|
Sector
NewswireTM
Sector: Mining - Metals and Minerals
:
News Release - February
25, 2015 12:03 AM ET
Metanor Resources is subject of
Special Situation Report
Metanor negotiates certainty on
debenture on favorable terms and avoids massive dilution --
currently presents buying opportunity during nominal related
financing.
NEW
YORK, NY, February 25, 2015 /Sector Newswire/ - Metanor
Resources Inc. (TSX-V: MTO) (US Listing: MEAOF) (Frankfurt: M3R)
is identified in a newly issued research report by Market Equities
Research Group as the subject of a special situation advisory and
dramatically undervalued. Metanor has renegotiated its debenture on
favorable terms and is in the process of securing financing to
secure the deal, in the process the share price is temporarily on
sale and poised for upside revaluation.
The full research report
may be found at
http://sectornewswire.com/MarketEquitiesResearch-MTO-02-2015.pdf online.
Metanor Resources Inc. is
an operationally-sound gold producer which has entered its third
year of commercial gold production at its 100% owned flagship
Bachelor Lake mill and mine located along the prolific Abitibi
Greenstone belt in mining-friendly Quebec, Canada. The mill is
currently operating at an effective rate near 700 TPD, yielding a
rate of ~45,000 oz gold per annum (this is expected to improve as
higher grades zones are tackled and less downtime is encountered).
Bachelor is a 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). The Bachelor mill is uniquely positioned sitting
geographically as the only mill located within 200 km in a gold rich
district.
In 2012 Metanor took on two debt obligations in order to pay for the
refurbishment of its’ Bachelor Lake mill and ready the mine for
reopening; a CDN$7 million loan from Investissement Québec, and a
CND$10 million debenture. The investments have been a success; 1)
Metanor owns the mill clear title and has total infrastructure and
equipment that would cost over $200 million to replace today, 2) it
has plenty of high-grade gold in the pipeline, 3) Metanor appears to
be able to operate profitably on EBITDA basis (with quarterly ounces
of production expected to be over 10,000 going forward), 4) Metanor
is yielding solid metrics in an environment where it operates in
affordable Canadian denominated input costs and derives
~CND$1,500/oz of gold (its cash cost (assuming normal operation) are
listed at ~CND$873 per ounce, its all-in-sustaining cost are
~CND$1,123 per ounce sold (which is below US$1,000/oz at current
rates of exchange)).
THE DEBENTURE DEAL: The $10 million debenture’s term was set to come
due in August 2015, and Metanor managed to remove uncertainty
surrounding this by negotiating an extension of the maturity for 24
months to August 22, 2017 (click
here to see related February 23, 2015 news release) – this is
conditional upon an equity financing of a minimum amount of $3.0
million being completed and an immediate repayment of $1.0 million
in principal, plus accrued interest. This means Metanor needs to do
an equity raise for up CND$4 million (the extra money would go
toward realigning working capital – we estimate Metanor averages ~$5
million cash and gold on hand). The debenture deal struck is
extremely beneficial for shareholders as it avoids dilution;
renegotiating (or retiring) the debenture close to the term with the
stock near 5 cents generally would have resulted in the convertible
strike-price being forcibly lowered to 6 or 7 cents (or an equity
raise of $10M at 5 cents) – shareholders should appreciate the fact
management managed to avoid >150 million shares of dilution and be
happy they only need to raise $3 million. Importantly, Metanor
retains the debenture strike-price of 28 cents and low coupon rate,
and bumps the debenture from short-term liability to long-term.
From our experience the nominal $3-4 million equity raise sets in
motion a phenomena that creates an excellent short-term buying
opportunity for investors that see the merit of establishing a long
position here, as the most interested participants to the equity
raise are existing shareholders that want to exchange their current
shares of MTO.V with new shares from the equity raise which come
with free half-warrants. So by selling their shares now, before the
private placement, they can load up on the same shares that come
with warrants for free and there is no extra capital outlay for them
in doing so -- this creates a temporary depression in the price, a
short-term buying opportunity for investors savvy enough to identify
the opportunity. In our opinion any shares under CDN$0.07 are an
outright steal considering you are getting an operationally-sound
gold producer with sizeable infrastructure and significant gold
assets. The value of the tax credits (from ~$40 million of
carry-loss-forward on the books) is near $15M alone, this alone is
close to the current market cap of MTO.V now – in short Metanor is a
serious buy here and will likely not remain at a low price per share
long. Important to note is that Metanor has stated it is considering
a second mining front and Metanor is NOT restricted by its
Gold-Participation-Agreement from processing gold sourced from
outside Bachelor; the Metanor that will exist in 2.5 years from now
could very well be a much healthier/more
profitable/mixed-ore-sourced beast than it is now. Also important to
note is that post March 31-2015, Metanor will no longer be spending
over $500K a month in interest and capital to Investissement Québec
as it is expected to be fully repaid by March 31.
Valuation commentary: Initial price target is 1/2 of ‘Book Value’:
MTO.V is extremely undervalued compared to its book value of
$0.1952/share, the current share price is near $0.05/share (with
296,557,733 shares outstanding the current market capitalization is
~$15 million). A logical initial share price target for MTO.V stock
is $0.10/share (half its current book value), Metanor is currently
trading at approximately 1/4 its current book value and this is
after it wrote-down ~$10 million of assets in 2013. As gold
retrenches, and strengthens, MTO.V harbors potential to leverage to
a multiple of book value and a multiple of earnings. MTO.V is
currently trading at a fraction (below 1/8) of its infrastructure
(replacement) value alone, ignoring the ~1.6 million oz global gold
resource in all categories (on all properties), and ignoring the
large resource growth potential. MTO.V also offers a significant
latent tax savings windfall value for a future acquirer with a
loss-carry-forward on the books of ~$40 million, the impact could
generate $12 million - $15 million in tax credits (that is near the
current market cap of MTO.V, certainly an indication the share price
is a serious buy here).
The full research report
may be found at
http://sectornewswire.com/MarketEquitiesResearch-MTO-02-2015.pdf online.
This release may
contain forward-looking statements regarding future events that
involve risk and uncertainties. Readers are cautioned that these
forward-looking statements are only predictions and may differ
materially from actual events or results. Articles, excerpts,
commentary and reviews herein are for information purposes and are
not solicitations to buy or sell any of the securities mentioned.
Readers are referred to the terms of use, disclaimer and disclosure
located at the above referenced URL(s).
SOURCE: Sector Newswire editorial
editorial@SectorNewswire.com
Additional Disclaimer and Disclosure I
Contact I
Terms and Conditions I
Copyright I
Privacy Policy
|
