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2018-10-15

Analys Kopy Goldfields: Looking for a golden exit

Detta är en betald analys på uppdrag av Kopy Goldfields AB utförd av analysföretaget Jarl Securities på uppdrag av Analysguiden.
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Kopy Goldfields is raising capital to prepare for a possible divestment of its share in the Krasny project. Recent progress in the projects, a low subscription price and the prospect for a near-term divestment are factors supportive to the case.

Kopy Goldfileds is a Swedish prospecting company within the gold industry. The company has several fully owned projects within the Irkutsk region, one of the worlds most productive areas for gold.

Increased gold resources

Following exploration results in 2017 and 2018, gold resources in Kopy Goldfields’ flag ship project Krasny have increased by 32 percent to 1,84 Moz. Kopy Goldfields and Russian Partner GV Gold have agreed on a budget to finance a sale process for the project for marketing to external buyers. We believe this is constructive news, as the path forward for Krasny may clear.

Attractive strategy

For Kopy, we view a possible near-term exit as an attractive option, considering the heavy investments and the uncertainty involved in starting up a greenfield mine. However, as the divestment process has just begun, a buyer, as well as a price, are yet to be determined.

Rights Issue

To further prepare Krasny for a possible sale, Kopy Goldfields is raising some SEK 25m through a rights issue. The low subscription price of SEK 1.05 per share and the fact that the issue is 75 per cent covered by subscription commitments and underwriting guarantees bodes well for participation.

Currency effects

The weak Ruble has handed the Russian gold industry a cost advantage and the regulatory and tax environment is benign. Most of Kopy Goldfields projects are in Lena Goldfields in Irkutsk, neighbouring the giant Sukhoi Log deposit currently under development. Geopolitical risks, such as U.S. sanctions toward Russian oligarchs, are a concern, but we see it unlikely that either Kopy Goldfields or its partner GV Gold will be directly targeted.

Fair value

In view of higher demonstrated gold resources and the prospects of a non-dilutive exit from Krasny, we have raised fair value for Kopy Goldfields to SEK 3.00 per share (from 2.23). The valuation is “risk-adjusted” assuming a 30 percent probability of a sale of Krasny. If a sale cannot be completed as planned, new financing could be required in 2019.

Författare Niklas Elmhammer

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