Canaccord NAV 57cps on KOTH

Miningnews.net this morning report a research note from Canaccord increasing their net asset value for KOTH to 57cps. Extract below:

In a note circulated this week, Canaccord Genuity says Red 5's final study is imminent, but "everything is pointing to a larger [mining] inventory".

The Canadian firm says its life-of-mine metrics and "assumed resource conversion rates" based on what Red 5 has achieved with its drilling since releasing its PFS underpins a "67% increase to the mined gold ounces over the LOM to 2.46Moz" in its valuation modelling.

"We assume a 50% conversion of the underground indicated resource, noting that this material was excluded entirely from the PFS. Our assumed underground inventory and mining rates support a six-year underground LOM, at which point the plant is solely fed from openpit sources," Canaccord says.

"We see potential for extensions of the underground mine life as development progresses, allowing installation of adequate drill platforms to support completion of extensional drilling.

"At a high level, gold production averages 155,000ozpa - about 165,000ozpa in the first five years - at an AISC of $1447/oz."

Canaccord suggests KOTH capital costs could be 20% higher than the PFS estimate at A$262 million, necessitating debt funding of $170 million, and a 14% higher average LOM AISC of $1447/oz with the early introduction of underground feed, but the "changes to both capex and opex are offset by the assumed increase to ore inventory, resulting in a 19% increase to our valuation for KOTH to $742 million".

"We suspect the capital cost estimate will be of great interest to investors but highlight that our valuation is more sensitive to operating costs given the larger inventory underpins a longer mine life," Canaccord says.

"Rolling our model forward two years results in a 19% increase to our NAV/share to A56c. If a 5% discount rate is applied to KOTH - currently 10% - our rolled forward NAV/share increased by 62% to A76c."Canaccord says it hasn't modelled Red 5's flagged potential plant expansion to 6Mtpa, but a discounted cashflow analysis that assumes a $50 million expansion comes on line in FY26 and is funded by mine cash flows shows the enlarged KOTH might be worth $945 million or 57c of NAV/share.

"Gold production increased to [more than] 200,000ozpa … for a seven-year period, reducing the mine life to 11 years on the updated inventory assumption [2.28Moz produced]. AISC average $1351-1257/oz after [the] plant expansion - with the NAV/share increasing by 10c/share to 57c."