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a 100% interest in 74,000 hectares of land in the historic Rouyn-Noranda Mining Camp
Message: Haywood Securities: Hold rating and $0.40 target
Haywood Securities: Hold rating and $0.40 target for FPC
According to Haywood Securities:
https://clients.haywood.com/uploadfiles/secured_reports/FPCJan282019.pdf
RESEARCH REPORT | January 28, 2019
Falco Resources Ltd.
(FPC-V)
RATING: HOLD
TARGET PRICE: C$0.40
PREVIOUS: C$0.75
Making Progress, but Timeline to be Determined; Downgrading to Hold, Reducing Target to $0.40
OUR TAKE: Falco provided a corporate update, and is finalizing its silver stream deal. However, timing for start of dewatering and development activities at Horne remains uncertain.
HIGHLIGHTS
• Falco looking to finalize its silver stream agreement, announced in June 2018, for up to $180M with Osisko Royalties toward the funding of the development of the Horne 5 project, subject to a right of first refusal in favour of Glencore Canada. Falco expects to receive Glencore’s response in 1Q19. Concurrent with the announcement of the stream agreement, Falco also announced the subscription by Osisko to a $7M debenture, convertible into 12.1M units of Falco, and a $10M secured loan agreement with Osisko. Completion of the streaming deal would provide an immediate cash infusion of $25M, which would be used in part to pay off the secured loan.
• Still awaiting Glencore approval in order to start development. Falco continues negotiations with Glencore PLC (GLEN-LON, Not Rated) for approvals to move ahead with dewatering and development of the Horne 5 mine. Both sides remain apart on potential future liabilities related to old workings in the mine. Although discussions are continuing, there is no resolution in sight. Following the negotiation of an operating license, management is aiming to start dewatering this year.
OUTLOOK
• Continuing the environmental assessment process and technical work to support its development plans in order to receive the EIA’s acceptability from the Quebec ministry of the environment. The company’s objective is to start the public hearing process on the Horne 5 Project by the end of the year.
• Exploration will continue. Falco’s objectives for exploration will be to complete the compilation of geological data in order to plan future exploration programs. No plans for drilling were announced.
• We are adjusting our target to C$0.40 from C$0.75 to reflect a valuation of Horne 5 with a longer timeline to production and financing of the project at a lower equity price.
RECOMMENDED ACTION
We recommend HOLD as we await key developments
• We remain positive on the potential for Horne 5, and are confident in the abilities of management to advance the project, but we also recognize that the process leading to the redevelopment of the mine may extend beyond the original timeline. Accordingly, we are downgrading our rating to HOLD from BUY as we await key developments. Our target of C$0.40 represents a multiple of 0.54x NAV.
https://clients.haywood.com/uploadfiles/secured_reports/FPCJan282019.pdf
RESEARCH REPORT | January 28, 2019
Falco Resources Ltd.
(FPC-V)
RATING: HOLD
TARGET PRICE: C$0.40
PREVIOUS: C$0.75
Making Progress, but Timeline to be Determined; Downgrading to Hold, Reducing Target to $0.40
OUR TAKE: Falco provided a corporate update, and is finalizing its silver stream deal. However, timing for start of dewatering and development activities at Horne remains uncertain.
HIGHLIGHTS
• Falco looking to finalize its silver stream agreement, announced in June 2018, for up to $180M with Osisko Royalties toward the funding of the development of the Horne 5 project, subject to a right of first refusal in favour of Glencore Canada. Falco expects to receive Glencore’s response in 1Q19. Concurrent with the announcement of the stream agreement, Falco also announced the subscription by Osisko to a $7M debenture, convertible into 12.1M units of Falco, and a $10M secured loan agreement with Osisko. Completion of the streaming deal would provide an immediate cash infusion of $25M, which would be used in part to pay off the secured loan.
• Still awaiting Glencore approval in order to start development. Falco continues negotiations with Glencore PLC (GLEN-LON, Not Rated) for approvals to move ahead with dewatering and development of the Horne 5 mine. Both sides remain apart on potential future liabilities related to old workings in the mine. Although discussions are continuing, there is no resolution in sight. Following the negotiation of an operating license, management is aiming to start dewatering this year.
OUTLOOK
• Continuing the environmental assessment process and technical work to support its development plans in order to receive the EIA’s acceptability from the Quebec ministry of the environment. The company’s objective is to start the public hearing process on the Horne 5 Project by the end of the year.
• Exploration will continue. Falco’s objectives for exploration will be to complete the compilation of geological data in order to plan future exploration programs. No plans for drilling were announced.
• We are adjusting our target to C$0.40 from C$0.75 to reflect a valuation of Horne 5 with a longer timeline to production and financing of the project at a lower equity price.
RECOMMENDED ACTION
We recommend HOLD as we await key developments
• We remain positive on the potential for Horne 5, and are confident in the abilities of management to advance the project, but we also recognize that the process leading to the redevelopment of the mine may extend beyond the original timeline. Accordingly, we are downgrading our rating to HOLD from BUY as we await key developments. Our target of C$0.40 represents a multiple of 0.54x NAV.
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