Cora Gold* (LON:CORA) 8.0p, Mkt Cap £15m – Earnings update. Growing the resource and fast-tracking Sanankoro into production
BUY – 17.2p
Sanankoro yields a $55m NPV8% (post tax) and a ~120% IRR (post tax) implying Cora is trading at 0.3X multiple to project value using $1,800/oz gold price.
Lionhead $21m mandate endorses Sanankoro investment proposition and significantly reduces financing risk.
Near-term focus on expanding the Sanankoro resource to meet a minimum of 6y life of mine at 40kozpa triggering offered financing deal and fast-tracking the project into production – updated MRE expected H1/21.
Detailed metallurgy testwork in progress with results expected Q4/20.
Feasibility Study with all respective components targeted before YE21.
Valuation - Sanankoro NPV10% (post tax) estimated at >$100m at $1,800/oz assuming a minimum of 6y LoM translating into a 17.2p risked Cora target price.
Building on Scoping Study parameters, we assumed the coming exploration programme delivers at least 6y mine plan at 1.5mtpa throughput rates that at envisaged 1.45g/t grades and 70% recoveries translate into ~49kozpa. The potential is supported by previously released and later confirmed 1-2moz exploration target by SRK in oxides at the Sanankoro project. As such extending the life of mine to the minimum required under the Lionhead mandate and adjusting sustainable capital and reclamation costs while using $1,800/oz gold price (refer to the Appendix I for target price to gold price and discount rate sensitivities), we arrive at NPV10% (post tax) of $103m for the project. Applying 0.5x multiple for the stage of the project while also recognising strong financial backing by the Company’s shareholders and the Lionhead funding mandate and adjusting for the outstanding 1% NSR (assumed Cora exercises its option to acquire 5% interest in Sanankoro for $1m) and 10% state free carried interest in the project, we arrive at $43m NAV and a 17.2p target price (USDGBP 1.3) driving our BUY recommendation.
Upside potential drivers among others include expansion of the resource base, completion of DFS further de-risking of the project narrowing the discount to project value, development funding closure, exploration success on other properties and gold prices outperforming our estimates.
Near term news flow and catalysts
Metallurgical testwork Q4/20
MRE update around H1/21
FS by YE21
Funding completion post the FS release
*SP Angel acts as Nomad and Broker to Cora Gold
Analysts
Sergey Raevskiy – 0203 470 0474
Simon Beardsmore – 0203 470 0484
John Meyer – 0203 470 0490
Sales
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.