Victoria Gold — Update 16 December 2015

Victoria Gold — Update 16 December 2015

Victoria Gold

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Victoria Gold

Eagle receives its final permit

Final permit received

Metals & mining

17 December 2015

Price

C$0.15

Market cap

C$51m

US$0.73/C$

Net cash (C$m) at 31 August 2015 (excludes restricted cash)

12.9

Shares in issue

340.1m

Free float

82%

Code

VIT

Primary exchange

TSX-V

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

15.4

25.0

50.0

Rel (local)

16.7

30.7

57.9

52-week high/low

C$0.22

C$0.10

Business description

The Eagle Gold Project, Victoria Gold’s flagship project, is located in the 100%-owned Dublin Gulch property in the Yukon Territory, Canada. Victoria Gold also intends to explore its other claims while developing Eagle and is looking to monetise its Santa Fe project in Nevada, US.

Next events

Olive/Shamrock drill start

Q117

Updated Eagle FS

H217

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Victoria Gold is a research client of Edison Investment Research Limited

Victoria Gold (VIT) has received the final (water) permit it requires to develop the Eagle Gold Project into a working mine, after a considerable two years of work for the company. Eagle is a shovel-ready, fully permitted, pre-financed gold project (ie all permits received with First Nation support in place), which has robust economics at current (and lower) gold prices. VIT is to complete further satellite deposit drilling with the aim of delineating new resources that will then refine Eagle’s production profile. VIT intends to publish a revised Eagle feasibility study by end 2016.

Year end

Revenue (C$m)

PBT*
(C$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

02/14

0.0

(1.6)

(0.9)

0.0

N/A

N/A

02/15

0.0

(1.7)

(0.3)

0.0

N/A

N/A

02/16e

0.0

(2.1)

(0.6)

0.0

N/A

N/A

02/17e

0.0

(2.0)

(0.6)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Interim results show end-August cash of C$12.9m

VIT’s interim financial statement indicates cash burn of C$962k per quarter and an end-August cash balance of C$12.9m. Adjusting for its H116 results, we estimate that VIT will finish FY16 with cash of c C$9.3m, which we anticipate will cover its FY17 work programme. However, VIT is currently finalising the scope and budgets for its FY17 work programmes, so we await this guidance to refine our cost profile for the company through FY17 and beyond.

2016 to see refined project data come through

VIT’s 2016 work programmes are likely to comprise drilling of a total 6,000m, spread equally across the Shamrock/Olive deposits. This drilling will aid delineation of new resources and new met testing potentially allowing for improved grades to bolster project economics in the first few years of Eagle’s production. Following completion of drilling and compilation and verification of all data, VIT will publish an updated feasibility study (FS), which we expect to show improvement over the already robust 5 April 2012 FS (see valuation section below for scenario).

Valuation: Solid with further upside via new NI43-101

We adjust our C$1.28 base case value for a US$/C$ FX rate of 0.73 (0.76 previously) and VIT’s H116 results. We retain our gold price forecasts as per our sector report Gold: The value of gold and other metals and use a 10% discount rate to reflect general equity risk. On this basis, our valuation increases 15% from C$1.28 to C$1.47 per share. At a flat gold price of US$1,000/oz, VIT’s base case valuation is C$0.47, a 213% premium to its current share price. Our upside valuation, which uses the aforementioned adjustments, but also factors in extra crushing capacity and raises the head grade in the early years of production (due to Olive ore being treated), is C$2.30 per share (C$2.04 previously). This latter scenario is our attempt to estimate the value uplift resulting from the forthcoming 2016 drill campaigns and updated Eagle FS due by end 2016.

Financial summary

Exhibit 1: Financial summary

C$'000s

2013

2014

2015

2016e

2017e

Year-end 28 February

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

0

0

0

Cost of Sales

15,796

(2,779)

(8,522)

(2,146)

(2,146)

Gross Profit

15,796

(2,779)

(8,522)

(2,146)

(2,146)

EBITDA

 

 

(3,391)

(2,491)

(1,985)

(2,146)

(2,146)

Operating Profit (before amort. and except.)

(3,391)

(2,491)

(1,985)

(2,153)

(2,153)

Intangible Amortisation

0

0

0

0

0

Exceptionals

18,308

(364)

(6,537)

0

0

Other

(1,475)

(1,438)

867

(100)

0

Operating Profit

13,442

(4,293)

(7,655)

(2,253)

(2,153)

Net Interest

1,046

940

320

82

186

Profit Before Tax (norm)

 

 

(2,345)

(1,550)

(1,665)

(2,071)

(1,967)

Profit Before Tax (FRS 3)

 

 

14,488

(3,353)

(7,335)

(2,171)

(1,967)

Tax

(4,843)

30

(118)

0

0

Profit After Tax (norm)

(8,663)

(2,959)

(916)

(2,171)

(1,967)

Profit After Tax (FRS 3)

9,645

(3,323)

(7,453)

(2,171)

(1,967)

Average Number of Shares Outstanding (m)

339.7

340.1

340.1

340.1

340.1

EPS - normalised (c)

 

 

(2.6)

(0.9)

(0.3)

(0.6)

(0.6)

EPS - normalised and fully diluted (c)

 

(1.2)

(0.4)

(0.1)

(0.3)

(0.3)

EPS - (IFRS) (c)

 

 

2.8

(1.0)

(2.2)

(0.6)

(0.6)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

110,076

112,949

114,903

117,680

117,680

Intangible Assets

9,163

0

0

0

0

Tangible Assets

100,853

112,949

114,903

117,680

117,680

Investments

60

0

0

0

0

Current Assets

 

 

33,621

25,498

16,341

10,910

9,031

Stocks

0

0

0

0

0

Debtors

14,265

11,008

185

185

185

Cash

12,489

14,175

14,752

9,321

7,442

Other

6,867

315

1,404

1,404

1,404

Current Liabilities

 

 

(6,087)

(3,908)

(4,260)

(4,084)

(4,172)

Creditors

(6,087)

(3,908)

(4,260)

(4,084)

(4,172)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(4,616)

(3,784)

(2,798)

(2,798)

(2,798)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(4,616)

(3,784)

(2,798)

(2,798)

(2,798)

Net Assets

 

 

132,994

130,755

124,185

121,708

119,741

CASH FLOW

Operating Cash Flow

 

 

(8,946)

(3,986)

(2,859)

(2,774)

(2,065)

Net Interest

1,046

940

320

82

186

Tax

4,097

(553)

(798)

0

0

Capex

(3,587)

4,428

3,459

(2,739)

0

Acquisitions/disposals

14

37

0

0

0

Financing

107

821

454

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(7,269)

1,687

577

(5,431)

(1,879)

Opening net debt/(cash)

 

 

(19,664)

(12,489)

(14,175)

(14,752)

(9,321)

HP finance leases initiated

0

0

0

0

0

Other

94

0

0

0

0

Closing net debt/(cash)

 

 

(12,489)

(14,175)

(14,752)

(9,321)

(7,442)

Source: Edison Investment Research, company accounts. Note: Our base case Eagle capex assumptions run from 2017.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Research: Investment Companies

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