LONDON, April 16, 2015 /PRNewswire/ --
Edison Investment Research, a leading international investment research firm, announces the initiation of full coverage of True North Gems
Highlights of the analysis on True North Gems by Edison's metals & mining analysts Tom Hayes and Charles Gibson are as follows:
True North Gems' core asset is its 93%-owned (reducing to 73% as the mine enters production in Q315) ruby and pink sapphire deposit in Greenland, located on exploitation (mining) licence 2014/21, over 20km2. The licence provides exclusive rights to pursue mining activities in these areas. An exclusive exploration licence (2008/46) is also allocated to True North; this extends around the mine licence and hosts the second and third targets for future exploration.
Our base case valuation uses True North's 2015 PFS on the Aappaluttoq deposit announced on 18 March. The PFS details a currently defined nine-year mine life (although deposits 2 and 3 have already been identified as extending this), extracting variably sized and distributed quantities of rubies and pink sapphires. Sale agreements are being finalised with offtake partners for specific parcels of stones. This 'sight-holder' approach is favoured over auctions (eg Gemfields' approach) as Aappaluttoq's hard rock deposit style (cf alluvial deposits such as Gemfields') allows for far greater prediction of mine output. On this basis, we value True North's 73% share of Aappaluttoq at C$0.41 (using a 10% discount rate). A near-term risk associated with achieving the sale of Aappaluttoq's stones during FY15 exists, but adjusting FY15 revenue by increments of C$5m only alters our valuation by 3%.
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