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2019-10-14

Analys Kopy Goldfields: New exploration

Detta är en betald analys på uppdrag av Kopy Goldfields AB utförd av analysföretaget Carlsquare på uppdrag av Analysguiden.
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A drilling program has started in the promising Maly Patom area. A new loan secures short term financing. The main trigger is still a potential sale of the flagship Krasny asset. The rise in gold price is supportive but further exploration might be required for a deal.  

Kopy Goldfields has moved to the next phase in the exploration of the Maly Patom licenses starting a drilling program. In previous geochemical surveys three areas of interest with an exploration potential of at least 1 Moz of gold each has been identified. The target is to eventually define mineral resources in one or more of these assets. While this means that costs will increase, it is a positive sign that the project is now moving forward.

To finance the increased activity, Kopy Goldfields has expanded its loan facility with an additional SEK 15m to SEK 45m in total. At the same time the due date for the whole consideration has been pushed forward to September 2022. We view this as a favourable solution to short term financing needs given the low share price. Milestone payments from the sale of the Kopylovskoye asset could provide additional financing in 2020. 

The main trigger in the short to medium term is if Kopy’s pursuit to divest its share of the flagship Krasny asset will be successful. In the summer the company presented a new scoping study to support an alternative plan for mining development involving multiple stages and lower initial investment. While this might appeal to opportunistic buyers given the rise in the gold price, the intentions of Kopy’s partner in Krasny, Russian gold producer GV Gold (also the majority owner of Krasny), are still unclear. GV Gold itself has recently been reported to be an acquisition target.

We have taken a more cautious approach and reduced the likelihood of a deal in the short term. In addition, we have used a more conservative valuation of Krasny on the back of the new scoping study. Our new fair value of SEK 2.6 per share (3.4) still points to a considerable potential in the shares. We believe this view is supported by a relative valuation.

Författare Niklas Elmhammer

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