Senior gold producers are still interested in buying non-producing companies with advanced projects . . . but not at any price, and certainly not without a hard-nosed look at project economics. That’s why mining analysts are keeping a close eye on potential takeover target
Rosia Montana isn’t particularly high grade, but it is big, and therefore of potential interest to major companies wanting to boost their resource profiles. But with gold prices in the dumper, all bulk-tonnage deposits face tougher criteria for development, as well as a decrease in the number of buyers able and willing to compete in the auction process. A critical next step for Gabriel will be the release of a definitive feasibility study, scheduled for later this summer.
Michael Curran of Merrill Lynch sees potential for Rosia Montana to become a significant gold producer, perhaps even more than 500,000 oz. per year. He cautions, however, that “project risk will remain high, even after the definitive feasibility study is completed, as the market digests the scale and economics of the proposed project and how Gabriel might proceed with development.”
Curran sees Gabriel’s options as still open. “The company could either develop an open-pit operation (200,000-300,000 oz. annually) with potential for expansion, or attract a more senior gold producer as partner (or purchaser) with the financial strength to build a larger open-pit mine (500,000-800,000 oz. per year).”
In any event, Curran expects market interest in Gabriel to remain high for the next few months, as more project details are announced. In the meantime, Merrill Lynch is holding its “accumulate” rating.
Gabriel currently trades at about $3.72 in a 52-week range of $4.68 to $2.35. It has 81 million shares outstanding and a market capitalization of $280 million.
At last report, Rosia Montana contained an overall resource of 344 million tonnes grading 1.3 grams gold per tonne, or about 14.3 million oz. gold and 67 million oz. silver. The bulk of this resource is in two main deposits: Cetate and Cirnic. The project covers numerous other targets that have yet to be fully explored.
Metallurgical work is ongoing, though the favoured flowsheet option calls for gravity, flotation of sulphides, and cyanidation of the concentrate in a carbon-in-pulp circuit.
The project has some social challenges in that the village of Rosia Montana must be relocated to World Bank standards before mine construction can begin. However, local support is strong, owing to high unemployment levels in the region and its strong mining heritage.
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