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Inside the Market’s roundup of some of today’s key analyst actions

Canaccord Genuity analyst Yuri Lynk sees “a compelling growth profile ahead” for Exro Technologies Inc. (EXRO-T) with its proprietary power control technologies for electric motors and batteries on the cusp of commercialization.

In a research report released Monday, he initiated coverage of the Calgary-based company with a “buy” recommendation, believing it is “poised to benefit from fast growing markets.”

“Exro’s EV traction inverter, called the Coil Driver, expands the capabilities of the industry standard inverter, allowing it to provide two separate speed-torque profiles from the same motor,” said Mr. Lynk. “This effectively expands the capabilities of the electric motor throughout the speed range allowing EV manufacturers to employ smaller or fewer motors, saving costs and/or increasing efficiency.

“The Coil Driver technology has been significantly de-risked and is ready for commercialization due, in part, to an important endorsement from tier-1 automotive supplier Linamar. On May 15, 2023, Exro and Linamar signed a definitive agreement to serially produce and commercialize their integrated electric beam axle product for Class 3-6 commercial vehicles. This comes after successful testing and validation by Linamar of the Coil Driver product samples delivered in Q4/2022. The agreement contemplates the start of series production by Q4/2024 and includes annual commercial volume targets that build to 25,000 units per annum by 2027, which we estimate could generate $80-million of annual revenue. Additionally, Exro has strategic partnerships with Wolong Electric (a top-three global motor manufacturer), a large European tier-1 automotive supplier, and a European automotive OEM that could represent large volume commitments if commercialization is reached with each partner.”

With the Coil Driver set to commence production in the third quarter and its Cell Driver slated for Start-of-series production, Mr. Lynk said he expects a “steep revenue ramp” through his forecast horizon.

“Backed by Master Service Agreements (MSAs) and purchase orders in hand, we estimate revenue increases 76 per cent in 2023 to $4-million before surging to $64-million in 2024 and $132 million in 2025 with EBITDA breakeven mid-2025,” he said. “With a total addressable market of US$150 billion that we expect to grow at a compound annual growth rate (CAGR) of 13 per cent for the next seven years, we see attractive growth potential in Exro.”

“We see good upside potential to our financial forecast. For example, our model doesn’t include any Cell Driver sales, although we hope to get better visibility on what this product’s sales ramp-up might look like later this year. As for the Coil Driver, Exro has strategic partnerships with Wolong Electric (a top three global motor manufacturer), a large European tier-1 automotive supplier, and a European automotive OEM that could represent large volume commitments if commercialization is reached with each partner.”

Projecting it well-funded through the end of 2025 and emphasizing the importance of its “highly experienced team in power electronics,” Mr. Lynk set a target of $2.75 per share. The average target on the Street is $3.08, according to Refinitiv data.


Canaccord Genuity analyst Jeremy Hoy assumed coverage of 11 intermediate and junior gold producers, developers, and explorers on Monday following the departure of a colleague.

He gave these stocks “buy” ratings:

* Karora Resources Inc. (KRR-T) with a $7.50 target. The average on the Street is $6.66.

Analyst: “We believe KRR offers a compelling growth story, quickly advancing towards its stated goal of reaching 200koz of annual production by 2025 (from 134koz in 2022). The company is now equipped with 2.6Mtpa of total processing capacity split between the HGO and Lakewood mills, both of which are fed by a variety of mines in the HGO area as well as KRR’s flagship Beta Hunt gold/nickel mine. The anticipated completion of Beta Hunt’s second decline by Q1/23 is expected to double the mine’s current throughput to 2Mtpa in support of this growth plan, which we forecast will boost KRR’s FCF to north of $110-million by 2024, presenting investors with a 14-per-cent-plus FCF yield.”

* Lundin Gold Inc. (LUG-T) with a $21 target. Average: $20.64.

Analyst: “In our view, LUG presents a combination of substantial lowcost production paired with promising exploration and M&A potential under a proven management team, all while also offering investors an attractive 3.4-per-cent dividend yield. The current management team led by CEO Ron Hochstein successfully brought FDN into production on time and under budget in early 2020 and has since established the gold mine as one of the top globally, ranking in the bottom quartile for AISC and top 15 per cent of production for all primary gold mines last year.”

* Orezone Gold Corp. (ORE-T) with a $3.25 target, down from $13.75. Average: $2.46.

Analyst: “Under the stewardship of CEO Pat Downey, Bomboré was built on time and under budget following an 18-month construction period, and achieved commercial production on December 1, 2022. The newly constructed 5.2Mtpa “Phase I” oxide plant achieved full capacity after only a single month and is now outperforming design with ORE guiding to 5.7Mtpa this year, teeing up gold production (100-per-cent basis) of 155koz at $1,035/oz AISC in 2023 (CG est.). Further growth sits on the horizon as the company eyes the ‘Phase II’ expansion into Bomboré’s sulphide material, expected to be completed in 2024/2025 via construction of a new 4.4Mtpa (per ORE) sulphide circuit to be outlined in an upcoming R&R update/Feasibility Study, expected H2/23. We see the upside potential from this expansion as significant, given the larger and higher-grade existing global resource base (4Moz Au grading 0.80g/t in sulphides vs. 2.17Moz Au grading 0.53g/t in oxides), as well as the impressive exploration results ORE has delivered at its P17 Trend and elsewhere.”

* Torex Gold Resources Inc. (TXG-T) with a $27 target. Average: $25.21.

Analyst: “While the stock has now rebounded from what we view as deeply unwarranted lows as recently as September, we believe there remains upside from a re-rate via execution on Media Luna, noting the ongoing build does present an elevated period of risk over the coming year. Offsetting this risk, in our view, is TXG’s balance sheet, major ongoing FCF from ELG, and a strong management team that has executed particularly well on the operations front over the last year. We believe valuation remains fairly attractive at current levels (P/NAV of 0.46 times vs. peers at 0.70 times) though note operating in Guerrero and the recent noise related to Mexico’s mining policies will likely continue contributing towards a discount vs. peers in higher quality jurisdictions”

He gave these stocks “speculative buy” recommendations:

* Amex Exploration Inc. (AMX-X) with a $4 target, down from $4.75. The average is $3.98.

Analyst: “Overall, we believe Amex offers substantial upside potential in both development and M&A scenarios given its top-tier location in Quebec’s Abitibi, the underexplored nature of gold mineralization at Perron, and the project’s value being underpinned by the High Grade Zone.”

* Artemis Gold Inc. (ARTG-X) with a $17 target. Average: $11.59.

Analyst: “With first gold at Blackwater targeted for H2/24, we believe Artemis is well-positioned to execute throughout its upcoming construction period due to its proven and aligned (approximately 38-per-cent insider ownership) management team, led by Chairman & CEO Steven Dean (former President of Teck Cominco Ltd., now Teck Resources).”

* O3 Mining Inc. (OIII-X) with a $4.50 target, down from $5. Average: $3.99.

Analyst: “With O3′s fundamental value underpinned by Marban, we see multiple other positive factors at play for the company. At the forefront is O3′s membership within the Osisko Group (Osisko Mining owns 22 per cent of O3), which carries a strong reputation for advancing projects, building mines, and developing companies, including success stories like building the Canadian Malartic Mine and growing Osisko Gold Royalties. Also of note is O3′s strong balance sheet. O3 has $12-million in cash (as of Q1/23), no debt, and $42-million in marketable securities/investments, leaving it well funded to pursue ongoing drill programs and work towards Marban’s FS. Factoring in its 4Moz global resource leaves O3 trading at an in situ valuation of just US$7/oz, an unjustifiably deep discount considering the top-tier jurisdiction in Val-d’Or, in our view. M&A is also a factor given the location, project size, and exploration potential. We note multiple logical acquirers in the Val-d’Or camp, including Agnico Eagle, who will be looking to source additional ore to keep its 55ktpd Canadian Malartic Mill full after open pit material is depleted in 6 years.”

* Osisko Mining Inc. (OSK-T) with a $6.50 target, down from $7. Average: $5.45.

Analyst: “Osisko Mining is a development-stage junior gold company advancing its 50%-owned Windfall Project toward production with newly secured JV partner Gold Fields (GFI-NYSE | Not Rated). Located in the EeyouIstchee James Bay territory of Quebec, we believe Windfall is a project of worldclass size and quality, further situated in an attractive jurisdiction with low geopolitical risk. OSK acquired the project in 2015 when it had a global gold resource of 1.6Moz grading 8.0g/t and has since grown it to one of the largest and highest-grade gold development projects in Canada. Windfall now hosts an impressive 7.4Moz, 9.8g/t global gold resource following multiple resource updates and technical studies, including a 2022 Feasibility Study. The recent FS showcased a highly robust, low-cost gold project.”

* Probe Gold Inc. (PRB-T) with a $3.25 target. Average: $3.34.

Analyst: “Overall, we like Probe for its strong flagship project in a top tier jurisdiction, experienced management team, and exploration/M&A potential. Novador’s location near Val-d’Or, Quebec, brings benefits that include an abundance of skilled labour, extensive pre-existing infrastructure, and a supportive government, all in a jurisdiction with low geopolitical risk. On exploration, we believe Probe’s 1,500km2 Abitibi land package contains significant potential – we see Novador as primed for more growth given its underexplored nature, while PRB’s Detour Project presents intriguing optionality to a prospective, virtually untested land package. Novador’s location in the heart of Val-d’Or also heightens M&A potential, in our view, as larger players may look to consolidate the area.”

* Skeena Resources Ltd. (SKE-T) with a $14 target, down from $16. Average: $16.06.

Analyst: “Skeena is a junior developer advancing its flagship Eskay Creek gold-silver project, located in the Golden Triangle of British Columbia. Previously, Eskay was operated as an underground mine by Barrick and was the highest-grade gold mine in the world at the time, producing 3.3Moz Au grading 45g/t from 1994-2008. The Eskay of today is a brownfield revitalization project focused on open pit extraction of both high-grade mineralization left untouched by Barrick as well as newly discovered zones on the property, uncovered by Skeena’s ongoing exploration programs. We believe a substantial, high-grade opportunity remains on the property in light of Barrick’s exceptionally high cut-off grades to the mill (more than 15g/t Au) and the new gold price environment.”

Mr. Hoy gave Wesdome Gold Mines Ltd. (WDO-T) a “hold” rating and $8 target, below the $9.72 average on the Street.

“We like Wesdome for its portfolio of high-grade assets in low-risk jurisdictions, track-record of exploration success, and near-term growth potential driven primarily from the Kiena Mine,” he said. “That said, our HOLD recommendation reflects the operating challenges that WDO faced in 2022, reducing our near-term production and FCF expectations and increasing WDO’s balance sheet risk. Specifically, ground conditions at Kiena and grade variability at Eagle’s high-grade Falcon Zone drove production and cost weakness, pinching the company’s FCF generation and balance sheet. We also believe these challenges, which drove negative guidance revisions in 2022 and weak full-year guidance for 2023 (midpoints of 120koz at US$1,710/oz AISC), may tarnish WDO’s premium trading multiple until the company demonstrates several consecutive quarters of stable operating performance; though we note WDO had a solid first quarter in 2023.”


Concurrently, Canaccord Genuity’s Lucas Pamatat assumed coverage of a pair of precious metals producers on Monday.

Touting “the scale, strong local partner, and exploration potential” of its 44-per-cent owned Juanicipio project in Mexico, he gave MAG Silver Corp. (MAG-T) a “speculative buy” recommendation.

“Once at full capacity, we forecast Juanicipio will be one of the largest and highest grade primary silver mines in the world, driven by 600 grams per ton or more AgEq [silver equivalent] mill grades,” said Mr. Pamatat. “We project Juanicipio to operate at its full nameplate capacity of 4ktpd in 2024, driving annual payable production of 19Moz Ag (35Moz AgEq) per year at co-product AISC of $10.50/oz AgEq until 2038. On our current price deck, this generates annual attributable FCF for MAG of US$160-million, a 13-per-cent yield.

“JV partner and operator Fresnillo plc (Not Rated), based in Mexico City, is the world’s largest producer of silver and has a strong history of operating in Mexico. We view the expertise of a strong local partner like Fresnillo to be invaluable in Mexico.”

Seeing exploration upside at both Juanicipo and other 100-per-cent owned projects, including Larder and Deer Trail, the analyst reaffirmed the firm’s $26 target. The average on the Street is $24.70.

Mr. Pamatat also reiterated Canaccord’s “hold” rating and US$5 target for Gatos Silver Inc. (GATO-N, GATO-T). The average is US$6.33.

“We visited the company’s Cerro Los Gatos (CLG) mine in Chihuahua state, Mexico on June 7,” he said. “We came away impressed with the quality of CLG, its strong FCF generation, and exploration results pointing to material mine life extensions. Due to the company’s ongoing regulatory concerns, we remain cautious on the stock in the near term; although we acknowledge the significant progress that Gatos has made in the past 18 months, and we believe the saga is approaching its conclusion. As a result, we maintain our HOLD rating and US$5.00/sh target price on the stock, which remains based on a 1.25 times multiple applied to our 2024 operating NAVPS estimate less net debt and other corporate adjustments.”


Predicting the preliminary feasibility study for its Cactus project in Arizona will be “significantly” larger than previously anticipated, Raymond James analyst Farooq Hamed initiated coverage of Arizona Sonoran Copper Company Inc. (ASCU-T) with an “outperform” recommendation on Monday.

“A PEA [preliminary economic assessment] was completed on the Cactus project in August 2021 based on the Cactus deposit and historic stockpile,” he said. “The PEA envisioned an 18-year mine life with average annual production of 28kt copper at C1 costs of $1.55 per pound, initial capex of $124-million and a project NAV8-per-cent of $312-million (using a $3.35 per pound copper price). Company developments since the PEA and our discussions with ASCU management lead us to conclude that the historic PEA no longer reflects the most likely development and operating plan for the Cactus project.

“In our opinion, significant departures from the 2021 PEA could include the incorporation of the Parks/Salyer deposit resource in the LOM [life-of-mine] development and operating plan and additions to initial development capex to reflect additional equipment required for the project, inflation and changes to the sequencing of mine development. ASCU expects to publish a PFS on the Cactus project reflecting these changes in early 2024. Our working assumptions ahead of the PFS based on the current resource and management discussions envision a 32-year mine life with average annual production of 45kt copper at C1 cash costs of $1.68 per pound, initial capex of $400-million and a project NAV8-per-cent of $690-million (using a $3.75/lb copper price). Our expectations are based on production of the oxide and enriched resource only. There is potential for processing of the sulphide resource at the project using RIO’s Nuton sulphide leaching technology which is in very early stages of development.”

Expecting a PFS in early 2024, Mr. Hamed thinks the Cacus project “represents low capital intensity, good profitability” and expects a “significant” increase in the life-of-mine production schedule.

Seeing its shares trading a discount to relevant peers, he set a target of $3.25 per share. The average is $3.41.


Ahead of the release of Empire Company Ltd.’s (EMP.A-T) fourth-quarter 2023 financial results before the bell on Thursday, Desjardins Securities analyst Chris Li cautioned “patience is required” for investors.

“We expect 4Q results to reflect continued challenges from high inflation driving shoppers to discount, an increase in competitive intensity and elevated e-commerce dilution, partly mitigated by Project Horizon benefits, which we believe are underappreciated by the market,” he said. “We believe EMP’s discounted valuation largely reflects near-term industry challenges. Moderation in inflation is key to improving results and sentiment, but it probably will not happen until at least 2H.”

In a research note released Monday, Mr. Li updated his financial projections for the grocer. He’s now projecting adjusted earnings per share for the quarter of 67 cents, a penny below both the consensus forecast on the Street and the result from the same period a year ago, on same-store sales growth of 2.5 per cent.

“While we believe moderation in inflation and economic stability are key to volume improvement at the full-service format, we look for an update on the progress of various initiatives (ie Scene+, e-commerce, store optimization, productivity improvement, etc) and implications for the longer-term outlook,” he said. “While earnings growth will likely remain challenged in the near term, we expect FY24 EPS growth of 9 per cent (in line with consensus), which would be comparable with L and MRU.”

While Mr. Li raised his revenue and EBITDA forecast for the next fiscal year (2024), he maintained a $41 target for Empire shares with a “buy” recommendation. The average target is $40.63.

“We believe EMP’s discounted valuation largely reflects industry challenges. Moderation in inflation is key to improving results and sentiment but it will likely take 1–2 more quarter,” he said.


In other analyst actions:

* TD Cowen’s Daniel Chan raised his Celestica Inc. (CLS-N, CLS-T) target to US$14.50 from US$13.50 with a “hold” rating. The average is US$14.33.

* Following the close of the US$104.6-millio sale of non-operated assets in its North Dakota operations, RBC Dominion Securities’ Luke Davis raised his target for Lucero Energy Corp. (LOU-X) to 75 cents from 70 cents with an “outperform” rating, while Raymond James’ Jeremy McCrea bumped his target to 85 cents from 80 cents with an “outperform” rating. The average is 89 cents.

“Lucero is an emerging U.S. Bakken producer off the radar screens of most institutional investors,” said Mr. McCrea. “Despite having a seasoned management team with a track record of success, the valuation remains quite low relative to the sector (18-per-cent FCF Yield). With the disposition of certain non-strategic, non-operated assets within its North Dakota Bakken/ Three Forks [Thursday] for $140-million; 4.5 times CF, it shows the company can be opportunistic in the other direction as well. Going forward, with debt now completely paid off and $40-million of cash on its balance sheet, we believe the company is in a strategic position to likely make well-timed acquisitions at these lower commodity prices.”

Editor’s note: An early version of this story incorrectly stated Canaccord's target price for shares of Exro. It has been updated.

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