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9/28/16

OGC and BTO, analyst opinion wrap-up from a Bloomberg terminal piece

Thanks A Reader for punting this one on:

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(BFW) OCEANAGOLD/B2GOLD STREET WRAP: Philippines Suspension Unlikely

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OCEANAGOLD/B2GOLD STREET WRAP: Philippines Suspension Unlikely 2016-09-28 13:22:29.743 GMT

By Aoyon Ashraf
    (Bloomberg) -- B2Gold fell ~12%, OceanaGold 14% in Canadian trading yday, after Philippines govt. noted that audit of roughly three quarters of mines in the country could see operations suspended; most analysts expect issue to be resolved, and mine suspension unlikely for both cos., although stocks likely to be volatile in S-T until issues are resolved.


CIBC (Jeff Killeen)
  * OGC CN, BTO CN have sufficient balance sheet strength be able to develop mines in Philippines (based on $1,300/oz gold price) uninterrupted
  * Says during previous site visits, it was observed, that operations at Didipio and Masbate mines seemed to be employing industry best practices; would be surprised if ops ultimately halted
  * Didipio represents ~37% of NAV for OGC CN; Masbate ~29% of BTO CN’s NAV


BMO (Brian Quast)
  * Masbate comprises 22% of BMO’s NAV, 28% of 2017 production ests.
  * Didipio represents 31% of asset-level NPV, 30% of 2017 gold eq. production for OGC CN
  * Expect weakness for OGC CN until further clarity is provided


RAYMOND JAMES (Chris Thompson)
  * OGC CN’s social license, strong environmental track record from operating in New Zealand and Philippines for several years underscore its commitment to safe and responsible mining
  * Also OGC CN has strong local support, which will help OGC CN in resolving this matter
  * Didipio is 30% of NAV for OGC CN; Masbate represents 28% of NAV for BTO CN


HAYWOOD (Geordie Mark)
  * OGC CN will be able to resolve issues raised in audit, even though DENT announcement presents negative headline risk, heightened investment risk for Philippines
    * Didipio accounts for roughly 23% of project NAV
  * BTO CN’s Masbate mine represents 20% of project NAV; notes that mine received ISO 14001 accredition earlier this yr, which confirms environmental mgmt system is up to ISO standard required by country’s law


CANACCORD (Reg Spencer)
  * Says unlikely that OGC CN can’t satisfactorily address listed social issues; notes that suspension is based on “soft” social issues rather than any specific environmental breaches
  * Didipio represents 30% of NAV ests; OGC CN ultimately will be able to resolve these issues, uncertainty will be elevated until situation is resolved


CORMARK (Richard Gray)
  * Ascribing low probability for suspension of BTO CN’s Masbate mine
  * BTO CN now trades at 0.97x NAV, 8.2x CF, which is “attractive value” for investors looking to build or add to position in high quality, growth co. in gold sector
  * Finds it “hard to believe that a well-run operation such as
    Didipio would actually be suspended;” also sees OGC CN trading on attractive valuations


NATIONAL BANK FINANCIALS (Raj Ray, Steve Parsons)

  * Doesn’t see any balance sheet risk for OGC CN, in case of potential suspension of Didipio (~22% of asset NPV)
  * Reiterating sector perform rating, PT of C$4.50 for BTO CN given potential for resolution of cited violations without production interruption or material impact to costs
    * Says Masbate represents 17% of mine/project NAV at C$0.54/shr


SCOTIABANK (Ovais Habib)
  * For OGC CN, under a worst-case outcome, oper. license at Didipio (39% of asset NAV ests.) would be suspended; although at this time its low-probability scenario
    * More likely that there will be requirement for more stringent operating conditions
  * For BTO CN remain optimistic that Masbate (23% of asset NAV) operating license can remain in good standing; final negotiations between co. and govt expected in coming weeks