Terraco Gold Corp. (CVE:TEN), a junior explorer with operations in the U.S. and Canada, might gain as much as $80 million from a royalty interest on the Spring Valley property, a joint venture between Barrick Gold (TSE:ABX) and Midway Gold Corp. (CVE:MDW), according to the editor of Morning Notes.
"Based on our conservative "back of the envelope" math, the royalty interest could be worth as much as $80 million toTerraco Gold today," wrote Chris Berry.
"We want to stress that we are using data provided fromMidway Gold Corp.'s NI 43-101 on Spring Valley and adding our own assumptions to arrive at this number," he added.
Terraco Gold has an option for up to an 3 percent net smelter returns royalty on the developing property.
The Spring Valley property adjoins Terraco's 100 percent owned Moonlight project that spreads over 35 square kilometres.
Midway announced on May 29 recent drill results from the Spring Valley project, highlighting an interval of 361 metres of 1.47 grams per tonne (g/t) gold starting at 35 metres depth, which includes 21 metres of 7.54 g/t gold and 23 metres of 3.02 g/t gold.
Terraco Gold, with a market value of C$20.7 million, advanced 15 percent to 15.5 Canadian cents in afternoon trading in Toronto on Wednesday. The stock has gained 19 percent over the past 12 months.
"What is notable is the value of the royalty interest ($80 million) versus the current market capitalization of Terraco Gold ($19.22 million fully diluted)," Berry wrote. "We believe there is a very clear disconnect between the intrinsic value of the company and its market value."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.