Tara Hassan, National Bank Financial (01/10/11)
"We are raising our 12-month target price for Timmins Gold to CAD$3.15/share, up 25% from our previous target of CAD$2.50. Our target price for Timmins is based on a 1.25x multiple to our NAV. Beyond the adjustments to our commodity and exchange rate assumptions, we have adjusted our valuation for Timmins to reflect the recently updated mine plan, which outlines a move to 18,000-tpd production (from 12,000-tpd design capacity and 14,000-tpd current operations) beginning in July 2011.
Timmins continues to trade well below its peers on a cash flow basis (~4.5x vs. peers at 8x–10x). The company is continuing to proceed with its proposed offer for Capital Gold and we expect to see more developments regarding this offer in the coming weeks. Currently, Timmins' suggested offer is trading at a substantial premium (14%) to Gammon's offer for CGC; however, Timmins has yet to formalize this offer to its shareholders. . .We reiterate our Outperform rating for Timmins."
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