Prodigy Gold "redefines aggressive development" at Magino, says Stonecap Securities

Wed 10:29 am by Deborah Sterescu

Prodigy Gold (CVE:PDG) received initial bullish coverage from capital markets firm Stonecap Securities on Wednesday, which says the gold miner is once again "well positioned" from another successful year at its Magino project in 2012.

The junior gold explorer is currently focused on the 100 percent-owned Magino project, located in Wawa Ontario.
Stonecap analyst Brian Szeto cited "great economics" at Magino, which are about to get "even better."

Management is targeting annual production of 249,300 ounces per year over an 11-year mine life, with cash costs of US461 per ounce, based on a current mine plan comprising only 2.7 million of the project's total global resources of 3.9 million ounces, the Stonecap report said.

"We believe that with continued drilling the total mineable resources will ultimately reach 3.5 million ounces," Szeto added.

In addition, the analyst report lauded the property for being a low-risk, past-producing asset. Magino is located in an area that is home to other producing mines, and a pro-mining jurisdiction in general, Stonecap said.

The fact that Magino is a past producing mine also substantially lowers the overall risk of the project from both a technical and an operational standpoint, the report added.

A production decision is expected in late 2012 or early 2013, with the remainder of the year anticipated to be "catalyst-heavy", Szeto said, which should allow the company to remain in the spotlight with investors.

Upcoming catalysts include further drill results from the current 60,000-metre drill program, a resource update in June 2012, and a feasibility study by the fourth quarter of the year.

"The company had a banner year in 2011, providing investors with two resource updates and two PEAs, while single handedly redefining the term ‘aggressive development’.

"With a war chest of just under $60 million, we believe that the company is once again well positioned for another successful year at Magino in 2012," Szeto concluded.

Stonecap rated Prodigy Gold with an initial "outperform" rating, and a target of $1.30 - way up from its current trading price of 49 cents. The valuation is based on a discounted cash flow approach for the Magino project, and a long-term gold price of US$1,250 per ounce.