Sunday, January 15, 2017 Derek Macpherson

AMI Grows Kemess East; Adds Long-term Value

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AuRico Metals Inc. (TSX:AMI) released an updated resource estimate for Kemess East and has grown the overall resource and the high-grade core of the deposit. The overall tonnage increased by 19% and with grades seeing a very minor decrease, metal content has increased a similar amount (Figure 1). We view this as mildly positive since it enhances the long-term value of the Kemess project. The Kemess Underground project currently has a 12 year mine-life based on current reserves. This update, in-particular the high-grade core at Kemess East, along with the resources excluded from reserves at Kemess Underground, suggests this could be an exceptionally long-life mine, which would be attractive to larger mining companies. While this update adds long-term value to Kemess, in our view the key catalyst for unlocking this project’s value is the completion of Kemess’ Environmental Assessment expected in Q1 2017 and mine permit expected in H2 2017. These catalysts should allow AuRico to decouple its royalty and development assets and enable the company to unlock value for shareholders. read more

Sunday, January 15, 2017 Derek Macpherson

RCKS Drilling Deeper Lunch Features Three Royalty Companies

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Last week, Red Cloud Klondike Strike Inc. (RCKS) hosted another installment as part of our Drilling Deeper lunch series, this time featuring three companies that own and are unlocking royalty value in unique ways. The presenting companies were AuRico Metals Inc (TSX:AMI), Marlin Gold Mining Ltd (TSXV:MLN) and Maverix Metals Inc (TSXV:MMX). We believe all three presenters have the potential to unlock value for investors through each company’s royalty and streaming assets. read more

Thursday, January 12, 2017 Derek Macpherson

Permitting Catalysts on the Horizon for AuRico

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AuRico Metals Inc. (TSX:AMI) provided a permitting update for the Kemess Underground project which continues to suggest the Environmental Assessment decision will be made shortly. The process has now entered the final stages with the Assessment Report and conditions being made available to the public for a month long public comment period. The company expects a final ministerial decision regarding the EA certificate by the end of Q1. We view this positively as in our opinion the receipt of environmental assessment is a key catalyst to unlock the value Kemess and its royalty assets. Based AuRico’s current EV of ~C$149 million implies an EV/EBITDA for royalties only (excluding Kemess costs, annualizing Q3 results) of ~23.1x. This is higher than the EV/EBITDA of royalty peers at 18.7x, which suggests the market currently allocates a value of ~C$28.4 million to Kemess. Similar stage development peers trade at C$49/oz and 0.53x NAV which implies Kemess could easily be ascribed a value between C$115-120 million. This suggests to us that with the completion of the Environmental Assessment (Q1 2017), followed by the mine permit (H2 2017), AuRico should be positioned to decouple its royalty and development assets in 2017, allowing it to unlock significant value for shareholders.  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, 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

Tuesday, October 04, 2016 Derek Macpherson

RCKS Fall Mining Showcase Presenter Preview

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On Thursday October 6th, Red Cloud Klondike Strike Inc. will be hosting its 4th Annual Fall Mining Showcase. The event, that will offer attendees the opportunity to meet with a number of companies, features presentations from 20 companies and a buy-side discussion panel comprised of three of the industry’s most influential fund managers. Visit the event page for more details on the day’s schedule. In this post we provide a brief preview on the 20 presenting companies and 8 banner sponsors that will also be in attendance.  read more

Tuesday, August 30, 2016 Derek Macpherson

AMI Site Visit: Kemess Worth More than Valuation Suggests

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Last week we visited AuRico Metals Inc.’s (TSX:AMI) Kemess project in Northern British Columbia and were impressed by the existing infrastructure and the management team's technical expertise. In our opinion, once management completes the project’s environmental assessments (expected early 2017) it should be positioned to unlock the value of Kemess. In our view the market appears to ascribe Kemess zero value, providing investors an opportunity for a viability re-rating as management de-risks this project. read more


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