LEX CORP NEWS LETTER
"Discovering Value In Commodity Stocks"
June 11th 2009 Aura Minerals -ORA
On June 9th Aura Minerals struck a great deal with Yamana Gold which transforms Aura Minerals into a mid-tier gold producer 220'000oz/yr. Good thing Peter Marrone -Yamana CEO- sits on the board of Aura Minerals and owns alot of shares. I took a position on Tuesday and today. I believe the stock has alot of upside and should be trading over $1.00 within 1-2mths. I believe in 12mths the stock will be trading between $1.50-$2.00. At current prices it's still a Screaming Buy.
News Release:
Aura Minerals Inc. to Acquire Three Producing Gold Mines from Yamana Gold Inc.-Creating a New Intermediate Gold Producer
VANCOUVER, BRITISH COLUMBIA, Jun 9, 2009 (Marketwire via COMTEX News Network) --
Aura Minerals Inc. (TSX:ORA) (the "Aura Minerals" or the "Company") is pleased to announce that, subject to certain conditions, it has entered into a binding letter agreement with Yamana Gold Inc. ("Yamana") to acquire the San Andres Gold Mine located in Honduras and the Sao Francisco and Sao Vicente Gold Mines located in Brazil (the "Acquisition").
Article From National Post: Raymond James Upgrades Aura Minerals
Shares of Aura Minerals Inc. soared on Thursday following a very favourable report from Raymond James analyst Tom Meyer.
Mr. Meyer upgraded the stock to "strong buy" and nearly tripled his target price to $1.25 a share, up from just 45¢. This is all due to the company's transaction with Yamana Gold Inc., in which it is buying three of Yamana's non-core mines for about US$240-million.
Mr. Meyer wrote that the deal vaults Aura into a gold producer of "reasonable size" with plenty of near-term cash flow coming from gold. As a result, he hiked his target price-to-net-asset-value (NAV) multiple to 1.0 times (it was previously just 0.30 times), noting that the company is "leaving the base-metal multiple behind."
He estimated that the three mines will give Aura production of about 220,000 ounces of gold a year, with near-term cash costs of US$571 an ounce. While there could be room to make operational improvements to get those costs down, he expects that the increase in the Brazilian real against the U.S. dollar will offset a lot of those potential cost savings. On the positive side, the high costs should give Aura good leverage to the price of gold.
"Above average operating leverage is an attractive attribute in a rising gold price environment and given our view of rising gold prices, we believe [Aura] shares are poised for strong performance," he wrote.
Mr. Meyer added that mid-tier gold producers trade at an average price-to-NAV multiple of about 1.5 times. He estimated that Aura is paying 0.74 times for Yamana's mines, so the transaction should benefit the company if it gets the anticipated multiple expansion. He projected an after-tax internal rate of return on the acquisition of 19%, and wrote that the stock should garner a "gold premium" over time.
