The Critical Investor profiles Atlantic Gold, which expects to commission its Moose River gold mine in Nova Scotia by the end of this year.
Sometimes companies continue to fly under the radar of the big audience, despite having done almost everything right in the past few years, except maybe being too prudent on marketing. One of those companies is Atlantic Gold Corp. (AGB:TSX.V), which is currently building its Moose River gold mine in Nova Scotia, a mining friendly jurisdiction in Canada (#17 out of 109 according to the 2015/2016 Fraser Survey of Mining Companies). However, this junior isn’t completely unknown to the mining investment community, guys like Rick Rule recognized the potential early, and invested heavily together with other powerful backers, when the share price was much lower.
Construction activities are entering the final phase, which will allow Atlantic Gold to start commissioning the mine before the end of this year. The mine has an anticipated all-in sustaining cost of just CA$690 per ounce of gold, which is very close to, if not (in the Western hemisphere) industry-leading. As Atlantic Gold currently trades close to NAV, there is room for further appreciation as I will discuss further on in this article.
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Atlantic Gold is a gold developer in Nova Scotia, Canada, has been around for quite a while, and is now nearing the apotheosis of its existence: bringing its first gold project into production. The Moose River Consolidated (MRC) gold project should be commissioned at the end of Q3/17, with commercial production to start shortly thereafter in Q1/18.
Atlantic’s management team is very experienced with Steven Dean as Chairman and CEO. Dean has a very rich history in the mining sector as he has been the CEO of Teck Cominco and founder of Normandy Mining and also Amerigo Resources. Newmont bought out Normandy for A$4.4B in 2002, as Normandy was the largest Australian gold producer (and a substantial base metal producer too) at the time. Although he wasn’t responsible for the final growth stage of Normandy, it is safe to say that Dean knows what it takes to create a substantial company. He is determined, as he told me, to build another mid tier producer by organic development and acquisitions, like Endeavour Mining, Oceana Gold or B2Gold for example, which are sporting hefty market caps at the moment (C$2.5B, C$2.5B and C$4.1B). There are several (historic) deposits within trucking distance of Touquoy, so I’m curious how long it will take for news coming out in that regard.
After Atlantic Gold was created through a merger and an acquisition, Dean took the helm after being a Chairman of predecessor Spur Ventures.
Management and Board of Directors consist of numerous other very experienced people like COO Maryse Belanger, former VP Technical Services at Goldcorp, director and vice Chairman Robert Atkinson, former President and CEO of Loewen Ondaatje McCutcheon, several very experienced geologists, and last but not least director Ryan Beedie, the largest shareholder of Atlantic and a very successful real estate developer in British Columbia, Canada.
The company currently has 173.3M shares outstanding, which results in a market cap of C$176.77M at a share price of C$1.02. The fully diluted share count is almost 231M shares, and the warrants, options and convertible debentures are all in the money at the moment. It looks like Atlantic Gold will be fully funded until the start of the commercial production phase, but it would be nice if some of the 23.1M warrants (priced at C$0.60) would be exercised throughout 2017 to add some more working capital to the treasury as approximately C$9M of the C$26M cash position consists of flow-through funds, which cannot be used to fund construction activities. An additional 3M options expiring in 2017 are in the money as well, and this would result in a cash inflow of C$1.34M.
The management team, together with insiders and associates, owns approximately 35% of the outstanding shares which is rather unique when your name isn’t Ross Beaty or Robert Friedland, whereas the total amount of stock held by institutional investors is approximately 37%.
The share price did exactly what you would expect on higher gold, as the markets rewarded the company with a higher share price upon completing the financing, plus locking in the required hedges, and further derisking of MRC. As the gold price started to lose momentum after the summer, Atlantic’s share price came under pressure, but was able to hold most of its gains, probably also because of the substantial hedge book.
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The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long term commodity pricing/market sentiments, and often looking for long term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources which more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.
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( Companies Mentioned: AGB:TSX.V,
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