AuRico Metals Inc. (TSX:AMI) reported Q2 2017 financial results and increased its annual royalty revenue to US$10.5-11.0 million from US$9.5-10.4 million.
The increase in revenue guidance was due to an updated reserve estimate from Kirkland Lake Gold’s (TSX:KL) Fosterville Gold Mine by 110% to 1.03 million
oz Au. In Q2, royalty revenues reached a record high of US$2.8 million, for a total of US$5 million (US$2.2 million in Q1 2017) year to date. The company
remains focused on advancing Kemess East and Kemess Underground, planning a combined FS for mid-2018. Drill results for Kemess East are expected to
be available in Q4 2017, with an updated resource estimate to follow in Q1 2018. As well, at Kemess Underground, permitting and engineering work are
to be advanced for early construction in H1 2018. We believe the company is well positioned to unlock the value of Kemess. Using AuRico’s updated guidance
the company trades at ~16.6-17.7x royalty EBITDA, versus peers at 16.4x (2017e EBITDA). This implies the market is ascribing Kemess negligible value,
which in our view should be worth ~C$100-125 million as compared to stand alone development stage peers.
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
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Priced as of prior trading day's market close, EDT (unless otherwise noted).
All values in USD unless otherwise noted
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AuRico Metals Inc. - TSX:AMI - 1, 2
Kirkland Lake Gold - TSX:KL - None
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