Ryan Matthiesen
Managing Director of Investment Banking
Haywood Securities
William O'Hara
Managing Director of Institutional Sales (Toronto)
Haywood Securities
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Insight

Striking Gold with Undervalued Assets

Sat, 10/28/2017 - 17:15

The junior exploration market in Mexico is one of the investment industry’s best-kept secrets. It has a wide array of highly underrated projects in the shadows waiting to be found and acquired at low prices. The trick is to remain one step ahead of the crowd and catch these hidden jewels before word gets out to maximize profitability and stock value.

“Junior Mining companies are a priority for us because they have viable projects that are often ignored by the market in their early stages,” says Ryan Matthiesen, Managing Director of Corporate Finance at Haywood Securities, Canada’s largest boutique investment bank with a mining specialty. “This is an area of opportunity that we take advantage of by having a team of mining analysts that travel the world in search of inexpensive projects that can be acquired and sold at a much higher value.” The firm provides advice to mining issuers that are active in several global mining regions including Mexico, predominantly those exploring for precious metals like gold and silver.

RAISING CAPITAL

Haywood Securities mitigates risk by having a diversified portfolio. Half of its business is mergers and acquisitions while the remainder is capital raising. “During the last five years, the equity market in the mining industry was raising a small amount of money, which caused an increase in the prevalence of mergers and acquisitions,” says William O'Hara, Haywood's Managing Director of Institutional Sales (Toronto). “The challenge for many was having enough money to take advantage of these cheap properties.”

The investment bank places Mexico at the top of its list in terms of activity through client issuers. It is a geologically endowed area that offers favorable benefits in comparison to countries such as Russia and Turkey. Mexico is also better positioned than its Latin American neighbors like Chile that are struggling to strike a balance between the industry and environmental organizations and NGOs.

Despite its ability to compete globally, Mexico struggles to prove investment stability, according to the Haywood directors. It can be challenging to attract capital in the country when political or security issues arise because these influence the investment perception of the entire region. “Mexico just needs to have more jurisdictional stability,” says O’Hara.

As a result, Haywood Securities is selective when it comes to choosing its projects. Its team of analysts prioritizes administrators with a strong track record of discoveries and interaction with surrounding communities. The firm mostly works with companies from Africa and Latin America, regions that have a higher number of companies listed on the TSX.

In Mexico, the firm collaborates with Kootenay Silver and Minera Alamos in its La Fortuna project, among other prospects in the country. La Fortuna is an open-pit gold project that Minera Alamos acquired from Argonaut Gold in early 2016. It is expected to be a high-margin, latedevelopment stage project with manageable capital requirements. The project has successfully completed the surface rights agreement stage and is scheduled to receive technical reports and enter into the construction phase by the end of the year.

This is an exemplary project for Haywood, say the directors. “It is a good example of an extremely undervalued project that is releasing positive economic studies and has an experienced management team orchestrating the process,” says Matthiessen.