saucy doubts and fears

The Desjardins sell call on Argonaut Gold (AR.to)

Today’s most interesting research report is the piece written by Michael Parkin of Desjardins on Argonaut Gold (AR.to). Here’s how it kicks off:

The Desjardins Takeaway
Through channel checks, we came across a new LOM plan for El Castillo published recently by Argonaut which calls for production to fall by ~50% in 2017. Based on our revised estimates, we believe the company can produce nearly 95koz next year on a total basis, down ~30% yoy (consensus is currently at 125koz for 2017). We view the San Agustin update from April 29 as positive, but believe the nearer-term negative outlook will overshadow the update. We are downgrading Argonaut to Sell from Buy.

The report then continues, but the reason it’s interesting is that management at AR.to know all about this unexpected (for most people) tailing off of production at El Castillo from 2017 onward and they knew they had to disclose it (being a material matter), but instead of making it a widely known fact decided to bury the plan deep in the AIF. So far, only the eagle-eyed Parkin has spotted it. 
Bottom line: Parkin has got this call spot-on dead right, the rest of the sector covering AR is wrong.
The other interesting thing: AR.to reports tomorrow and then there’s a Conference Call. I’d strongly suggest to all your sellside suits covering this stock that you do your reading and then ask management on the call about El Castillo, else run the risk of looking pretty stupid in front of your clientele.

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