viewAnaconda Mining Inc

Anaconda Mining gets initial "buy" rating from Fundamental Research


Fundamental Research has initiated coverage on Anaconda Mining (TSE:ANX) with a "buy" rating and $0.20 fair value share price.

Anaconda is a junior producer focused on the Pine Cove gold mine located near Baie Verte, Newfoundland. The company's management has indicated that the Pine Cove property is the only currently producing gold mine east of Quebec.

In a research note last week, analyst Siddharth Rajeev, said: "Anaconda is the only pure play gold producer on the island of Newfoundland, and as such, has built a large amount of credibility, particularly on the Baie Verte Peninsula.

"As a result, the company has been approached by owners of mining licenses in the area to discuss the possibility of leasing property."

Late last year, Anaconda sold its legacy Chilean iron ore exploration assets for $11 million cash plus a gross sales royalty to private Chilean company Hierro Tal Tal.

The 100 percent-owned Pine Cove mine comprises two contiguous mining leases with a total area of approximately 660 hectares.

A total of four main deposits have been identified on the property, named the Thunder and Lightning Zone, Romeo and Juliet, Anoroc, and Animal Pond. The current open pit mine extracts material from the Thunder and Lightning deposit.

In June 2010, the company completed a probable reserve estimate for the deposit contained within the indicated and inferred resource of 2.6 million tonnes containing 175,000 ounces of gold at a grade of 2.07 grams per tonne (g/t). Both estimates used a gold cut-off grade of 0.95 g/t.

"We believe that the Romeo and Juliet deposit represents significant near-term upside potential for ANX as it will ultimately allow them to increase gold production," Fundamental's Rajeev said.

In 2011, Anaconda produced and sold approximately 5,300 ounces of gold and expects to produce and sell a sharply higher 12,500 ounces in 2012.

Resource expansion drilling down dip of the current open pit over the summer of 2011 identified gold mineralization over significant widths, including 59.2 metres of 1.96 g/t gold, and 40.8 metres of 2.50 g/t gold.

Revenues for 2011 were $7.48 million, and net loss was $9.6 million.

Fundamental Research sees "significant improvements in profitability ratios and cash flows in 2012", forecasting revenues to increase to $18.91 million in 2012 and $27.57 million in 2013 and net income of $2.38 million for 2012 and $8.42 million for 2013.

Going forward, Rajeev sees "a significant long term increase in production" at the Pine Cove mill if the company is successful in acquiring additional mining laims on the Baie Verte Peninsula.

Quick facts: Anaconda Mining Inc

Price: 0.58 CAD

Market: TSX
Market Cap: $84.9 m

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