The acquisition of Lone Tree and Ruby Hill makes I-80 the premier gold developer in the US, and on par with the best developers in Canada and Australia. For SCPe capex of US$458m, we estimate that I-80 can reach annual production of >400koz/year. Adding the Ruby Hill open pit, we estimate 2026-2031e average annual production of 500koz(peaking at 638koz) at LOM US$1,155/oz AISC. On defined resources alone, this generates an NPV5%-1850 of US$1.73bn. Uplift to producer peer averages results in annualized returns of 21-31% from present to 2026e. Moreover, all of I-80’s assets have exploration upside at depth with limited historic exploration for sulphides due to a lack of sulphide processing capacity. To reiterate: a path to 500kozpa, exploration upside, sulphide processing ability and 20% annual returns equates to one of the best risk-adjusted return opportunities in the gold miner/developer peer group. We update our model for the transaction and reiterate our BUY rating and lift our price target to C$7.00/sh on our unchanged target multiple of 0.75xNAV5%-1850. Stepping back, yes for newcomers this is a complex set of assets but upside is spectacular and with domestic US assets in a mining friendly state.  

Eoin Treacy's view

Here is a link to the full note.

The big challenge for gold explorers is securing acreage in close proximity to major mines. That greatly enhances their chances of securing funding because they can point to their neighbours and argue that where gold was found once it can be found again.

The Carlin trend stretching across northern Nevada is one of the five largest gold producing regions in the world and I-80’s management have spent a great deal of time securing leases along it. Building out these disparate prospects will require some additional equity issuance but is unlikely to be on the kind of scale we saw from gold miners in the last cycle.

The promise of half a million ounces of production is tantalizing but it can only be achieved by combining production from lots of different areas. It’s not the most efficient structure and would never have come to fruition without the benefit of gold at $1800. It is a reflection of how few big new discoveries there are that a collection of smaller operations is being touted as turning the company into the most attractive developer in the USA. 

The share IPOed in April and is now back testing the upper side of its base formation.