Sometimes companies continue to fly under the radar of the big audience,
despite having done almost everything right in the past few years, except
maybe being too prudent on marketing. One of those companies is Atlantic Gold
Corp. (AGB:TSX.V), which is currently building its Moose River gold mine
in Nova Scotia, a mining friendly jurisdiction in Canada (#17 out of 109
according to the 2015/2016 Fraser Survey of Mining Companies). However, this
junior isn't completely unknown to the mining investment community, guys like
Rick Rule recognized the potential early, and invested heavily together with
other powerful backers, when the share price was much lower.
Construction activities are entering the final phase, which will allow
Atlantic Gold to start commissioning the mine before the end of this year.
The mine has an anticipated all-in sustaining cost of just CA$690 per ounce
of gold, which is very close to, if not (in the Western hemisphere)
industry-leading. As Atlantic Gold currently trades close to NAV, there is
room for further appreciation as I will discuss further on in this article.
All presented tables are my own material, unless stated otherwise.
All pictures are company material, unless stated otherwise.
All currencies are in US Dollars, unless stated otherwise.
Company
Atlantic Gold is a gold developer in Nova Scotia, Canada, has been around for
quite a while, and is now nearing the apotheosis of its existence: bringing
its first gold project into production. The Moose River Consolidated (MRC)
gold project should be commissioned at the end of Q3/17, with commercial
production to start shortly thereafter in Q1/18.
Atlantic's management team is very experienced with Steven Dean as
Chairman and CEO. Dean has a very rich history in the mining sector as he has
been the CEO of Teck Cominco and founder of Normandy Mining and also Amerigo
Resources. Newmont bought out Normandy for A$4.4B in 2002, as Normandy was
the largest Australian gold producer (and a substantial base metal producer
too) at the time. Although he wasn't responsible for the final growth stage
of Normandy, it is safe to say that Dean knows what it takes to create a
substantial company. He is determined, as he told me, to build another mid
tier producer by organic development and acquisitions, like Endeavour Mining,
Oceana Gold or B2Gold for example, which are sporting hefty market caps at
the moment (C$2.5B, C$2.5B and C$4.1B). There are several (historic) deposits
within trucking distance of Touquoy, so I'm curious how long it will take for
news coming out in that regard.
After Atlantic Gold was created through a merger and an acquisition, Dean
took the helm after being a Chairman of predecessor Spur Ventures.
Management and Board of Directors consist of numerous other very experienced
people like COO Maryse Belanger, former VP Technical Services at Goldcorp,
director and vice Chairman Robert Atkinson, former President and CEO of
Loewen Ondaatje McCutcheon, several very experienced geologists, and last but
not least director Ryan Beedie, the largest shareholder of Atlantic and a
very successful real estate developer in British Columbia, Canada.
The company currently has 173.3M shares outstanding, which results in a
market cap of C$176.77M at a share price of C$1.02. The fully diluted share
count is almost 231M shares, and the warrants, options and convertible
debentures are all in the money at the moment. It looks like Atlantic Gold
will be fully funded until the start of the commercial production phase, but
it would be nice if some of the 23.1M warrants (priced at C$0.60) would be
exercised throughout 2017 to add some more working capital to the treasury as
approximately C$9M of the C$26M cash position consists of flow-through funds,
which cannot be used to fund construction activities. An additional 3M
options expiring in 2017 are in the money as well, and this would result in a
cash inflow of C$1.34M.
The management team, together with insiders and associates, owns
approximately 35% of the outstanding shares which is rather unique when your
name isn't Ross Beaty or Robert Friedland, whereas the total amount of stock
held by institutional investors is approximately 37%.
The share price did exactly what you would expect on higher gold, as the
markets rewarded the company with a higher share price upon completing the
financing, plus locking in the required hedges, and further derisking of MRC.
As the gold price started to lose momentum after the summer, Atlantic's share
price came under pressure, but was able to hold most of its gains, probably
also because of the substantial hedge book.
To read the entire article, click here.
The Critical
Investor is a newsletter and comprehensive junior mining platform,
providing analysis, blog and newsfeed and all sorts of information about
junior mining. The editor is an avid and critical junior mining stock
investor from The Netherlands, MSc background in construction/project
management. Number cruncher at project economics, looking for high quality
companies, mostly growth/turnaround/catalyst-driven to avoid too much
dependence/influence of long term commodity pricing/market sentiments, and often
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