Guyana Goldfields Up 3.5% As Credit Suisse Analyzes its Aurora Gold Project

Credit Suisse initiated coverage on Guyana Goldfields Inc (GUY.TO) with an Outperform and $13 target.

"We initiate coverage of Guyana Goldfields (GUY) with an Outperform rating and a C$13.00 target price. GUY is developing their flagship Aurora gold project in Guyana, where we estimate production from the current 5.7Moz (M&I) resource will begin in 2014."

Growth from an already solid resource base is expected. "The Aurora gold project contains a combined open pit/underground M&I resource grade of 3.8 g/t, with more ounces to come, in our opinion, largely from the underground, as most deposits remain open laterally and at depth."

A prospective acquisition target. "In our view, the quality of the company's resource, its exploration upside, pre-construction stage of development, production and cost profile (LOM average of 311 koz gold at $527/oz), valuation at 0.7x NAV, and the current gold price environment, make GUY an attractive candidate for gold producers looking to add value and growth to their pipelines."

September could be a big month for GUY. "Before month's end, we expect the government of Guyana will amend the Mineral Agreement (royalty structure) and grant GUY a mining license for its Aurora gold project. As securing debt financing, placing large equipment orders and commencement of construction are unlikely to begin until the license is granted, receipt of a mining license would be a significant step forward for the company."

Valuation: "GUY currently trades at a P/NAV multiple of 0.7x, in-line with International Tower Hill Mines, but below Detour Gold. We believe this is appropriate, given the stage of development for each of the respective companies. We believe, however, that given the exploration upside, as well as the higher grades and lower cash costs of the project, the market will re-rate the multiple upward significantly as the major milestones are achieved."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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