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April 21, 2017

#Gold @IntegraGoldCorp $ICG

Comments from Paradigm: Integra Gold - Updates


·         There are currently 6 rigs operating right now, 5 on surface (4 at Triangle and 1 at Lamaque Deep), and 1 underground at Triangle. There are 8500m of surface drilling results pending, and 10,000m (10mx10m spacing) of underground infill drilling on the bulk sample area (C2) ongoing. Drilling results have been consistent (see yesterday's release) and the confidence in the deposit continues to increase.  


·         The underground exploration ramp is complete down to 850m and has reached the footwall of the C2 zone. Integra is on track to start the Bulk Sample in May, and have retained BBA as the independent consultant to supervise and audit the bulk sample, which is expected to mine ~25K tonnes. We estimate the production ramp up from bulk sample to production below (based off of the PEA schedule):


o   2017 (Bulk Sample) – 8,000Koz

o   2018 (ramp up) – 76,000oz

o   2019 (full production) – 125,000oz


·         The C2 structure will account for the majority of production in the first 4 years, and the infill drilling is indicating that there is still potential for upgrading: the current indicated resource grade at Triangle is 8.65gpT – The 8 infill holes released on March 22 averaged 41gpT over 6.2m (uncapped and downhole widths), and the 4 C2 holes released on April 18th averaged 32gpT over 4.1m (uncapped and downhole widths).


·         We continue to view the transition from Bulk sample into production as an important de-risking element to the Integra story. The bulk sample will allow for validation of the deposit and fine-tuning during the transition on several fronts:

o   Confirm the geometry and orientation of the C2 structure

o   Confirm and reconcile the grade distribution within the C2 structure

o   Reconciliation of the resource estimates and deposit limits

o   Confirm mill performance and recoveries


Valuation Comments


-          Integra continues to rank in the top half of our Takeover Twenty rankings and trades at 0.73x NAV, in line with our emerging-developer average of 0.71x. The share price is up 55% YTD,  a reflection of management continuing to meet important milestones (positive resource update in March, ramp development on track, positive infill drilling results, bulk sample planning)


-          Although we view Integra as a prime takeover candidate, we are confident that Integra will meet or exceed our strong growth expectations over the next year and can comfortably  graduate into a Junior Producer.


-          As a comparison, we have had three graduates from our Takeover Twenty since August 2014: Guyana Goldfields (up 129% since Aug/14), Torex (up 75% since Aug/14) and Roxgold (up 52% since Aug/14). The average performance was 85%, not far off the 90% gain from companies not acquired/graduated from our Takeover Twenty in the same time frame (see our April 5th note attached). Guyana Goldfields remains on our coverage list, and now trades at 1.13x NAV.



Emerging-Developers P/NAV


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