Special Situation Report and Valuation Advisory on Metanor Resources Inc. (TSX VENTURE:MTO) (Pink Sheets: MEAOF). Metanor is the subject of an interview with Al Korelin of the Korelin Economics Report along with mining expert Jay Taylor and management of Metanor Resources. Metanor is a new gold producer with less than 72M shares outstanding, no debt, and infrastructure replacement value of approximately $140M; the current intrinsic value (ignoring large gold resources, growth, and cash flow from production) is close to CDN$2 per share. Based on forward discounted cash flow potential the shares of MTO.V, last trading on April 8, 2008 at CDN$1.03, appear in line for upside price adjustment.
Video source of aforementioned interview is located at kereport.com/videos/Metanor/ found at Korelin Economics Report website kereport.com
Market Equities Research Group report short notes of interview:
1) Al Korelin believes Metanor Resources Inc. to be an incredibly undervalued situation and one of the best he has ever seen.
2) Jay Taylor recommends, share price is cheap – “value play”, Metanor is in production, just poured first gold, production currently coming from open pit Barry Deposit –possibly 3M ounces of low cost mining at relatively high grade for open pit in the order of 5 to 6 g/t at that one site alone, ability to ramp up production, Jay Taylor sees MTO having 2 to 4 times his money from his first recommendation at CDN$0.83
3) Summary of Ghislain Morin, President MTO, comments: Metanor has learned Barry Deposit is vertical and not flat like they thought when they bought it, the pit is now over 1,000 feet long, open on both sides, and 200 feet wide (unlike the 40 feet they first thought it might be). In short - Barry Deposit is a monster.
First gold bar was poured (700 ounce gold bar) and a new gold bar should be poured ever 10 days from here out. Calculating grade from the pit from first bar shows very good grade.
Aside note: Interview is nominally dated and news from Metanor as of April 8, 2008 reveals the Company has poured approximately 2,000 ounces of gold to date.
At 5 g/t economics of that would equal out to cash cost of $310 per ounce - direct cost. Next year MTO plans to pour 45,000 ounces. Open pit is close to mill and transportation is lower cost as it is on a private road.
5) Summary of Ronald Perry, Treasurer, and Director MTO, comments: Bachelor Lake mine too will be developed in time, Barry deposit provides immediate cash flow, also MTO will build a business out of local deposits as their Bachelor Lake gold mill is the only mill in a 60 mile radius where there are numerous small 43-101 deposits privately owned (ie. A 40K ounce gold deposit that on its own does not justify a mill) that can do a deal to be bought out by MTO – Ronald Perry calls this “guaranteed exploration” – totals 1.5M oz in the area that can do deals with MTO. So there are 3 ways to increase reserves 1) Barry Property 2) Guaranteed Exploration 3) Bachelor Lake.
MTO currently has lots of gold and potential on its own: Bachelor Lake Mine has almost half a million ounces of 43-101, it is open at depth, there are two veins that run parallel … have to prove up but could easily be a million ounces +, and there are other targets on Bachelor Lake. MTO has been expanding and owns more claims around Barry – feels something is brewing in that area. MTO also owns 70% of the Nelligan property which is only 4km from MTO’s mill. Channel samples were good (one in excess of 500 g/t).
Bachelor Lake mill will next be moved up to approximately 750 TPD and eventually 1,200 TPD. Management has built a business based on fundamentals.
Shares outstanding: ~72M, no debt, infrastructure replacement value is anywhere from to $125M to $140M = ~$2 per share ignoring the gold.
6) Closing opinion in interview of Jay Taylor: Mentaor is lower risk than many other stories out there as MTO is in production, MTO is also a growth story, and timing is right in a bull market.