodyerandGiustrabuythismineataseriousdiscount,theinbuiltexpansionopportunitywithBermejalUndergroundisimpressive,andwillpositionLeagoldasoneofthelowestcostgoldproducersaroundinafewyearstime.Idon'tseetoomanydifferenceswithpeerTorex,andviewanear-termre-ratingbasedonthecurrentsituationasimminent.Besidesthis,Idoexpectthismanagementteam,havingbuildseveralmultibilliondollarcompaniestogetherandindividually,nottositontheirhandsontheM&Afrontbefore2019.Asaconsequence,themakingofanEndeavourMining2.0couldmaterializesoonerthanmanywouldthink,andI'mlookingforwardtoproceedingsasashareholder.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on my website www.criticalinvestor.eu, and follow me on Seekingalpha.com, in order to get an email notice of my new articles soon after they are published.
Disclaimer:
The author is not a registered investment advisor, and currently has a long position in this stock. All facts are to be checked by the reader. For more information go to leagold.comand read the company’s profile and official documents on sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.
Los Filos Mine
TheCriticalInvestorisanewsletterandcomprehensivejuniorminingplatform,providinganalysis,blogandnewsfeedandallsortsofinformationaboutjuniormining.TheeditorisanavidandcriticaljuniorminingstockinvestorfromTheNetherlands,withanMScbackgroundinconstruction/projectmanagement.Numbercruncheratprojecteconomics,lookingforhighqualitycompanies,mostlygrowth/turnaround/catalyst-driventoavoidtoomuchdependence/influenceoflongtermcommoditypricing/marketsentiments,andoftenlookingforlongtermdeepvalue.Gettingburnedinthepasthimselfatjuniormininginvestmentsbyfollowingoverlypositivesourceswhichmoreoftenthannotavoidedtomention(hidden)risksorcriticalflaws,TheCriticalInvestorlearnedhislessonwell,andgoesafewstepsfurthereversince,providingafresh,morein-depth,andcriticalvisiononthings,hencethename.
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