CIBC World Markets Inc. lowered its price target on shares of Allied Nevada Gold Corp. (TSX: ANV.TO) (NYSEAMEX: ANV) to $40 from $48, while maintaining its "Sector Performer" rating.
ANV updated reserves for the Hycroft heap leach and mill resulting in more ounces and lower grades with the mill now accounting for 80% of reserves (up from 70%). NPV for the heap falls due to a stable mine life with lower grades, while lower grades at the mill are offset by increased mine life.
The initial PEA for Hasbrouck was also announced. CIBC's new valuation based on NPV is $79million, moderately higher than our previous value of $61 million using a $/oz. methodology. In CIBC's opinion, the PEA likely understates capex and operating costs.
Q4 EPS were$0.18, below CIBC's estimate of $0.20 and consensus of $0.21 due to sales being less than production. ANV's offsite carbon processor is no longer accepting its carbon, which represents about 25% of production. ANV is looking for another processor but this issue may drag into Q2.
The brokerage's NAV has fallen 13% to $31.48 due primarily to the drop in value for the heap. The brokerage is also lowering NAV multiple from 1.4 times to 1.3 times considering the mill continues to represent an increasing proportion of its NAV, and has high technical risk.
The brokerage reduced its 2012 EPS estimate for ANV to $1.88 from $1.92, while introducing its 2013 estimate of $2.75.
ANV.TO is currently trading up 0.20% at $34.92.