#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 18^th 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 5^th note attached). Guyana Goldfields remains on our coverage list, and now trades at 1.13x NAV.

 

 

Emerging-Developers P/NAV

 

#Gold & #Silver #COT Commitment of Traders

Net commitments of futures traders (attachment 1) shows that large speculators (hedge funds and money managers) have increased their long gold positions. Net commercial gold dealers have increased their short positions.

 

The KITCO Gold Survey reveals that Wall Street and Retail Investors (Main Street) are bullish for this week (attachment 2).

 

The Gold Barometer shows the same pictureas last week. Gold stocks are halfway between neutral and overbought and the physical gold price is neutral (attachment 3).

 

The gold hourly chart indicates that gold had a good run last Monday and then glided down till Friday, March 31st and just gained a few dollar at the end of the trading session. As per Friday, New York time 4 p.m., gold closed at US$ 1,247 per ounce, unchanged on the week (attachment 4).

 

HUI, the ARCA Gold Bugs Index, went nowhere last week. It is still trading below the 50-day moving average and was unable to really penetrate on the upside the 200-day moving average since November 2016 (attachment 5). HUI is an index of shares of gold companies.

 

Commitment of futures traders in silver reveals that large speculators have increased their long positions and net commercial silver dealers their short positions. Historically these positions are extremely large.

 

In the first quarter of 2017 silver (+13.4%) has outperformed gold (+8.6%).

 

Over the last 6 months the gold price didn't perform well against currencies of emerging markets (see attachment 7-9). It lost 7.3% versus the Brazilian Reals, 7.5% versus the Mexican Pesos and 1.6% versus the Chinese Yuan.

 

What #gold price are large cap gold stocks reflecting?

As can be seen from the Table below, Randgold Resources is trading at a 30% premium, which implies a gold price per ounce of US$ 1'635. On average the large capitalized group is trading at a premium of 5% or an implied gold price of US$ 1'321 per ounce.

 

This from SCOTIABANK:

 

- Gold Equities Continue to Lag the Underlying?…What Gold Price the Large Cap Gold Equities Reflecting?: Scotiabank Senior Precious Metals Analyst Tanya Jakusconek this morning noting that with the gold price continuing to march upwards post Fed (and post Trump's healthcare failure), she thought she would highlight the valuation level in the group and her stock recommendations. As per the chart below, the group is currently trading at an overall premium to gold price of just 5%!

 

Premium/Discount to Gold Price – %

Source: Scotiabank GBM Precious Metals Research

 

Recall that the "Implied Gold Price" resulting the calculated premium/discount (in the chart above and table below) is the gold price that would be need for the respective stocks to be trading at 1.0x NAV3% using Tanya's modeled estimates.

 

Source: Scotiabank GBM Precious Metals Research