Tom Gallo, an analyst with Canaccord Genuity,
makes the case for investing in this company with a "top-tier" mine
in Northern Ireland.
A March 26 research note indicated Canaccord Genuity transferred primary
coverage of Dalradian
Resources Inc. (DNA:TSX) to Tom Gallo from Eric Zaunscherb. "Our
view remains that the company's wholly owned Curraghinalt project, one of the
highest grade, undeveloped gold projects globally, is a top-tier development
asset despite recent headwinds," analyst Gallo clarified. Curraghinalt
is located in Northern Ireland.
Gallo reiterated Canaccord Genuity's Speculative Buy rating and CA$2.50
per share price target on Dalradian. The latter reflects a more than doubling
of the current stock price, which is about CA$0.95 per share and "very
attractive at this level," Gallo added.
Year to date, Dalradian's stock price is down 22% due to two primary
reasons, Gallo speculated. One is uncertainty around Brexit, specifically
"what the border between Northern Ireland and the Republic of Ireland
would look like, which we view as more of a muddying of the waters than an
actual impediment to project advancement."
The other is "a very small group" of people protesting
construction of the Curraghinalt mine, citing toxic cyanic damage to the
local environment, and thereby leading investors to question whether or not
Dalradian will be able to obtain necessary project permitting. Though the
"movement has drummed up sporadic government support," specifically
that of Sinn Féin, Gallo wrote, "we remain of the view that an operating
mine in the community providing an economic benefit to many will outweigh
concerns raised by a select few" and "the current choppiness
surrounding this process will have presented investors with a very attractive
entry point."
Despite the overhang on the stock, some major events are on the horizon
and would likely catalyze upward movement in the price, according to the
report. An updated resource estimate is expected by the end of Q2/18 and a
subsequent updated feasibility study in Q3/18. "The feasibility study
could increase the overall reserve base while exploring several optimization
techniques including dilution management with ore sorting, which could reduce
mining costs," Gallo noted.
Also anticipated is Dalradian receiving a final permit decision for
Curraghinalt, "a major derisking event," likely in H2/19, said
Gallo. Production ramp-up then could likely follow in late 2020.
In the interim, Dalradian continues to strengthen its balance sheet,
having ended 2017 with CA$138M in cash. The company would likely fund the remaining
$262M in capex for Curraghinalt via a combination of working capital, equity
and debt," Gallo estimated.
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Disclosures from Canaccord Genuity, Dalradian Resources Inc.,
Change in Coverage, Mar. 26, 2018
Analyst Certification: Each authoring analyst of Canaccord Genuity
whose name appears on the front page of this research hereby certifies that
(i) the recommendations and opinions expressed in this research accurately
reflect the authoring analyst’s personal, independent and objective views
about any and all of the designated investments or relevant issuers discussed
herein that are within such authoring analyst’s coverage universe and (ii) no
part of the authoring analyst’s compensation was, is, or will be, directly or
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authoring analyst in the research.
Analysts employed outside the US are not registered as research
analysts with FINRA. These analysts may not be associated persons of
Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241
and NYSE Rule 472 restrictions on communications with a subject company,
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Required Company-Specific Disclosures (as of date of this publication)
Dalradian Resources Inc. currently is, or in the past 12 months was, a
client of Canaccord Genuity or its affiliated companies. During this period,
Canaccord Genuity or its affiliated companies provided investment banking
services to Dalradian Resources Inc.
In the past 12 months, Canaccord Genuity or its affiliated companies
have received compensation for Investment Banking services from Dalradian
Resources Inc.
Canaccord Genuity acts as corporate broker for Dalradian Resources Inc.
and/or Canaccord Genuity or any of its affiliated companies may have an
agreement with relating to the provision of Investment Banking services
Canaccord Genuity or one or more of its affiliated companies intend to
seek or expect to receive compensation for Investment Banking services from
Dalradian Resources Inc. in the next three months.