Roth Capital is repeating its Buy rating on Auryn Resources Inc (TSE:AUG) (NYSEAMERICAN:AUG) after the miner released a “better than expected” preliminary economic assessment on its Homestake Ridge project earlier this week.
The new preliminary economic assessment (PEA) on Homestake Ridge boasts a net present value of US$108 million with an internal rate of return of 23.6% at an all-in sustaining cost of US$670 per ounce using a conservative US$1,350 per ounce gold price scenario.
Roth maintained its US$3.25 price target on Vancouver-based Auryn’s stock, saying that the results “significantly exceeded” prior expectations.
READ: Auryn Resources delivers positive preliminary economic assessment outlining high-grade, low-cost gold operation at Homestake Ridge
Analyst Joe Reagor wrote in a note that the project’s future value is likely to be generated by a merger or sale.
“While our valuation of $75 million for Homestake represents only 43% of the NPV at $1,620 per ounce of gold, we believe there remains significant upside to this valuation,” Reagor wrote.
“We note that the current gold price of $1,715 per ounce is significantly above the gold price used in the PEA. Additionally, we believe that AUG is likely to either sell Homestake or spin it out and merge it with a junior producer. Each of these outcomes would likely result in a premium valuation compared to what we have chosen to assign at this time.”
Homestake Ridge is a 7,500-hectare gold project located in the highly prolific Golden Triangle area of northwestern British Columbia. Over 90,000 metres of drilling across nearly 275 holes have been completed on the property to date.
According to a 2019 resource estimate, the project contains an indicated resource of 165,993 ounces of gold at a grade of 7 grams per ton (g/t), 1.8 million ounces of silver at 74.8 g/t and 2.9 million pounds of copper at a grade of nearly 0.2%.
Shares of Auryn were trading at US$1.13 in New York and C$1.60 in Toronto on Thursday morning.
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