This article by Henry Lazenby was published by Mining Weekly on December 11th, 2013. The following is an excerpt from that article, click here for source.
TORONTO (miningweekly.com) – “With its favourable mining policies, ease of operating and permitting, solid infrastructure and a skilled workforce in the mining sector, along with significant exploitable gold and silver reserves, analysts at Desjardins Capital Markets this week said they expected Mexico would continue to rank as one of the more competitive jurisdictions to attract mining investment.
Authored by analysts Michael Parkin and Adam Melnyk, and associates John Sclodnick and David Lee, the 84-page report provided a broad overview of the precious metals mining sector in Mexico and also announced that Desjardins had initiated coverage of four gold resource companies focused in the North American country.
The analysts said that they liked gold producers Argonaut Gold and Primero Mining, as they had relatively low‐cost operations with silver by‐product credits, and gold developers Newstrike Capital and Torex Gold Resources, as they had relatively high‐grade projects with promising economics – all attractive features in the current gold price environment.
Mexico has a long tradition of mining that dates back to the earliest explorers in the 1500s, who discovered deposits near Zacatecas, Real Monte and Guanajuato.
Desjardins on Tuesday started coverage of two gold producers and two gold developers, which have their primary assets in Mexico.
Newstrike Capital is an exploration‐stage company whose flagship asset is the 100%‐owned Ana Paula gold project, located in the Guerrero Gold Belt of Mexico. The analysts saw production at Ana Paula starting in the first quarter of 2019, and forecast the average yearly output of 154 000 oz of gold at total cash costs of $636/oz over a six‐year mine life.
Desjardins underlined the project’s high‐grade breccia as underpinning its valuation with a ‘buy’ rating and a target of C$1.50 a share. The analysts’ discounted cash flow model, which was based on the March $600/oz pit shell for the 1.27-million ounce, 3.77 g/t project, generated a 7% net present value at $1 500/oz of gold of $146-million – more than three times Newstrike’s current enterprise value.
The analysts also viewed the exploration potential at Ana Paula in a favourable light. However, at current trading levels, investors were believed to exclude any value for resource expansion potential in the company’s market value, they said.”
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