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Peak Gold Ltd. - exciting new entrant


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(new company, great board. CC is rather keen on it.)

 

Peak Gold Ltd

Peak anticipation

Initiation on new high-profile, middle-tier, growth, gold company

220koz of gold forecast for this year at cash cost of US$340/oz

Following the acquisition of two mines from Goldcorp, Peak Gold owns the Peak gold mine in Australia, which we expect to provide a stable production base, and the Amapari gold mine in Brazil, which offers possible upside in the form of operating improvements, exploration and potential re-engineering.

 

Goal: to reach 600koz pa within a year through acquisitions

The high-profile board has indicated that it intends to pursue additional growth through acquisitions. It has an impressive track record of delivering value through executing similar strategies elsewhere.

 

Premium valuation, which is key to success of acquisition strategy

Our target price of C$1.15/share is based on a multiple of 1.6 times our NAV estimate, assuming a 5% discount rate and our peak gold price scenario of US$750/oz. We believe that this above-average multiple, compared with similar sized North American gold companies, is justified on account of potential upside at its operations and management’s track record.

 

Recommendation

We initiate coverage of Peak Gold, with a BUY recommendation and a target price of C$1.15/share.

Risks

We believe the key operating risks relate to the delivery of planned operating improvements at Amapari and that delivering value-adding acquisitions will be the key to maintaining its premium rating.

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