New Research Report on GoldMining

GoldMining, Inc.
GOLD-CN: Price: C$1.98; Market Cap (M): C$235
Rating: Buy; Price Target: C$4.50
Heiko F. Ihle, CFA
Bellhaven Acquisition Provides Possible District-Sized Opportunity; Raising PT
On April 12, 2017, GoldMining Inc. announced the proposed acquisition of Bellhaven Copper and Gold (BHV; not rated). Upon closing of the transaction, shareholders of Bellhaven are entitled to receive 0.25 shares of GoldMining for each share of Bellhaven held, implying a purchase price of approximately C$13.5 million. Bellhaven owns the La Mina Gold Project, which is located just six kilometers southeast of GoldMining’s Titiribi Project. The project currently hosts a resource base totaling 1.01 million ounces of gold equivalent in the Indicated category grading 1.12 g/t. This is in addition to 0.43 million ounces grading 1.07 g/t in the Inferred category, for a total resource base of 1.44 million gold equivalent ounces. We note that insiders and large shareholders holding 67.5% of Bellhaven shares have already entered into an agreement to pledge shares in favor of the transaction, and we therefore expect the deal to close by the end of 2Q17. We do not anticipate any other bidders for Bellhaven to come forward.
Mining activity is beginning to heat up in Colombia. The project provides GoldMining with a second asset in the Mid Cauca Belt in Colombia, which has experienced increased mining activity of late. The area has seen increased presence of mining, including Continental Gold (CNL; not rated) who recently received permits for construction of its Buritica Project, and IAMGOLD’s (IAG; not rated) option agreement with Gran Colombia Gold (GCM; not rated). In our view, the recent activity in the area bodes well for GoldMining as the firm could now own two projects in the area with Titiribi and La Mina. We point towards the permitting of Buritica as evidence that Colombia is becoming an attractive mining jurisdiction.
GoldMining continues to execute on its strategy of acquiring gold ounces at a discount. Based on the figures surrounding the Bellhaven transaction, GoldMining is expected to purchase the asset on a $/oz of gold equivalent in the ground price of approximately $9.38. While the purchase price per ounce in the ground is somewhat higher than previous transactions completed by GoldMining, we believe that further exploration work should uncover additional ounces at the project, ultimately driving this metric lower. To this end, La Mina currently hosts two deposits, with multiple exploration targets including La Garrucha. The last drill hole completed at La Garrucha returned 1.03 g/t gold and 0.13% copper over an impressive 271 meters. GoldMining intends on conducting follow up drilling at La Garrucha in an attempt to produce an updated resource estimate, which we believe should further increase the existing 1.44 million gold equivalent ounce resource base. More importantly, the district potential of the overall area leads us to feel good about potential synergies with Titiribi.
We are reiterating our Buy rating and increase our PT to C$4.50 from C$4.25 per share. Our increased PT is primarily a reflection of adding in-situ value for the firm’s Colombian assets into our model. Our valuation remains based on a DCF of operations at São Jorge utilizing a 10% discount rate. To this, we add in-situ value for the firm’s additional assets, particularly Whistler, Titiribi, and La Mina at $20/oz for Indicated resources and $8/oz for Inferred resources. Although GoldMining paid under $10/oz for La Mina, we believe $20/oz more accurately reflect’s the project’s value as economies of scale can be realized due to its close proximity to Titiribi.
Risks. 1) Gold price risk; 2) operating and technical risk; 3) financing risk; and 4) political risk.
Heiko F. Ihle, CFA
Please note that the statements and opinions contained in this third-party report are being provided for informational purposes only and are not adopted by GoldMining Inc.

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