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Wednesday, May 31, 2023
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


Calibre Mining’s execution has been very strong in Nicaragua: VIII Eight Capital

The firm analyst said that it was one of his highest-quality site visits

Calibre Mining's execution has been very strong in Nicaragua: VIII Eight Capital
The mill at Limon. Image via Calibre Mining

Calibre Mining Corp.’s (TSX: CXB) (OTCQX: CXBMF) operations in Nicaragua are going “very well” with over 20 per cent production growth while maintaining control of capital and operational expenditures.

That’s according to Chartered Financial Analyst Grant Beasley from the financial research firm VIII Eight Capital, who visited Calibre’s facilities recently and said that it was one of his highest-quality site visits. He said the last quarter’s results indicate that Calibre has a strong fundamental story and execution in Nicaragua.

VIII Eight Capital is a Canadian full-service investment dealer that focuses on investment banking, equity research and institutional sales and trading.

During the site visit, the analyst’s concerns about political risk in Nicaragua were reduced. This opinion was shared by most journalists, investors, and analysts who also attended the visit. They had discussions with various local political commentators from previous governments, as well as officials from the ministry of mines and energy.

“I think seeing is believing when it comes to Nicaragua,” he said, adding that compared to other countries such as Panama, Peru, Ecuador, Brazil, Colombia, and Mexico, investors should evaluate and understand the jurisdictional risk associated with Nicaragua.

Read more: Calibre Mining well-positioned to continue organic growth through gold grade increases: Cormark Securities

Read more: Calibre Mining expands high-grade gold discoveries at Panteon North

According to Beasley, the company’s free cash flow in the first half of the year should see a significant uptick as 65-70 per cent if capital expenditure is spent in the first half of the year to expand production to 250,000 -270,000 run rate.

“In my view, the market risk for Nicaragua is too extreme. Nicaragua may not be for everybody but with those who are willing to take more political risk, the country is trading at too much of a discount at the moment,” wrote Beasley.

He thinks continued fundamental success and an improved outlook on Nicaragua will lead to an improved valuation. With the stock trading at 1.5x EV/EBITDA, Calibre has a significant upside when that multiple expands to 2.5-3x over the next 12 months.

“I see $1.50-$1.70 over the near to medium term followed by $3 long term.”

Company stock stayed flat on Friday and closed at $1.23 on the Toronto Stock Exchange.

Calibre’s hub and spoke model can be attributed to positive community relations

Calibre’s hub and spoke model can be attributed to positive community relations, as community support has enabled the transportation of ore between La Libertad and El Limon.

The national investment in infrastructure has also been beneficial, with high-quality roads supporting the model’s effectiveness. Additionally, the company has significant room for exploration success, as only a portion of their mill capacity at La Libertad is currently being utilized.

Calibre’s team has developed a compelling exploration strategy, with new resources at Panteon North containing 9 g/t of 300k oz. El Limon is part of a 5 million oz district, and recent discoveries of 11.6 g/t over 9 m and 6.7 g/t over 2.1 m indicate plenty of exploration targets both near and far from the processing capacity. Overall, the hub and spoke model is contributing to Calibre’s achievements.

Read more: Calibre Mining builds strong foundation for continued success in Nicaragua: Canaccord Genuity

Read more: Calibre Mining reports high-grade ore from Pavon central mine

Nicaragua has a ‘very’ stable operating environment

When it comes to jurisdictional risk, Nicaragua is considered to have a very stable operating environment, especially when compared to Brazil, Colombia and Mexico. In fact, Nicaragua has the lowest homicide and organized crime rate in Central America, and the majority of its exports go to the USA, which also serves as the country’s largest importer.

Nicaragua has been working on improving its infrastructure, particularly in expanding its road network and ensuring power access throughout the country, which has increased foreign direct investment and benefited companies like Calibre Mining.

The gold sector is one of the top three export industries in Nicaragua, alongside textiles and beef, and the country’s mining law is well-established and transparent. The risk of nationalization is extremely low, as evidenced by failed attempts in the past.

In October last year, Joe Biden’s government imposed mining sanctions on Nicaragua and its President Daniel Ortega over mining activity in the country. However, these have not resulted in any business interruptions for companies like Calibre, and the United States is not interested in harming the country’s economy. Political stability is expected to continue until the next election in 2026, with strict control of the streets by heavy police presence.

While there were violent protests in 2018, the current opposition parties are not calling for the violent overthrow of the regime. One potential risk is the potential turmoil around Ortega’s regime change due to health reasons, as well as concerns about Chinese infrastructure investment in the country, although there has not been significant interest from China in Nicaragua beyond a potential Free Trade Agreement.


Calibre Mining is a sponsor of Mugglehead Magazine news coverage


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