OSISKO, AURICO UPGRADED AT CREDIT SUISSE
Osisko Mining Corp. and AuRico Gold Inc. were upgraded to outperform from neutral by credit Suisse analyst Anita Soni on Monday.
In the case of Osisko, Ms. Soni believes it has an attractive entry point as the miner’s Malartic project is progressing to full production, costs are improving to levels in line with the sector average and liquidity is no longer an immediate concern.
She acknowledged that Osisko shares have re-rated in response to liquidity and cost improvements, but noted processing costs should further improve, the cash-flow multiple should see a rerating, and higher throughput should improve the cost picture.
The analyst also noted optimization efforts in old mine areas should bear fruit in Osisko’s third-quarter results. Her target price on the stock moved up to $7 from $6. Ms. Soni said the upgrade of Aurico is the result of its long-watched transformation.
“Over the past year, Aurico has changed over management, transformed its asset base divesting higher cost mines to lower costs mines, revised expectations, and has delivered against targets,” she said. In our view, market hesitation remains given the upcoming commercial production catalyst, and thus Aurico provides an attractive relative valuation on net asset value.”
She noted the stock trades at 0.86x her NAV estimate on a spot gold price of uS$1,316 per ounce, which is below the group average of 0.93x.
“In our view, the market is already pricing in a bumpy rampup of the underground at young davidson,” Ms. Soni said, noting the company’s $210-million in cash and equivalents and $150-million in undrawn credit provide a buffer for the mine’s ramp-up.
despite the upgrade, the analyst cut her target price on Aurico to $5 from $5.50.