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Inside the Market's roundup of some of the Canadian small caps making news and on the move today. This post will be updated during the trading day.
RBC Dominion Securities analyst Sam Crittenden thinks Romarco Minerals Inc. could soon become a takeover candidate as it gets closer to bringing its Haile mine in the southeastern U.S. into production.
He upgraded the stock today to "outperform" from "sector perform" and raised his price target to $1.25 (Canadian) from $1. The action followed the company this week providing more clarity on the permitting timeline for Haile, which RBC views as one of the best early-stage gold projects.
"We view Romarco as a takeover candidate once permits are received based on potential for low-cost production, the scalability of the project, and regional exploration potential," Mr. Crittenden said in a note.
Ramarco said earlier this week that the U.S. Army Corps expects to issue its permitting decision on the project in November of this year. That would allow for construction to start in early 2015, with potential for first gold production in late 2016. "While the permit could be appealed we do not expect this to create a significant delay given the engagement of all relevant stakeholders and the level of detailed work completed," the RBC analyst added.
The Haile Mine is located within the Carolina Slate Belt of the Southeastern United States – a unique geologic feature that trends from Georgia to Virginia. It has proven and probable gold reserves totaling 2 million ounces, plus measured and indicated gold resources of 4 million ounces, according to the company's website.
"Using similar metrics to B2Gold's recently announced acquisition of Papillon resources would imply 20 per cent upside from the current share price (Fekola is higher grade, while Haile has better infrastructure and lower geopolitical risk, and both projects have above average grades and meaningful exploration upside," he said.
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Trican Well Service Ltd.'s second-quarter revenues came in at $534.6-million, up from $396.6-million last year. EPS came in above estimates, with Trican reporting a loss of 29 cents per share versus the consensus loss of 32 cents. The oil company said that increasing demand in the pressure pumping market, combined with an extended winter drilling season in April, has allowed Trican to increase prices as it anticipates continued demand in Canada.
TD Securities analyst Scott Treadwell raised his price target on Trican to $21 (Canadian) from $19 and reiterated a "buy" rating after reviewing the results. He commented: "Trican delivered a strong revenue result in Q2, driven largely by the accelerating U.S. marketplace and improving operational execution. Costs were higher than expected, most materially in the U.S., resulting in underwhelming margins; however, there appears to be some one-time items that dragged margin performance down in the quarter, and the timing of pricing and utilization gains appear to have had little impact on full quarter results. With an incremental crew moving into the Bakken, improving fundamentals in much of its U.S. operation and a busy second half in Canada, we expect Trican to post a material improvement through the rest of the year."
Shares are up 28 per cent so far this year.
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Horizon North Logistics Inc.'s earnings fell well under analyst expectations, reporting an EPS of 6 cents versus estimates of 13 cents. The company, which provides logistics for energy companies, saw its revenues fall to $96-million from $148.4-million the year prior due to a more competitive environment and the delay in a project which was expected to bring in revenue in the past quarter.
TD Securities analyst Scott Treadwell cut his price target to $9 (Canadian) from $10 but reiterated a "buy" rating after the results. He commented: "Horizon North's Q2 disappointed across the board, as project timing, activity levels, and competitive conditions conspired against the company. Looking ahead, the company expects material improvements in results through the second half of 2014, as drilling and large camp activity trends up, manufacturing activity recovers, and the company responds to some competitive pricing trends in the marketplace. We expect bids and awards for incremental camps to flow through the second half, but with weighting towards year end. We continue to believe that Horizon North's ability to manage costs through internal manufacturing remains a key plank in our thesis looking ahead."
Shares in the company are down nearly 10 per cent in mid-afternoon trading.
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Wi-LAN Inc. reported second-quarter revenues of $25.7-million, exceeding the company guidance by 32 per cent. Its adjusted earnings were 14 cents per share, beating the company's guidance by nearly 60 per cent. Shares are up 5 per cent in late morning trading.
Cantor Fitzgerald Canada analyst Bloair Abernethy raised his fiscal 2014 and 2015 earnings and revenues estimates for the company following the results. He commented: "Revenue outperformance was due to a higher level of front-loaded fixed-paymentlicenses which are not captured in Wi-LAN's guidance.During the quarter, Wi-LAN signed new license agreements related to wireless technology with Nokia Networks, ArchosS.A.., a license with Sony related to television technology,and licenses with two U.S. wireless carriers for network management technology. Wi-LAN also entered into a significant partnership with an industry leading memory company and entered into licensing partnerships in automotive, data networking, irrigation and medical technology markets.Wi-LAN noted that the backlog was fairly steady relative to 1Q.While 3Q revenue guidance only increased marginally, it appears to us that Wi-LAN's shift towards greater license volume focus and fixed-price legals, is positively impacting the income statement and improving margin consistency."
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Genworth MI Canada Inc. handily beat EPS estimates in the second-quarter, reporting $1.04 compared to the consensus 94 cents. The company reported a net income of $97-million, down from $98-million last year. The residential mortgage insurer also said that premiums written rose 17 per cent to $160-million as compared to last year, and that losses on delinquencies also fell, reflecting the rapidly improving quality of its insurance portfolio and continued strong housing market conditions.
BMO Nesbitt Burns upgraded Genworth to "outperform" and raised its price target to $46 (Canadian).
"Our upgrade is based on a better-than-expected loss experience going forward reflecting a lower trend of loss ratios, an improving top-line as MIC continues to improve market share, the added benefit of 15 per cent rate increases that started in May 2014, and an attractive valuation, at 1.1x P/BV (price to book value) and 9.6x estimated 2015 operating EPS, with a 3.7 per cent dividend yield," said analyst Tom MacKinnon said in a note.
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Amaya Gaming Group Inc. says its shareholders have approved a financing that's key to its proposed acquisition of the world's largest online poker company, operator of PokerStars and Full Tilt Poker.
Amaya said Wednesday it has now obtained all the required shareholder and regulatory approvals and will move to close the deal. Amaya had agreed to pay $4.9-billion (U.S.) for the Oldford Group, parent company of the Rational Group, whose poker brands have more than 85 million registered players.
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Detour Gold Corp. reported a net loss of $35-million or 23 cents per share, falling well below estimates of a 9 cent loss per share. Detour has lowered its production guidance for the year based on less than ideal throughput and mining rates. Shares have skyrocketed 224 per cent year-to-date and have lost 8.9 per cent since the beginning of July. In late morning TSX trading today, they lost another 6 per cent.
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Baytex Energy Corp. has announced that it will sell its North Dakota assets for $357-million to provide capital for its acquisition of Australia-based Aurora Oil and Gas Limited. The purchase will give Baytex access to the oil-rich Eagle Ford shale formations in Texas. Shares are up almost 22 per cent since the announcement of the acquisition in February. Baytex shares today are down 1 per cent.
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Alexco Resource Corp. announced it will increase its offering of units in the company to $7.015 million (Canadian) from $5.002-million. Shares are down 16 per cent on the TSX on the news today.
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Centerra Gold Inc. reported a second-quarter net loss of $31.7-million, compared to net earnings of $1.6-million last year. The company said that the losses were due to weak gold prices, higher share-based compensation and increased depreciation, depletion and amortization and an inventory impairment charge at its operations in Kyrgyzstan. Centerra's EPS loss of 13 cents missed estimates of a loss of 10 cents.
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SouthGobi Resources Ltd. said its majority owner, Turquoise Hill Resources Ltd., has agreed to sell a 29.95 per cent stake in the company to National United Resources Holdings Ltd., a Hong Kong-based public company.
Under the terms of the agreement, Turquoise Hill has agreed to sell 56,102,000 common shares that it owns in the capital of SouthGobi to NUR for 0.455 per common share. That will leave Turquoise Hill with 48,705,155 shares of SouthGobi, representing approximately a 26 per cent stake.
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M Partners initiated coverage on Kirkland Lake Gold Inc. with a "buy" rating and $5.70 (Canadian) price target. It commented, "With new senior management in place, Kirkland Lake Gold has become a turnaround story, with a renewed focus on operating profitably. This has resulted in a lower throughput, higher grade approach. We believe the turnaround is under way and should grade improvements exceed guidance by only 5 per cent, our NAVPS (net asset value per share) would increase by 14 per cent providing significant upside to our estimates. Kirkland Lake currently trades at 6.2x our F2015 EBITDA estimate (current fiscal year) versus North American underground peers that trade at 9.2x for 2014."
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Canaccord Genuity initiated coverage on Concordia Healthcare Corp. with a "hold" rating and $38 (Canadian) price target. Analyst Neil Maruoka commented, "Concordia is a US-focused specialty pharmaceutical company that leverages an efficient tax structure and directed marketing strategies to optimize cash flows from acquired legacy and orphan drugs. The company has assembled a portfolio of products with good cash flow growth profiles, with longer-term upside coming from future M&A (reflected in our higher DCF terminal growth rates). Despite our positive view of Concordia's prospects, the run-up in the stock suggests to us that the company may be fairly valued, even in light of additional product in-licensing and the potential for a tax-driven inversion transaction."
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MEG Energy Corp. reported second-quarter earnings per share of $1.11, swinging from a loss of 28 cents a year ago.
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Primero Mining Corp. said a decision on whether to construct its Cerro del Gallo project has been delayed to allow for drilling and metallurgical testing to be completed. It also announced new drilling results for the project.
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Excellon Resources Inc. reported a loss of 1 cent in its latest quarter, improving from a 9 cent loss a year earlier.
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Canada Energy Partners Inc. said its shareholders have approved the sale of the company's interests in certain Montney Shale lands and wells for $15,720,000, much of which will be distributed to shareholders.
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Hardwoods Distribution Inc. announced that its CEO Lance Blanco has suffered a cycling injury that will prevent him from fulfilling his duties for at least three months. Meanwhile, the company's current CFO, Rob Brown, has been appointed to the role.
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DH Corp. reported second quarter revenues of $286-million, 45 per cent higher than last year's $197.1-million. However, DH missed estimates, reporting an EPS of 36 cents versus the consensus 58 cents. The company said that the revenue increase was mostly due to Harland Financial Solutions, which DH acquired last year. Shares are up 4.4 per cent so far this year.
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First National Financial Corp. missed EPS estimates by a wide margin, reporting 44 cents versus the consensus 60 cents. The company saw a 12 per cent decline in second-quarter revenues, falling to $201.6-million from $229.8-million. last year. Mortgages under administration rose 12 per cent to $79.7-billion, and new mortgage originations also rose 12 per cent to $4.7-billion. The company said that the revenue fall was due to decreasing bond yields. Shares are up 7.6 per cent since the beginning of July.
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North American Palladium Ltd. announced its operating, development, exploration and financial results for its second quarter Adjusted EBITDA rose to $10.444-million from $9.743-million a year ago. Investor reaction has been negative, however, with shares down 7.5 per cent this morning on the TSX.
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Alexco Resource Corp. has announced that it has entered into a $5-million financing agreement with Canaccord Genuity Corp., which will see Canaccord buy 4.35 million shares at $1.15. per unit. Canaccord also hold an option of buying a further 15 per cent of the offering within 30 days of closing. Alexco says that it will put the funds towards general development and capital.
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Canaccord Genuity Corp. will use its over-allotment option for Terrace Energy Corp., buying an additional 1.623 million shares at $1.85 per unit. The proceeds will go towards further exploration and evaluation of Terrace's oil and gas operations in Texas.
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Slate Retail REIT has acquired the Waterbury Plaza in Connecticut for $27.3-million U.S.. The purchase is the REIT's third acquisition using existing capital resources.
Darcy Keith