Welcome to the Harvest Gold Corp Discussion Forum on AGORACOM
A mineral exploration company working in Nevada, USA and Manitoba, Canada.
Message: Research
Analysis for Intelligent Investors Siddharth Rajeev, B.Tech, MBA Analyst Vincent Weber, B.Sc. Research Associate—Mining August 18, 2010
2010
Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Harvest Gold Corp. (TSXV: HVG) – Excellent Drill Results at Rosebud; More Assays Forthcoming
Sector/Industry: Junior Exploration/Mining www.harvestgoldcorp.com
Market Data (as of August 17, 2010)
Current Price C$0.12
Fair Value C$0.30
Rating* BUY
Risk* 5 (Highly Spec)
52 Week Range C$0.08 – C$0.19
Shares O/S 57.72 mm
Market Cap C$6.93 mm
Current Yield N/A
P/E (forward) N/A
P/B 4.13
YoY Return 50.0%
YoY TSX-V 26.2%
About Harvest Gold Corp.
Harvest Gold is a TSX Venture listed junior mineral exploration company. The company’s flagship property,
Rosebud, hosts a past producing, high grade underground mine operated by a Hecla Mining (NYSE: HL) and
Newmont Mining (TSX: NMC, NYSE: NEM) joint venture from 1997 to 2000. Remaining in place resources
total approximately 0.24 million ounces of gold and 2.13 million ounces of silver.
Positive Drill Results at Rosebud
Initial assay results from the company’s first drill program include significant gold and silver intercepts,
indicating that important zones of mineralization remain to be developed. Assays for eight of 12 reverse
circulation holes from the 4,574 metre program have been released. The table on the next page is a summary
of holes HGR-1 to HGR-8.
0
800000
1600000
2400000
3200000
4000000
13-Aug-09 12-Dec-09 12-Apr-10 11-Aug-10
0.00
0.06
0.12
0.18
0.24
0.30
Harvest Gold Corp. (TSXV: HVG)
Page 2
2010
Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Source: Company
These drill results support our speculation that there is significant opportunity for the company to delineate
bulk tonnage targets as well as high grade pods. The company has stated that the results reinforce their reinterpreted
structural model. The broad zone of mineralization intersected in HGR-5 is 100 metres from the
nearest underground workings (a reasonable step-out) and near surface (a depth of 70 metres). The high grade
mineralization in HGR-3 is 30 metres from the nearest underground workings and results are among the top
one percent of all previous Rosebud silver intercepts. It is apparent that sections of bulk tonnage
mineralization remain in place, as do high-grade mineralized faults predicted by the company's geological
model. Mineralization intersected in both holes is open in several directions and results from HGR-5 are
comparable to the Hycroft Mine operated by Allied Nevada Gold Corp. (TSX: ANV).
The company is currently preparing for a 15,000 foot second phase of drilling at Rosebud.
Financials
At the end of March 2010, the company had $0.27 million in cash. Working capital was $0.35 million. The
company reported a net loss of $4.76 million (EPS: -$0.11) in FY2010 (ended March 2010). We estimate the
company had a burn rate (spending on operations and investing activities) of $0.05 million per month in
FY2010, compared to $0.11 million per month in FY2009. The following table shows the company’s key
Harvest Gold Corp. (TSXV: HVG)
Page 3
2010
Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA
PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
financial data as of March 31,2010.
Key Financial Data (FYE - Mar 31)
(C$) 2010 2009
Cash 2 66,046 480,023
Working Capital 3 50,810 350,730
Mineral Assets 1 ,671,450 5,891,936
Total Assets 1 ,970,133 6,441,893
Net Income (4,759,570) (771,109)
EPS (0.11) (0.02)
Subsequent to March 2010, the company closed a private placement of 13 million units at a price of
$0.10 per unit for gross proceeds of $1.3 million
. Each unit is comprised of one common share and one
share purchase warrant (weighted exercise price: $0.20, contractual life: 2 years).
Our discussions with
management indicated that the company currently has $0.97 million cash on hand. As of June 21, 2010, the company had 6.50 million stock options and 13 million warrants outstanding. Valuation and Rating: Our valuation on the Rosebud project was maintained at $0.19 per share despite the
slight drop in the peer average enterprise value to resource ratio from $41.3/oz, to $40.2/oz. The company, however, wrote down the Hunt property, and the Lesavage property, in Q4-2010, which resulted in a drop in the 'book value of other projects' from $3.39 million ($0.06 per share), to $0.84 million ($0.01 per share), since our previous report on the company. As a result, our net valuation on the company dropped from $0.27, to $0.22 per share (as shown below). Valuation Summary Value VPS Rosebud property $10,964,820 $0.19 Book value of other projects $835,542 $0.01 Estd. working capital $967,000 $0.02 Net Fair Value $12,767,362 $0.22 We have, however, maintained our BUY rating (Risk 5: Highly Speculative) and fair value estimate at $0.30 per share based on the highly encouraging results from Rosebud. Harvest Gold Corp. (TSXV: HVG) Page 4 2010
Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT Fundamental Research Corp. Equity Rating Scale: Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The
future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to
systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to
economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround
situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may
be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative. Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees of less than $30,000 have been paid by HVG to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, HVG has agreed to a minimum coverage term including an initial report and three updates. Coverage can not be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. The distribution of FRC’s ratings are as follows: BUY (76%), HOLD (7%), SELL (3%), SUSPEND (14%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscription.htm for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/se
1 Recommendations
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