MX Gold Corp. (TSX VENTURE: MXL) (OTC: MXLGF) (Frankfurt: 0DV) is identified in a newly issued research report by Market Equities Research Group with several potential catalysts that exist near-term with potential to result in $148 million market cap for MXL.V. MX Gold Corp. is currently advancing its Max Mill and Willa Gold Mine near Revelstoke British Columbia toward becoming Canada's newest gold mining operation. The Company has ~147 million shares outstanding, is trading near 34 cents, and is fully-financed thru to 10,000 t bulk permit. This comprehensive report places a 12 month price target on shares of MXL.V at C$1.00 based on key valuation drivers.
The full research report with chart, graphics, and analysis of value drivers may be found at http://sectornewswire.com/Report-MXL-Sep-2016.pdf online.
Final rehabilitation and upgrades to MX Gold's 100%-owned MAX Mill are underway, on budget, and expected to be completed for commencement of production this Q4-2016, starting with a 10,000 tonne bulk sample sourced from its nearby 100%-owned Gold/Copper/Silver Willa Deposit. Shares of MXL.V are poised for upside revaluation as the inherent value and accomplishments are appreciated by the market.
Intrinsic Value: MAX Mill has a replacement value of ~100+ million, the WillaMAX Gold Project has a NPV worth ~$39 million for starters (as per 2016 PEA using US$1,000 gold base case, plus the resource (& related initial mine life) is open for expansion), the moly resource under the MAX Mill is worth several millions (NPV of $40M (@ $15/lb Mo)), and the Company has a loss-carry-forward on the books of ~$50 million (allowing for tax free production for several years).
Strong PEA Economics: The WillaMAX All-in Sustaining Costs are estimated at CDN$750/oz gold (gold is currently trading above CDN $1700). Project economics are very robust; 83% IRR (after tax), with Cumulative Cash Flow of $56.1M after 4.25 year mine life (on the West Zone alone).
Since acquiring its interest in the high-grade, near-production ready Willa Au/Cu/AG deposit in late 2012 and the Max Mine & Mill processing facility in late 2013, MX Gold Corp. has been intent on moving these highly synergistic assets forward toward production. The Willa deposit is an intensively-explored, high-grade, production-ready Au / Cu / Ag deposit. Management is marrying this resource with the Max Mine, located within easy trucking distance and includes crushing, milling & concentrating facilities, tailing storage facilities, as well as the underground molybdenum mine, which ceased production in 2011 due to low prices.
Willa Deposit Highlights
- High grade deposit to generate high NSR / profitability (Measured and Indicated resources (3.0 g Au/t cutoff) of 825,000 t @5.07 g Au/t, 0.85% Cu, 9.20 g Ag/t).
- Well defined by closed-spaced, underground drilling (~600 drillholes).
- Good access with >2km of underground workings & good ground conditions expected for low cost underground mining methods.
- Positive metallurgical work completed to date for expected high recoveries. Planned mining rate of 500 tpd a perfect match for the MAX Mill.
MAX Mill Processing Facility Highlights
- The facility includes a full complement of crushing, milling / concentrating facilities, & tailing storage facilities.
- Equipment is late model and in very good condition (kept in good shape in anticipation of another start-up).
- Retrofit for Willa material has been simple and at low cost.
- 135 km distance to Willa on paved roads offers reasonable transportation costs.
- Substantial molybdenum deposit remains for long term blue sky potential. Currently heavily discounted, given time should Mo rise to $20/lb the gross value of the resource would exceed $300 million. Very low capex to refit mill to accommodate moly production.
The Analyst sees a well-delineated, high grade Willa deposit with excellent underground access - combined with a processing facility that is in excellent shape and newly retrofitted. They are in good proximity to each other and ideally suited in terms of scale (i.e. 500 tpd). In addition, we see a highly motivated management team with a CEO that has put up several million in financing to move this project along.
Summary of key value drivers:
1) Achieve Production: Upon realizing a successful 10,000 tonne bulk sample and reaching the planned 500 tpd production in 2017 (i.e. under a 75,000 tonne / yr small mine permit mentioned in July, 2015 news release), the company will have reached a very significant milestone. The company could continue mining via renewals, providing time to gain mining permits.
2) Use of MAX Mill to Process Additional Resources: The Willa & MAX properties are located in highly mineralized areas of BC with over a century of production. Acquiring additional deposits in the area would also represent a highly significant milestone for the company and facilitate a long term, highly profitable future for MAX.
3) Blue Sky Mineral Potential: There is significant, known exploration potential remaining at Willa that has only seen limited exploration largely due to topography and the historical emphasis on the West zone. In addition, records indicate a very promising Tungsten resource at MAX as well as additional moly resources (see discussion in report).
4) Remaining Molybdenum Resource at MAX: The significant remaining, virtually untouched moly resource at the MAX property provides very significant option value for MX Gold Corp., particular when viewed in the context of the mitigating effects of having a MAX mill in operation, along with the development work completed when the original MAX moly mine was placed into production.
5) Management: MXL.V has highly-accomplished technical leadership: The COO, Hugh (Bert) McPherson, P.Eng is a former Goldcorp mine manager with over 37 years of experience managing projects.
Synopsis of reasons the Analyst likes MX Gold Corp.:
1. High grade Willa deposit,
2. MAX processing facility in excellent condition,
3. Economics of the WillaMax Project makes sense,
4. Highly aggressive and motivated management,
5. Experienced and accomplished mining people at the helm, including Hugh (Bert) McPherson, P.Eng,
6. Very near-term to production (fully-financed thru to 10,000 t bulk permit cash flow),
7. Ability to utilize MAX mill for additional deposits beyond Willa – combined with location in prolific mining district in British Columbia with remaining resources believed to be within trucking distance of MAX,
8. Ability to expand capacity at MAX in future,
9. Apparent lack of permitting issues at Willa, existing processing permits at MAX,
10. Virtually unexploited known / defined moly resource at MAX along potential for additional deposits (i.e. Tungsten).
For these reasons, in view of MX Gold’s current market cap of ~$49 million, the company appears undervalued and offers significant upside with favorable risk-reward characteristics. Upon the realization of a successful bulk sample, commencement of commercial production pursuant to a small mines permit, and indications for a successful permitting process, we could see an upward revision in the market cap for MX Gold Corp. to the C $148+ million level by mid-2017. A price target of $1.00+/share may well be warranted. The aforementioned target share price was based on current gold prices (near US$1,300/oz), the company is leveraged to underlying commodity prices. Depending on capx estimates for the project, and any indication that additional resources may be available for acquisition, the potential for significant upward revisions to these estimates may be possible, depending on resource size. Further, the long term option value for the MAX moly deposit is very substantial, given the size of the deposit; a heavily discounted value of $10+ million for the moly now is not unreasonable, however should moly rise to US$20/lb shares of MXL.V would increase in multiples as the gross value of the Mo resource would exceed $300 million (note: back in 2008 Roca Mines, the former owner & operator, was trading at a ~$half-billion market cap at ~$4/share while producing molybdenum). Should gold and moly prices cooperate, even modestly, it is not unreasonable to expect to see MXL.V trade well beyond $1/share.
The full research report with chart, graphics, and analysis of value drivers may be found at http://sectornewswire.com/Report-MXL-Sep-2016.pdf online.
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Contact information:
Fredrick William, BA Ec.
Market Equities Research Group
[email protected]