AuRico Young Davidson

AuRico's Young-Davidson mine (Image: AuRico Gold)

AuRico Gold (AUQ.T) has been on my radar for a while, but a couple news releases in the last few months have really caught my attention. Last month the more important news was a new discovery of a copper-gold porphyry system at the Kemess project in north-central British Columbia. Today the company announced they have received $20 million from Crocodile Gold (CRK.T) which will strengthen an already strong balance sheet.

The $20 million dollar payment from Crocodile this morning revises the previous deal made when Crocodile purchased 2 mines from AuRico in 2012. AuRico will also receive a 2% NSR from the Foster gold mine and 1% from the Stawell gold mine. The $20 million will add to the $90 million year end cash balance.

Fourth quarter results were announced this morning, and AuRico delivered an 11th consecutive record quarter at the flagship Young Davidson mine. The key to the quarter is that AuRico generated $9 million in free cash flow. AuRico defines net cash flow as operating cash flow less sustaining and growth capital expenditures and includes working capital changes.

Financial results will be released on February 19th.

A few of us were having an interesting discussion in CEO.ca chat about all in sustaining cash costs (AISC) and how companies report them. For me, it all comes down to the bottom line and if the company makes a profit or not at the end of the quarter.

The announcement of a new copper-gold porphyry system at the Kemess East project in December is significant and could be a game changer for AuRico. Drill hole highlights include long intercepts of mineralization including 768 m of 0.442 gram per tonne (g/t) gold (Au) and 0.392 per cent copper (Cu). An initial resource estimate is expected out shortly.

Scott Perry, president and chief executive officer commented: "In 2015, we look forward to delivering further shareholder value through growing production and free cash flow from Young-Davidson, reliable and consistent production from El Chanate, all of which is underpinned by our strong balance sheet."

 

Aurico Gold 1 yr chart

AuRico stock has had a nice move since the beginning of the year as a result of gold going up and the positive news releases.

A major catalyst will be the Kemess East initial resource estimate, out any time now. The drill holes released  so far have been impressive and the deposit is located within 6.5 km of the Kemess mill facility.

The Dundee research team is out with an updated report this afternoon with a neutral rating and a $5.25 target on AuRico stock as the valuation remains rich compared to peers according to their research.

Symbol: AUQ.T

Share price: $4.76
Shares outstanding:  248.51 M
Market cap: $1.2 B

Read: AuRico Gold Recieves C$20 Million Upfont Payment and Ongoing Royalty with Crocodile Gold or Young-Davidson Delivers Eleventh Consecutive Quarter of Record Gold Production and Approximately US $9 million of Positive Net Cash Flow

I have no position in any of the stocks mentioned. This is not investment advice. All facts are to be verified by reader.As always please do your own due diligence