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Thursday, January 05, 2017 Derek Macpherson

MLN's Near-Term Cash Flow Should Fund the Future

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Following Marlin Gold Mining Ltd.’s (TSXV:MLN) conference call to discuss strong December operating results, we are maintaining our estimate for US$17-19 million per quarter of cash flow from La Trinidad. We highlight that this equates annually to US$68-76 million, or US$136-152 million over the next two years of La Trinidad’s mine-life. This cash flow is going to allow Marlin to fund near-mine and step-out exploration at La Trinidad, additional exploration and development activities at Commonwealth and fund the remaining commitments for its stream on Golden Reign’s (TSXV:GRR) San Albino project in Nicaragua. Our preliminary estimates suggest that Marlin is now trading at ~2.0x 2017E CF on a EV/CF basis versus peers at 4.6x. If you only account for La Trinidad and its short mine-life, this could be considered a fair valuation; however, it does not account for resource growth potential at La Trinidad, medium term production from Commonwealth or streaming cash flows from San Albino that the near-term cash flow from La Trinidad is expected to fund. This suggests that the stock has more room to run and in our view, further upside is likely to come from ongoing operating success, Q4 financial results demonstrating improved cash flow and exploration results from La Trinidad. read more


Wednesday, January 04, 2017 Derek Macpherson

Marlin Finishes Q4 with a Splash

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Marlin Gold Mining Ltd. (TSXV:MLN) announced another month of strong operations from its wholly owned La Trinidad mine in Mexico, reporting the third consecutive monthly record of recovered ounces. These robust operating results further support our view that Marlin is likely to deliver strong Q4 2016 and Q1 2017 financial results (see previous post), having reached a turning point in its operations at La Trinidad together with free cash flow (FCF) generation. We believe that the company is likely to use the FCF generated to fund its development projects, including the San Albino stream in Nicaragua and exploration/development work at its Commonwealth project in Arizona.  read more


Friday, December 30, 2016 Derek Macpherson

AuRico Adds Royalties with Kiska Acquisition

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AuRico Metals Inc. (TSX:AMI) and Kiska Metals Corp. (TSXV:KSK) announced last week that they have entered into a definite arrangement agreement whereby AuRico will acquire Kiska. With the proposed transaction AuRico expects to add six North-American non-producing royalties as well as wholly-owned exploration properties, including the Kliyul gold-copper project which is in the vicinity of AuRico’s flagship Kemess gold-silver-copper project in BC. The proposed transaction consists of a combination of ~C$2 million cash and ~8.2 million AuRico shares (at C$0.93/sh), implying a total value of C$9.6 million and is expected to close in Q1 2017. We view this tuck-in transaction positively as it highlight’s AuRico’s focus on building out its royalty portfolio. In our view, the completion of Kemess’ Environmental Assessment in Q1 2017 should allow AuRico to decouple its royalty and development, assets allowing it to unlock significant value for shareholders.  read more


Tuesday, December 06, 2016 Derek Macpherson

La Trinidad Likely to Deliver Meaningful Cash for MLN

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Following Marlin Gold Mining Ltd.’s (TSXV:MLN) conference call to discuss strong November operation results we have increased our go forward quarterly cash flow estimate for the company over the next two years. We now expect the company to generate US$17-19 million per quarter (was US$15-18 million), which equates annually to US$68-76 million, or US$136-152 million over the next two years of La Trinidad’s mine-life. Based on recent results and our preliminary go forward estimates, Q4 2016 and Q1 2017 are likely to be the best quarters. While a short mine-life at this point, this cash flow from La Trinidad should provide Marlin the ability to fund resource expansion efforts at La Trinidad (both brownfield and greenfield), ongoing exploration and development work at the company’s Commonwealth project in Arizona and the San Albino stream in Nicaragua. On a cash flow basis, the company’s current valuation is at a steep discount to peers. Based on our preliminary estimates, Marlin trades at ~1.0x 2017E cash flow versus peers at ~4.8x 2017E cash flow. While a discount is warranted, because of the short mine-life, the multiple should be closer to ~40% that of peers because La Trinidad’s cash flow allows them to fund future cash flow. In our view, ongoing production results and Q4 2016 financial results are likely to be the key catalysts for Marlin to re-rate.  read more


Monday, December 05, 2016 Derek Macpherson

MLN Delivers Another Excellent Month of Operations

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Marlin Gold Mining Ltd. (TSXV:MLN) announced a second month of strong operations from its wholly owned La Trinidad mine in Mexico. For November, the company reported monthly records stacked and recovered ounces. We believe that these positive operating results further support our view (see previous post) that Marlin has reached a turning point and is now generating free cash flow (FCF) at La Trinidad and is poised for a strong Q4. In our opinion, this transition is important as the company can use the FCF generated at La Trinidad to fund its development projects, including the San Albino stream in Nicaragua and exploration/development work at its Commonwealth project in Arizona.  read more


Tuesday, November 08, 2016 Derek Macpherson

AMI’s Kemess East Drill Results Point to a Longer Life

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AuRico Metals Inc. (TSX:AMI) announced results from its 13 hole (18,544m), 2016 drill program at Kemess East, which is located 1km East of the Kemess Underground deposit and 6.5km North of the Kemess Mill. Three holes intersected some of the longest combined intervals measured at Kemess East, highlighted by 0.53 g/t Au and 0.41% Cu over 628m (KH-16-13). We believe these results are likely to grow the existing Kemess East resource, and point to a longer mine-life for the Kemess underground project. While a longer mine-life may attract potential suitors for the project, we believe the key items for unlocking Kemess’ value are the completion of the Environmental Assessment for Kemess (early 2017) and the mine permit expected in H2 2017.  read more


Saturday, November 05, 2016 Derek Macpherson

AMI’s Q3 Highlighted by Growing Royalty Revenue

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AuRico Metals Inc. (TSX:AMI) released its Q3 results, which was highlighted by record royalty revenues and included a permitting update for its Kemess project in Northern British Columbia. During Q3 2016, the company recognized royalty revenues of US$2.3 million (pre-tax), which suggests an annual run-rate of over US$9 million. Completion of the Environmental Assessment for Kemess appears to be on track for early 2017, which together with the mine permit slated for H2 2017, we believe to be instrumental in further unlocking the value of Kemess. In our view, the market does not appear to ascribe Kemess its full value, providing investors with a potential upside as the de-risking of the project progresses.  read more


Thursday, November 03, 2016 Derek Macpherson

MLN’s La Trinidad Transitions to Positive FCF

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Marlin Gold Mining Ltd. (TSXV:MLN) provided an operational update from its wholly owned La Trinidad mine in Mexico. The company reported records for both ounces stacked on the leach pads and recovered in the month of October. As well, the company expects this level of production to persist for the remainder of the La Trinidad’s current 2+ year mine-life. In our view, these operating results indicate that the company has reached a turning point in its operations and has started generating free cash flow (FCF). This transition is key, as the company can use the FCF from La Trinidad to fund its development projects, including the San Albino stream and exploration/development work at the company’s Commonwealth project in Arizona.  read more


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