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This Q4 2011 Metanor Resources Inc. has been the recipient of several recommendations from analysts and industry experts; Industrial Alliance Securities has a near-term C$0.95share price target and Jay Taylor has initiated a 'Buy Recommendation' with a progress rating of A2. Taylor further stated that when Metanor achieves commercial production, it will be placed among his A1 producers and suggested investors cap their allocation to Metanor at 5% of their overall portfolio. Shares of MTO.V offer serious intrinsic value and growth potential in terms of increasing resources, production, and profits for investors seeking quality exposure to precious metals in a safe mining friendly jurisdiction.
The price of gold has consolidated after topping $1,900/ ounce this past summer, but for the most part gold prices still remain high in nominal dollar terms and provide excellent margin for producers. Adjust for inflation, gold has a long way to go to beat past highs and the current market weakness in metals and related stocks presents a excellent buying opportunity (perhaps the last and best chance before gold ramps up again to keep up with the global "race to the bottom" in paper currencies). Metanor Resources Inc. is deeply undervalued (current market cap = ~C$69M based on 201.7M shares outstanding, trading at ~$0.34 cents per share).
Metanor is leveraged to the price of gold, able to sell 80% of its Bachelor Lake Mine sourced gold at spot prices with the balance sold to Sandstorm as per gold participation agreement. The projected cash flow from the first year of operation at Bachelor Lake once a run rate of 5,000 ounces gold per month is established is astounding; at current gold prices (~C$1,600/oz) MTO.V will generate net revenue in excess of $40 million in year one beginning in Q3 2012. On this revenue figure from year one alone MTO.V should be trading well above its current ~70 million market cap. When comparing Metanor’s upcoming metrics to others that shared comparable production metrics at one point in time, such as Aurizon Mines which trade at over a $1B market cap when it produced 60,000 ounces, MTO.V now trading at under $70M market cap is highly attractive. The discounted future value of the significant amount of positive cash flow coming the way of Metanor justifies a market cap for shares of MTO.V at several times the current and may well be a consideration as a top portfolio candidate.
The 60,000 ounce per annum run rate utilizing 2/3 capacity can be increased in the near-term by utilizing the other (unused) 1/3 capacity, gold production could be increased to 80K - 90K ounces per annum possibly by either a work station on the Hewfran zone or resume trucking from Barry (the Barry sourced ore is not subject to gold participation agreement with Sandstorm).
The aforementioned $40 million in the first year alone is just the tip of the iceberg of possibly decades of life and cash flow from Bachelor Lake. Metanor's Bachelor Lake is a very rich underground mine with grades upwards of 26 g/t gold with an average grade of 7.38 g/t gold (fully diluted using long hole). MTO is currently in the midst program aimed at building on the established resource and mine life and has two drills turning, one underground and one at surface. The drills are conducting both new discovery holes and some conversion holes. MTO has inferred zones that will quickly convert to extended mine life, in fact MTO has identified zones that we believe will contribute to extending mine life closer to 10 years. This interpretation was corroborated following a site visit to Bachelor Lake by an analyst from Industrial Alliance earlier this year, prompting commentary back-of-the-envelope calculations of (non 43-101) 700,000oz resource achievable based on deep hole intercepts and extrapolation of data. Metanor will be conduction a feasibility study in the Spring of 2012 and will also apply the current drilling towards a new resource calculation which should add at least a year of mine life.
The possibility of decades of mine life exists because the shaft at the Bachelor Lake Gold Mine has been sunk to 2,400 feet so as to access known resources at that level, however it is believed by geologists familiar with the project the gold runs much deeper and Metanor is in a position to identify 1.5+ million ounces at Bachelor Lake going forward. The two main veins at the Bachelor Lake Gold Mine run parallel and are 75 feet apart at an 80 degree angle. Greenstone belts run deep, there are mines at 8,000 – 10,000+ feet such as area miners Aur Resources (now Teck Cominco), Agnico-Eagle and Sigma. The gold grade at the Bachelor Lake property increases at depth, the strike is open in all directions at the 2,400 foot mark, and the company has deep hole intercepts at ~3,500 ft.
Metanor also has large gold exploration upside at its nearby Neligan property and 100% owned Barry Deposit. The Barry property resource estimate now sits at 309,500 oz Gold of Indicated Resources (7,701,000 t at 1.25 g/t Au) and 471,950 oz gold of Inferred Resources (10,411,000 t at 1.41 g/t Au) and is wide open for large resource growth expansion. The current 1km strike at Barry is potentially 4km and there are in excess of 150 anomalies outside the pit area (a potential 13km strike length). Metanor has found the gold system at Barry and only needs to now track it. The Barry deposit is a 10M+ ounce target; the independent international professional geological firm SGS Geostat has identified Metanor’s Barry deposit as comparable in potential to rival other multi-million ounce deposits such as Osisko's Malartic gold deposit & Detour Gold's Detour deposit.
Metanor's infrastructure is valued (estimated replacement value) between CDN$150M - $200M, is fully paid, fully permitted, fully functional with proven production capabilities (having poured >40K oz gold from interim sourced ore with ~95% recovery during the mill upgrade from 250 TPD to present 1200 TPD). The intrinsic value of Metanor’s known resources (~1.6M oz gold in all categories on all its properties) and infrastructure are several times the company’s current market capitalization. As MTO.V enters gold production the reality of the infrastructure, resource value, cash flow growth, and clear ability to add ounces should lead to share price appreciation. Metanor currently has institutional investors comprising ~50% shareholding, including Sprott Asset Management, and is poised for large revenue and resource growth.