Resource World Magazine

22 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 4 i n s i g h t s & i n v e s t m e n t s E r i c H o e s g e n & D e n n i s H o e s g e n A s we write this, it's mid-July in Vancouver and 30° Celsius, higher if you are sitting in the sun. That's hot! You know what else is hot? The Canaccord Genuity Canadian Focus List, with resource stocks shining brighter than most. The Canaccord Genuity Canadian Focus List (+8.0%) outperformed the S&P/TSX in June (4.1%). In fact, the CG Focus List (+41.8%) strongly leads the market (+28.7%) over the past year. Below is a list of several companies on our Focus List and excerpts from their respective analysts who cover them. Trinidad drillinG lTd. [TdG-TSX] Trinidad remains Canaccord's favourite large-cap contract driller because of its modern fleet, proven technical exper- tise, compelling Halliburton JV, and well capitalized balance sheet. We continue to expect Trinidad to enjoy improved domes- tic and US fundamentals through the balance of this year. This is consistent with the increased volume of customer enquiries related to potential new-build opportuni- ties that management recently reported. Trinidad's Halliburton JV recently took possession of three upgraded rigs. Management expects these rigs to commence operations in Saudi Arabia in Q2/14 and believes this operation will generate positive cash flow from the out- set. As Halliburton currently runs ~100 rigs globally, we believe Trinidad remains well positioned to add roughly eight to 10 rigs annually into its JV fleet longer term. Trinidad remains committed to its previ- ously announced 2014 capital program of $315 million. We continue to expect Trinidad's net debt to remain below 1.5x 2014e EBITDA this year, leaving the com- pany well positioned to pursue additional growth opportunities. PainTEd Pony PETrolEuM lTd. [PPy-TSX] Canaccord's BUY rating on PPY and its place on the CG Focus List reflect our view that the stock is well positioned for a strong run through the last half of 2014. In addition to its compelling valuation, strong balance sheet and large proven resource, PPY has several potential catalysts on the horizon that could drive the stock higher through 2014. On our estimates (which line up with PPY guidance), PPY is growing production per share by 56% in 2014, 62% in 2015, and 61% in 2016. These are the highest growth rates across our coverage universe over the period by a significant margin. PPY's 203 section land base in NE BC boasts 2,400+ horizontal locations, approximately half of which are reasonably well delineated, in our view. To achieve its robust production targets, PPY plans to drill 60 wells in 2016, representing only ~2.5% of the company's inventory. Due to a significant jump in well perfor- mance, PPY has already had to increase its production guidance twice this year, and based on well performance in the public data, we believe it will need to revise num- bers up again. PPY's production ramps will be largely driven by the timing of facility builds and expansions. dalradian rESourcES inc. [dna-TSX] Dalradian just raised approximately $20M with Canaccord Genuity. This offering was done on a bought basis, $0.90/unit with a half 3-year warrant at $1.50. And if you were not able to participate, we sus- pect many more high quality offerings in the gold sector to come from Canaccord Genuity in the future. Dalradian is advancing its wholly owned Curraghinalt high-grade, underground, gold project in Northern Ireland. The bulk tonnage sampling program has been delayed (Q3/14E vs. Q2/14E) as we await the confir- mation of some conditions related to the permit, which was approved in early 2014. We anticipate the updated resource estimate will be incorporated in a revised scoping study (Q4/14E). Our analyst has modeled a head grade of 8.0 g/t; however, dilution required to achieve a mineable head grade from the updated resource estimate could be less than the 35-40% envisioned in the 2013 scoping study. We have modeled an annual production profile of 140-145,000 oz/yr at a C2 cash cost of US $690/oz over a 16-year mine life requiring ~US $190 M in development capital expenditures assuming a 1,700 t/d throughput rate. PrEMiEr Gold MinES lTd. [PG-TSX] Our interest in Premier Gold reflects the company's asset base, close to existing infra- structure in proven mining districts. With the first economics released on the Trans- Canada Project, Ontario, we believe the company becomes positioned as a poten- tial takeover target. Premier Gold's PEA on the Trans-Canada Project sees its Hardrock deposit developed as a 10,000 tpd starter pit, initial capital cost of C $410.6 M, and an after -tax IRR of 19% at US $1,250/oz gold. We believe this compares favourably to other Canadian open pit projects. A final resource for Hardrock is expected to be released (Q3/14E) to be used as a basis for the final feasibility study (mid-2015E). The company's Cove Gold mine in Nevada will be the explora- tion focus for 2014. Drilling to date has discovered new gold zones in proxim- ity to the historic Cove open pit, and polymetallic intercepts at depth. At the company's JV Rahill-Bonanza Project (51% Goldcorp), the underground tram between Canaccord Genuity Canadian Focus List up over 40% in past year

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