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Mandalay Resources ready to pounce on targets, says RFC Ambria

Broker RFC Ambrian says 'rather excellent' precious metals producer Mandalay Resources is now in a position to pounce on potential acquisition targets after a significant change to its financing.
Mandalay Resources ready to pounce on targets, says RFC Ambria
The gold producer, which operates mines in Chile and Australia, is said to be targeting advanced exploration or 'distressed' producing projects.

Broker RFC Ambrian says 'rather excellent' gold producer Mandalay Resources (TSE:MND) is now in a position to pounce on potential acquisition targets after a significant change to its financing.

On Wednesday, Mandalay expanded its credit facility up to US$30mln from US$20mln.

The gold and silver producer, which operates mines in Chile and Australia, is said to be targeting advanced exploration or 'distressed' producing projects.

RFC Ambrian, which rates the miner as a 'buy' with a C$1.16 price target (current price C$0.80), wasn't short of plaudits for Mandalay in a note released on Thursday morning.

"Mandalay is one of a shrinking number of producers that is consistently generating cash flow from operations," analyst Duncan Hughes said.

"We perceive the increased debt facility as a move by management to allow it to pounce quickly on any potential acquisition opportunities that may arise.

"Mandalay’s strategy is clear: acquire undervalued assets close to (or in) production with strong exploration upside that would benefit from the company’s proven mining credentials.

"This strategy has worked so far, as demonstrated by the company’s ability to pay dividends to investors. Current market conditions are favourable for a company in Mandalay’s position to acquire underperforming assets at relatively low costs.

"Mandalay is a low-cost gold-silver-antimony producer that has impressed us by delivering on its promises and, consequently, remains our preferred precious metals producer."

Hughes says his C$1.13 a share valuation, which is based on discounted cash flows on current reserves and resources, probably understates Mandalay's upside potential.

According to the analyst news of Mandalay's expansion plans for its existing operations will be the main upcoming catalyst, aside from acquisition news.

In Wednesday's statement, Mandalay chief Brad Mills said: "The additional US$10 million provided by the amendment gives the company increased flexibility.

“The company expects to use the facility for general corporate purposes, including the funding of permitted acquisitions."

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