Yesterday, Probe announced a 10% increase in its Borden Lake resource to 4.31 Moz (all categories, pit-constrained, 0.5 g/t cut-off), along with a 12% increase in grade to 1.02 g/t gold.

The stock remains cheap versus its peers, trading at an EV/oz of $24 vs. $32, the median average of select open pit deposits in Ontario and Quebec.

This resource update is more robust, with the higher grade, larger size and greater confidence (more indicated) coming from a more conservative approach to estimation via a restricted search radius for the inferred ounces and an instituted 20 g/t gold capping grade.

Focus remains on the higher-grade core that now boasts an enviable open-pit grade of 1.66 g/t and a resource of 2.34 Moz (85% indicated). We expect this should allow Probe to start mining with a smaller, less expensive mill on the order of 15,000 tpd while still maintaining significant production levels.

After including this updated resource and tweaking our mining assumptions to be more conservative (higher capex, strip ratio, production start-up now in 2017), our NAV5% still increases 3% to $5.45 per share. By applying the same multiples, our 12-month target increases to $4.00 per share (from $3.75).

Overall, we expect investors and potential acquirers to take note of this most recent resource update due to the significant higher-grade, open-pittable deposit located in one of the best mining jurisdictions.

Our NAV 5% valuation increases by 3% to $5.45 per share. We reiterate our BUY rating and increase our 12-month target to $4.00 per share (from $3.75) based on an unchanged 0.73x NAV multiple.