For Those About To Rock: A Low Capex, Near-Term Producer
  • We are initiating coverage of Northern Vertex Mining Corp. with a BUY recommendation and conservative 12-month target price of C$0.90/share.
  • Friendly Jurisdiction: Northern Vertex is currently working towards earning a 70% interest in the Moss Mine project, located ~10 kilometres from the historic mining town of Oatman, Arizona, and ~130 kilometres from Las Vegas, Nevada.
  • Low Cost to Develop: Based on a PEA and our interpretation of the project, the Moss Mine requires ~$24 million in upfront capex (on a 100% basis), and looks to produce just under 50 Koz of gold equivalents per year at cash costs of under $470/oz once steady-state production has been reached.
  • Initial Production from Phase I: Phase I of the project is already underway, which is essentially a pilot plant that will allow for further optimization of mining and processing methods. Over the course of 2014, we expect Moss to produce ~10.6 Koz, but more importantly will provide excellent data points intended to be implemented in a feasibility study.
  • Exploration Upside: Assays from a recent exploration program highlighted the continuation of mineralization to the south along the western section and also at least 220 metres vertically below surface, all beyond the current mineral resource outline. Additionally, only a small portion of the property has been explored to   date, with an abundance of historical workings in the area.
  • Attractive vs. Peers: The Moss Mine boasts higher grades than many other openpit heap leach deposits, which have been a growing M&A focus over the last several years. Should we apply the same take-out multiples to Northern Vertex, our target price looks all the more conservative. Additionally, it appears attractive on both P/E and P/CF metrics and boasts an excellent after-tax IRR of 71% at $1,250/oz, which few other projects are able to offer.
  • Near-Term Catalysts: Completion of a feasibility study (Q3/14), project financing for Phase II (TBA), and further exploration all remain key catalysts going forward which offer near-term re-rating potential.
  • Key Risks: Some of the largest risks associated with Northern Vertex include that of financing, exploration, technical, and commodity price. If the company is unable to obtain financing or maintain reasonable costs for the construction and operation of Phase II, our production forecast (and hence target price) will be adversely impacted.