Roth Capital Partners has repeated a 'Buy' rating on First Mining Gold Corp (TSE:FF) (OTCQX:FFMGF) following recent news of the proposed sale of its Goldlund gold project to Treasury Metals (TSE:TML) (OTCQX:TRSMF), which the broker says 'unlocks value' from First Mining's portfolio.
"We view the transaction as a positive as management narrows its focus on Springpole, which we continue to view as First Mining's cornerstone asset," Roth analyst Jake Sekelsky said in a note to clients.
First Mining Gold is an emerging development junior with a diversified portfolio of gold projects across North America. Its Springpole asset is one of Canada's undeveloped gold projects and covers around 33,000 hectares.
READ: First Mining Gold inks blockbuster deal to merge Goldlund deposit with nearby Goliath project owned by Treasury Metals
The proposed Goldlund deal sees the combination of the firm's asset with Treasury Metals' Goliath project, 25 kilometres away, creating a district-scale, multi-million ounce gold project poised towards construction.
Seklelsky called the deal 'logical'. He added: "We expect significant synergies to be realized, particularly the ability to utilize a single mill as a central processing facility. Based on existing resources, the combined project is expected to host over 2.0 million ounces of gold in the M&I category in addition to a significant land package totaling 330 square kilometers, which we believe hosts multiple targets for resource expansion going forward."
Under the deal terms, First Mining expects to receive 130 million in Treasury Metals shares, 35 million 3-year warrants with a strike price of C$0.50 per share, a 1.5% net smelter royalty (NSR) on Goldlund, and various milestone payments related to advancing the project.
First Mining is expected to retain a 19.9% equity interest in Treasury Metals, which Roth believes "provides the company with upside to the combined entity while returning capital to shareholders".
Roth has a C$1.10 price target on First Mining shares, based on a net asset value (NAV) estimate for Springpole using a 10% discount rate and in-situ value for the company's resource base.
Shares are currently changing hands at around C$0.34 in Toronto.
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