Analyst Ideas of the Week February 19, 2018

Transcription

1 Week of February 19, 2018 Analyst Ideas of the Week February 19, 2018 Sid Rajeev, B.Tech, MBA, CFA Head of Research Dynacor Gold Mines Inc. (TSX: DNG / Share Price: $2.02 per share/ FRC Rating: BUY with a fair value estimate of $3.85 per share) On February 16, 2018, Dynacor announced that January 2018 production was 5,560 oz of gold, up 6.8% YoY. The company is aiming to reach a daily production rate of 360 tpd by the end of this year year-end financial statements are expected to be released in March. The full year production in 2017 was 79,897 oz, with 24,066 oz coming from the last quarter (up 15% YoY). As 2017 gold production beat our estimate of 79,182 oz, we are expecting the company s 2017 financials to beat our revenue estimate of $100 million, and net profit estimate of $3.72 million (EPS: $0.10). Bonterra Resources Inc. (TSXV: BTR / Share Price : $0.50 per share/ FRC Rating: BUY with a fair value estimate of $1.03 per share) On February 15, 2018, Bonterra announced its intent to pursue a $21.50 million financing by issuing up to million super flow-through shares at $0.75 per share, and million flowthrough shares at $0.60 per share. The financing is expected to be completed in March 2018.

2 Aton Resources Inc. (TSXV: AAN / Share Price: $0.04 per share/ FRC Rating: BUY with a fair value estimate of $0.13 per share) On February 14, 2018, Aton announced the closing of a previously announced equity financing. The company raised $1.63 million by issuing million units at $0.04 per unit. Each unit consisted of a common share and a share purchase warrant (exercise price - $0.05 per share until February 2023). We were pleased with this raise as the company had originally announced a raise of just $1 million. Insider, OU Moonrider, acquired 25 million units and increased their total holdings to 29% of the total outstanding shares. As mentioned in our previous note, the company is preparing for an aggressive drill program at Rodruin. Corvus Gold Inc. (TSX: KOR/ Share Price: $1.63 per share/ FRC Rating: BUY with a fair value estimate of $3.14 per share) Corvus recently announced that it has expanded its land package in the region to 16 sq. km. The newly acquired land includes three promising targets, and the company has already commenced surface exploration on them. An updated preliminary economic assessment combining the North Bullfrog Project and the Mother Lode project is expected shortly. Kontrol Energy Corp. (CSE: KNR / Share Price: $1.25 per share/ FRC Rating: BUY with a fair value estimate of $2.54 per share) Kontrol announced two significant initiatives last week. 1) Launch of the biotasphere - a Decentralized Ledger Technology (DLT) platform that will enable early-stage companies, larger corporations, governments, and universities, to fasttrack commercialization of new DLT solutions. 2) Development of a utility token (GHGcoin) and a carbon offset trading platform it is a platform focused on greenhouse gas emissions using blockchain. The token, based on DLT, is aimed at sequestering up to 10 billion tonnes of C02 through the carbon offset markets. The value of each GHGcoin will be pegged to the value of one tonne of C02. We will publish a detailed update report once more details are announced. 2

3 3 Anthony De Ruijter, B.A. (econ) Analyst Isodiol Signs Definitive Agreement to Acquire 100% of Canadian National Pharma Group Inc. On February 15, 2018, Isodiol announced that it had entered into a definitive agreement with Canadian National Pharma Group Inc. ( CN Pharma ) to acquire 100% of the company s outstanding equity. The company had previously invested $1.5 million ($0.5 million in cash, and the rest in Isodiol stock) to acquire a 25% stake in CN Pharma. This deal makes CN Pharma a wholly owned subsidiary of the company, post-acquisition. The agreement calls for Isodiol to issue $6 million in stock to CN Pharma s shareholders, with the share count based on the closing price on February 14, The closing price at the end of that trading session was $1.16, indicating a total issuance of 5.17 million common shares of Isodiol unto CN Pharma. Our readers may recall that CN Pharma is a late-stage Licensed Dealer ( LD ) applicant under the Health Canada Controlled Substances Act. Upon Health Canada approval of the LD application, CN Pharma will be able to process and manufacture controlled substances, handle cannabinoid derivatives, import and export cannabinoid extracts, prepare custom formulations, and conduct DNA/ product testing on substances such as cannabis. The company continues to exhibit an aggressive, acquisition-led growth strategy. Whilst dilutive, we see this transaction as supportive of future operations on multiple fronts. It increases the assumed baseline revenue used in our DCF models, which readers may refer to in our initiating report. Secondly, the LD status (upon approval) would make Isodiol only the 36 th LD in Canada. This could potentially open Isodiol up to strategic relationships and product licensing agreements with third-parties interested in the formulation and extraction capabilities offered by the LD status. Furthermore, the import/ export capabilities allowed by the LD status stands to further expand Isodiol s international footprint, which is rapidly expanding via Isodiol s strategic acquisitions.

4 Lastly, the formulation capabilities allowed to an LD would allow Isodiol to introduce new products based on custom formulations- an avenue for future organic growth. 4

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