Analysts Reaffirm Price Target and Buy Recommendation
In a recently published “Research Flash,” analysts from Atrium Research have commented on the latest groundbreaking news from the Canadian gold company Lake Victoria Gold Ltd. (TSX-V: LVG; FRA: E1K). They feel confirmed in their assessment that the Lake Victoria Gold stock is a “Buy” and once again reaffirm their price target of 0.45 CAD.
A few days ago, Lake Victoria signed a non-binding term sheet with Monetary Metals & Co. for a so-called Prepaid Forward Agreement (PPF). The PPF includes a forward purchase of 7,000 ounces of Gold by Monetary Metals to support the development of the Imwelo Mine in Tanzania. Under this PPF, Monetary Metals acquires gold from Lake Victoria at a predetermined price discount, set at 99.7% of the London PM Fix price on the day of delivery. At a gold price of $2,500 per ounce, this equates to ~$17.5 million, which would be more than enough to finance the development of the Imwelo project.
Furthermore, Monetary Metals is entitled to off-take 100% of Lake Victoria Gold’s approved export production, up to 100,000 ounces, at a 2.0% discount to the market price. This news is significant because, following the transfer of the Imwelo mining license (announced on November 7), which eliminated the project risk from a regulatory perspective, today’s news eliminates the project risk from a financial perspective. Therefore, the experts maintain their Buy rating and price target of 0.45 CAD per share for Lake Victoria Gold.
Lake Victoria has also agreed to a quarterly cash sweep mechanism, allowing the company to use positive cash flow from the project to adjust future delivery obligations.
As part of the agreement, the company will also issue 2.5 million bonus warrants to Monetary Metals. Each warrant entitles Monetary Metals to acquire one common share of Lake Victoria Gold at an exercise price set at the market price, subject to TSXV approval, for a period of three years from the issuance of the loan.
According to Atrium Research, the delay in receiving the mining license has, in hindsight, significantly benefited Lake Victoria, as the gold price has increased by approximately 20% during this time, providing the company with more capital than originally planned.
Additional Financing
The analysts also remind that the second tranche of Taifa Group’s equity investment is expected to be completed in the near future. This investment includes 16 million units, consisting of one common share at a price of $0.24/unit for gross proceeds of C$3.84 million and a warrant exercisable for two years at a price of C$0.26/share. The agreement also states that Taifa has 20 days to exercise the aforementioned warrants six months after the company’s groundbreaking for the project, which would provide an additional C$4.16 million.
The complete research in English is available here:
