Friday, November 18, 2016 Derek Macpherson

KLG-NMI Merger Being Completed Now Highly Likely

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On Friday, Silver Standard Resources Inc. (TSX:SSO, NASDAQ:SSRI) and Gold Fields Ltd. (JSE:GFI, NYSE:GFI) announced they have withdrawn the latest version of the joint offer. In our view, this suggests that the planned merger between Kirkland Lake and Newmarket is likely to be completed as planned (~90% likelihood), while there remains a small chance that investors of one or both companies do not vote in favour of the deal (~10% likelihood), with the hope that a better deal can be struck with Silver Standard and Gold Fields in the future. With these odds and that Newmarket is trading at a ~6.2% discount to Kirkland Lake based on the exchange ratio, Newmarket likely represents the most attractive value.  read more

Sunday, November 13, 2016 Derek Macpherson

KLG Turns Down Offer, Continues with Planned Merger

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On Friday, Kirkland Lake Gold (TSX:KLG), in response to rumors, announced that it had turned down a C$1.44 billion dollar combined offer from Silver Standard Resources Inc. (TSX:SSO, NASDAQ:SSRI) and Goldfields Ltd. (JSE:GFI, NYSE:GFI). This offer represents more than a 50% premium to Thursday’s close. Our understanding is that this proposed offer would stop the planned merger with Newmarket Gold (TSX:NMI). While this offer is a substantial premium to Kirkland Lake’s current share price, Kirkland Lake’s board and financial advisors, see superior value in the merger with Newmarket being completed. In our view there are three possible outcomes. First and most likely, considering board, management and shareholder support, is that the merger between Kirkland Lake and Newmarket is completed as announced (~70% likelihood). The second is that because of a board conflict which supports the planned merger, Silver Standard and Goldfields make a hostile offer for Kirkland Lake and are successful (~25% likelihood). The last and probably least likely is that shareholders (of one or both companies) do not vote in favour of the merger (~5%). With these odds and that Newmarket is trading at a ~13.6% discount to Kirkland Lake based on the exchange ratio, likely represents the most attractive value. However, should Silver Standard and Goldfields continue to pursue Kirkland Lake it could provide higher near-term return, but with higher risk.  read more

Thursday, September 29, 2016 Derek Macpherson

KLG & NMI to Merge, Creating a Mid-Tier Producer

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This morning Kirkland Lake Gold (TSX:KLG) and Newmarket Gold (TSX:NMI) announced they have entered into an agreement to merge the two companies. As consideration for the transaction, each Kirkland Lake shareholder would receive 2.1053 Newmarket shares, implying a 9.3% premium for Newmarket in the transaction. We view the merger positively, for both KLG and NMI shareholders as the companies increased scale is likely to warrant a premium valuation. It is also likely to be beneficial for other junior producers as the merger continues to highlight the scarcity of quality assets in good jurisdictions.  read more

Thursday, September 22, 2016 Derek Macpherson

Drilling Continues to Extend Fosterville's Life

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Newmarket Gold (TSX:NMI) announced another set of high-grade drill results that continue to suggest that the company is poised to expand resources and reserves with the year-end update. The company released four surface holes (4,326m) and 96 underground holes (22,799m) from the Lower Phoenix zone at its Fosterville Gold Mine in Australia. Drilling at Fosterville continues to deliver high-grade results and these results combined with those recently released from the Harrier and Osprey zones, continue to suggest that Fosterville’s mine-life is likely to be extended. However, this does not appear to be reflected in the company’s current valuation, suggesting that when the year-end resource/reserve update is released a re-rating is likely.  read more

Thursday, September 15, 2016 Derek Macpherson

NMI's Drill Results Suggest Fosterville Likely to Grow

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Newmarket Gold (TSX:NMI) released drill results from 17 holes (6,376m) from its Fosterville Gold Mine in Victoria, Australia, which continue to suggest that resources are likely to grow. Results were highlighted by 64.8 g/t Au over 4.5m (UDH1734) and 46.22 g/t Au over 6.8m (UDH1764). The drill program was focused on expanding the resources/reserves at Fosterville to extend the mine-life. In our view, these results along with previous ones suggest a mine-life extension is likely; however, based on the current valuation, this does not appear to be incorporated in the company’s share price. In our view as Newmarket demonstrates the potential for a longer mine-life at Fosterville it should close the valuation gap to peers.  read more

Tuesday, August 23, 2016 Derek Macpherson

NMI Appears to be Extending Cosmo’s Mine-Life

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Newmarket Gold Inc. (TSX:NMI) announced positive results from its 13,834 m (45 holes) diamond drilling program at the Cosmo Gold Mine in Northern Territory, Australia. These results suggest resources and reserves are likely to grow and that Newmarket is poised to extend Cosmo’s mine-life. The highlighted results include drill intercepts at the Sliver Lode and newly discovered Redbelly and Taipan Lodes which are located adjacent to the existing underground mine development. Newmarket continues to trade at a discount to peers, partially because of the perception that its mines have shorter lives. These results along with ongoing reserve and resource expansion should help close that valuation gap. read more

Sunday, July 31, 2016 Derek Macpherson

As Predicted NMI Increases Guidance after Strong Q2

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Newmarket Gold Inc. (TSX:NMI) increased production and reduced cost guidance for 2016 along with reporting Q2 financial results. After exceptional operating results, we suggested that Newmarket was likely to increase guidance, which could see Newmarket partially close the valuation gap to peers, which it did. Not only did Newmarket have strong production, it saw improving operating and all-in sustaining costs (AISC), along with strong financial performance. The strong quarter was driven by higher grades and recoveries from the company’s flagship asset, Fosterville. In our view continued operating execution along with continued exploration success at Fosterville, should see Newmarket close the current valuation gap to peers.
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Wednesday, July 13, 2016 Derek Macpherson

NMI’s Record Q2 may lead to Increased Guidance

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Newmarket Gold Inc (TSX:NMI) released record Q2 2016 production results yesterday after the close. Continued production growth was driven by another quarter of increased grade at Fosterville, as the company continues to mine higher grade material in the Lower Phoenix zone. Also, it is worth noting that H1 production of 119,248 ounces represents ~54% of the top-end of 2016 guidance, suggesting a guidance increase may be on the horizon. We expect Newmarket’s continued execution to help close the current valuation gap to peers, particularly if guidance is increased with Q2 financial results later this month.  read more


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