Friday, May 19, 2017 Derek Macpherson

AMI Signs IBA on Kemess

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AuRico Metals Inc. (TSX:AMI) has signed an Impact Benefits Agreement (IBA) with the Tse Keh Nay (TKN) First Nations, advancing the Kemess Underground project. Including the recently completed Environmental Assessment for the Kemess Underground project, we view these steps positively and should help unlock the project’s value. Using AuRico’s guidance the company trades at ~15.0-17.0x royalty EBITDA, versus peers at 16.9x (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. read more

Sunday, May 07, 2017 Derek Macpherson

AMI Ups 2017 Guidance; Kemess Remains Undervalued

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AuRico Metals Inc. (TSX:AMI) reported Q1 2017 financial results and increased its royalty revenue guidance for 2017 from US$8.0-US$8.4 million to US$9.5-US$10.4 million. The increase in guidance was driven by Kirkland Lake Gold Ltd. (TSX:KL) increasing its production guidance at Fosterville (was 140-145k oz Au, now 200-225k oz Au). AuRico is continuing to advance Kemess with ongoing permitting, a planned 12km drill program at Kemess East and Offset zones as well as a planned PEA to demonstrate the economic potential of Kemess East. We believe the company is well positioned to unlock the value of Kemess. Using AuRico’s updated guidance the company trades at ~14.3-16.2x royalty EBITDA, versus peers at 16.2x (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. read more

Wednesday, April 19, 2017 Derek Macpherson

AMI Adds C$11.2M to Its Balance Sheet

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AuRico Metals Inc. (TSX:AMI) announced it has replaced the C$18.7 million restricted cash deposit used as security for reclamation and closure activities at the Kemess site, with a surety bond. The conversion released ~C$11.2 million in cash, as the company paid C$7.5 million in cash as collateral. In addition, the company appointed Sean Masse former Superintendent and Mine Manager at New Afton as Mining Project Manager and Mike Padula former Project Manager for Victoria Gold and Manager of Mining Wastes and Water for MMG Limited as Surface Construction Project Manager. The new additions to the AuRico team and stronger cash balance positions the company to continue to advance its Kemess Underground Project. read more

Thursday, March 30, 2017 Derek Macpherson

AMI Royalty Update Highlights Portfolio Value

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AuRico Metals Inc. (TSX:AMI) provided an updated on its cash flowing royalties, the creation of a new royalty project acquired in the acquisition of Kiska and the addition of two additional non-producing royalties. We view the update positively, as it not only highlights the value of the company’s existing portfolio but reminds us of its ongoing focus to continue expanding its royalty portfolio. Three of the company’s existing royalties, Fosterville (2% NSR), Eagle River (0.5% NSR) and Hemlo (0.25% NSR on Williams Mine and 1.5% NSR on David Bell Property) all saw material reserve increases, 66%, 15% and 73% , respectively. As well, the company has optioned the Kliyul property, acquired via the acquisition of Kiska, and created 0.5% NSR on it through the option agreement with First Quantum (TSX:FM). Finally, the company acquired 1% NSR on exploration properties close to Goldcorp’s (TSX:G) Red Lake mine and a 0.75% NSR on exploration properties in the Rainy River district. read more

Wednesday, March 15, 2017 Derek Macpherson

AuRico Receives Positive EA Decision for Kemess

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AuRico Metals Inc. (TSX:AMI) announced today it has obtained a positive environmental assessment (EA) decision for its Kemess Underground project in British Columbia. We view this very positively as we believe it is an important catalyst for AuRico to unlock Kemess’ value. AuRico’s current EV of ~C$157.8 million implies an EV/EBITDA for royalties only (based on 2017 guidance) of ~22.0-23.7x, which is slightly higher than royalty peers that trade at 19.2x (2017e EV/EBITDA). This suggests the market currently allocates a value of ~C$20-30 million to Kemess. However, similar development stage peers trade at 0.56x NAV or C$48/oz, which suggests that Kemess on its own could be ascribed a value of ~C$115 million. In our view, with the completion of the Environmental Assessment, AuRico should now be positioned to unlock this value, providing investors the potential for meaningful near-term upside as the market prices in the viability of Kemess. read more

Tuesday, March 07, 2017 Derek Macpherson

Kiska Shareholders Approve AuRico Acquisition

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Last week, Kiska Metals Corp. (TSXV:KSK) announced its shareholders approved the planned acquisition by AuRico Metals Inc. (TSX:AMI) and that it has received the final court order approving the plan of arrangement. The transaction is expected to close on March 8, 2017. We continue to view this tuck-in transaction positively as it highlight’s AuRico’s focus on building out its royalty portfolio. Looking ahead, we believe the completion of the Environmental Assessment (expected in Q1 2017) is likely to be a key catalyst for AuRico to unlock the value of Kemess which appears to be undervalued by the market. read more

Wednesday, February 15, 2017 Derek Macpherson

AMI's 2017 Guidance Highlights Royalty Value

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Yesterday, AuRico Metals Inc. (TSX:AMI) released its Q4 and 2016 financial results and provided guidance for 2017. The company has guided for royalty revenues of US$8.0-8.4 million in 2017, a slight increase over 2016. The company recognized 2016 royalty revenues of US$8.1 million, reaching the top end of 2016 guidance (US$7.7-$8.1 million). At US$2.2 million, Q4 2016 revenues increased by 47% over Q4 2015, primarily driven by a production increase at Fosterville and a higher gold price. AuRico also reaffirmed that it expects the Environmental Assessment for Kemess to be completed by the end of Q1 2017, which we believe to be the key catalyst for unlocking the project’s value. This should allow AuRico to decouple its royalty and development assets and enable the company to unlock value for shareholders. read more

Wednesday, January 18, 2017 Derek Macpherson

AMI's Royalties Perform Well in 2016

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AuRico Metals Inc. (TSX:AMI) provided an update on its royalty portfolio and continues to expect royalty revenues for 2016 to be at the higher end of the US$7.7 - US$8.1 million guided range as result of recently released production results. The majority of royalty revenue is expected to come from Young-Davidson (US$3.3M – US$3.4M) and Fosterville (US$3.4M-US$3.5M), with the remainder from Hemlo and Eagle River. In 2016, production at Young-Davidson was 170,000 oz Au, and is forecasted to increase by 6% in 2017. Fosterville produced record annual gold results of 151,755 oz in 2016 and is expected to produce 140–145k oz Au in 2017. In addition, AuRico announced it expects to close the Kiska Metals transaction later in Q1, growing its royalty portfolio. AuRico’s current Enterprise Value (EV) is sitting at ~C$154 million, which implies an EV/EBITDA for royalties only (excluding Kemess costs, annualizing Q3 results) of ~23.6x. This is higher than the EV of royalty peers at 18.7x, which implies that the market currently allocates a value of ~C$32.0 million to Kemess. Similar stage development peers trade at 0.54x NAV or C$50/oz which suggests Kemess could easily be ascribed a value around C$115-120 million. This suggests to us that as permitting advances for Kemess Underground and AuRico continues to grow its royalty portfolio, it should enhance value for shareholders. read more


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