Canaccord Genuity (TSX:CF, LSE:CF) has resumed coverage of i-80 Gold Corp with a 'Speculative Buy' rating and a C$4.50 target price, noting that the Nevada-focused company has “transformed itself” and the stock reflects low jurisdictional risk.
The Canadian broker noted that over the past year, i-80 has transformed itself, disposing of non-core assets and acquiring projects that will allow it to run a hub-and-spoke operation in Northern Nevada.
“IAU's portfolio now includes Lone Tree, Brooks/Buffalo Mountain, Granite Creek, McCoy-Cove, and Ruby Hill. With Lone Tree acting as the hub of its operation, i-80 intends to restart production quickly and move toward becoming a Nevada-focused mid-tier precious metal producer,” Canaccord's analysts said in a note to clients.
READ: Stifel raises target price for i-80 Gold Corp to C$6.20 per share, repeats 'Buy'
Canaccord pointed out that i-80 offers “the best production growth profile” among the junior precious metal producers in its coverage universe.
“We note that some uncertainty surrounds the successful execution of its aggressive expansion plans; however, we expect IAU will re-rate higher as it continues to de-risk its assets,” added the analysts.
Over the next several years, i-80 is planning to launch a substantial hub-and-spoke gold mining operation in Nevada, restarting three underground and two open-pit mines. Minor amounts of oxide ore will be heap leached at existing Lone Tree and Ruby Hill leach pads. Ore from the larger refractory deposits will be toll processed through an interim agreement with Nevada Gold Mines (NGM) until the Lone Tree autoclave has been refurbished, at which point Lone Tree will act as a central processing hub for the surrounding mines.
As a result, Canaccord expect the company to register "significant" projected near-term growth.
“We forecast gold production ramping up over the next decade, surpassing 300koz by 2028, while cash costs decline from approximately $1,540 per ounces (oz) currently to below $1,000/oz,” said the analysts.
“During this period of rapid growth, we expect i-80 will have to invest heavily into its business, with material cash outflows from 2022 to 2025. We forecast free cash flow (FCF) will turn neutral in 2026, with significant FCF generation beginning in 2028,” they added.
The analysts underscored that i-80 is well-financed to pursue its near-term growth objectives as it currently has cash and equivalents of around $200 million.
“We forecast the company ending 2022 with $100 million and the undrawn $100 million accordion,” said the analysts.
Meanwhile, i-80’s projects in Nevada have key infrastructure already in place including grid power connections and convenient access off paved highways, said the analysts.
Canaccord’s C$4.50 target price leaves plenty of upside for i-80 Gold’s shares that currently trade at around C$2.66 on the Toronto Stock Exchange
“Our target multiple is on the upper end of the range we use for junior precious metal producers and developers, reflecting IAU’s low jurisdictional risk and strong technical team, tempered by the development and financing risks the company faces as it ramps up production at several operations,” concluded the analysts.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive