CIBC initiates coverage of Equinox Gold

By Posted Northern Miner Staff / September 07, 2018 / www.northernminer.com / Article Link

CIBC has launched coverage of junior developer Equinox Gold (TSXV: EQX) with an outperform rating and a 12-18 month target price of $1.30 per share.

The stock is currently trading at $1.07.

The company, with assets in Brazil and California, was formed late last year through a three-way merger of Trek Mining, Newcastle Gold and Anfield Gold.

Equinox expects to pour first gold from its Aurizona project in Brazil before the end of the year, and start the first phase of construction of its Castle Mountain project in California in 2019, with gold production slated to follow in 2020.

Mining entrepreneur Ross Beaty owns an 11% stake in the company.

CIBC analysts Bryce Adams and Eve Hurowitz note the company has a "solid balance sheet and a focused management team with a clear growth strategy guided by chairman Ross Beaty."

The company's executive and board also have "ample mine building and M&A experience," the analysts continue.

"Longer term, the current scarcity of quality, mid-tier, multi-asset producers creates a niche market for Equinox to target," they state in a research note. "Prudent M&A will be key to achieving this strategy, and the management team has a track record of executing on the corporate goals."

The company "has ambitions to be the next intermediate gold producer, with production of 500,000 to one million oz. gold in three to five years," the analysts point out. "Chairman Ross Beaty has publically stated that he intends to grow the company to an intermediate producer in the next three to five years and, to do so, the company will be very active in the M&A market with at least one deal to be announced in 2018, possibly two," the analysts say.

In the meantime, production at Aurizona is anticipated to ramp up next year to an average annual production rate of 136,000 oz. gold.

Castle Mountain will produce an average of 45,000 oz. gold annually for the first three years under Phase I, the analysts say, and in Phase 2, the mine "has the potential to increase company-wide production to over 300,000 oz. per annum."