Victoria Gold’s new study highlights promise of Eagle deposit

The updated definitive feasibility study for Victoria Gold’s 100%-owned Eagle heap leach project reflects improved economics for the mine, prompting five analysts to applaud the company’s investment and takeover potential.


In a Sept. 12 press release, Victoria Gold Corp. (VIT:TSX.V) announced the fully permitted Eagle project in the Yukon has a post-tax NPV of $508M and an internal rate of return (IRR) of 29.5%, with annual gold production of ~200,000 oz, operating costs of US$539/oz, and all-in sustaining costs of US$638/oz.

“With a shovel-ready project in a top-tier geopolitical location, we believe Victoria represents a rare opportunity,” said Paradigm Capital’s Don Blyth in a report issued on Sept. 13.

“The results of the updated study are positive and robust, incorporating both the higher-grade Olive zone and the run-of- mine (RoM) heap leach. We will be reviewing our estimates and expect to make a number of tweaks, but are confident that Victoria will remain one of our favourite takeover candidates,” Blyth wrote.

“In our view, the new study confirms the economic attractiveness (and leverage) of Eagle,” analyst Adam Melnyk wrote in a Sept. 12 research report for National Bank Financial. “In addition, optimization work and exploration success over the past four years has clearly improved economics and optimized the project for a now more robust gold price environment,” Melnyk stated.

Analyst Derek Macpherson, writing for Red Cloud Klondike Strike Inc. in a Sept. 12 report, noted that, “In our view the benefits of this update have not yet been fully reflected in Victoria’s valuation and we believe that these results should be a positive catalyst for the stock. As well, there remains multiple ways for Victoria to further improve project economics providing some additional upside. We expect a project financing update, along with ongoing drill results from Olive-Shamrock, are likely to be the next catalysts for Victoria.”

The “robust economics” outlined in Victoria’s revised study prompted Echelon Wealth Partners analyst Ryan Walker to reiterate the company’s Speculative Buy and Top Pick H2/16 status, “which reflects the Eagle project’s strategic size, fully permitted status, district-scale land package with substantial exploration potential, and situation in geopolitically stable Canada.”

Analyst Richard Gray of Cormark Securities believes potential acquirers will follow on the DFS release. “As one of the very few shovel-ready projects in Canada that can allow a larger company to benefit from the tax synergies of a Canadian development project, we believe a takeover is still a realistic possibility for Victoria Gold. After adjusting our model for the updated feasibility details and equity assumptions, our target increased to C$1.15 (from C$0.80),” he wrote in a Sept. 13 report.

Melnyk has an Outperform rating on the company and also mentioned takeover potential in his comments: “We believe [our] valuation is well-deserved and reflects Eagle’s solid economics, exploration upside, fully permitted status and location in Canada. For these reasons, we continue to see VIT as a takeout candidate.”

Blyth summed up Victoria’s takeover promise this way: “[VIT] offers many advantages to the acquirer and investors over and above an attractive valuation: a shovel-ready, permitted project with a robust IRR; low jurisdictional risk; a quick construction timeline; an efficient use of construction capital, which at <US$300M is within reach of several companies; a meaningful 190Koz/year production at an attractive AISC <$800/oz and considerable optionality to higher gold prices.”

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Source: The Gold Report (9/20/16)