Natural Resources

Pacific Trader: Integra Resources makes the leap from exploration to production

By acquiring a producing mine in Nevada, the junior miner sets itself up to become a mid-tier gold producer within a few years

By Michael McCullough /

The stock: Gold keeps notching new highs this year. How best to take advantage of a rising gold price continues to be a matter of debate, however. Some say it’s better to invest in bullion directly—a strategy that offers diversification benefits but also drawbacks such as security, insurance and/or management fees. Others favour investing in gold mining companies, which come with their own risks. But, if well managed and capitalized, gold companies can also add value on the upside. Consider the case of Vancouver-based Integra Resources Corp. (TSXV:ITR; NYSE:ITRG).

The drivers: Hitherto a junior miner, Integra announced it was acquiring Toronto-based Florida Canyon Gold (TSXV:FCGV), which operates an open-pit mine near Integra’s exploration properties in Nevada and Idaho, on July 29. While the all-shares deal is valued at a relatively modest $95 million, it promises to provide cash flow to help Integra fund permitting and development of its DeLamar and Nevada North properties, also in the Great Basin of the western U.S. The transaction is expected to close in October.

If all unfolds as planned, the deal sets Integra up to be the operator of three heap-leach, open-pit mines within a three hours’ drive of each other, sharing equipment, staff and expertise as needed. Output is projected to rise from 71,000 ounces of gold equivalent at Florida Canyon last year to 286,000 ounces from three mines by 2030.

The market’s reaction since the deal was announced has been an indifferent “Meh,” however. The stock closed Tuesday (Aug. 27) at $1.30 on the TSX Venture exchange, essentially flat over the past 12 months.

Word on the street: “We see significant re-rate potential for Integra from its current valuation of 0.29 times NAV [net asset value] as it moves from developer to producer status with this transaction,” wrote John Sclodnick of Desjardins Securities. He has a “buy” rating and a 12-month target of $4 on Integra shares.

Coming and going: After 46 years with Canfor Corp. (TSX:CFP) and 13 as CEO, Don Kayne plans to retire as of year-end. He will be succeeded by Susan Yurkovich, who currently serves as the Vancouver-based forest company’s senior vice-president of global business development.