NEW YORK (TheStreet) -- Shares of AuRico Gold Inc. (AUQ) are up 11.53% to $3.58 after the Toronto-based gold producer announced today that it has entered into an agreement to subscribe for 70,600,000 common shares of Carlisle Goldfields Limited at a price of 8 Canadian cents a share, for total consideration of approximately C$5.6 million.
Additionally, AuRico announced a joint venture agreement with respect to Carlisle's Lynn Lake Gold Camp, in which AuRico will acquire a 25% interest in the project for an initial cash contribution of C$5 million, with the option to earn up to an additional 35% interest by funding C$20 million on the project over a three-year period and delivering a feasibility study within that time period.
Lynn Lake, located in Lynn Lake, Manitoba, is a highly prospective past-producing gold camp consisting of five near surface deposits with significant existing infrastructure in place, according to AuRico.
"This transaction with Carlisle represents a compelling, but low risk opportunity to participate in the early stage advancement of a highly prospective mining district in Canada and is consistent with our strategic focus on high-quality assets in North America," CEO Scott Perry said.
Separately, TheStreet Ratings team rates AURICO GOLD INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate AURICO GOLD INC (AUQ) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly decreased to $4.65 million or 66.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- AUQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.88%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- AURICO GOLD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AURICO GOLD INC reported poor results of -$0.77 versus -$0.44 in the prior year.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, AURICO GOLD INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 37.37% is the gross profit margin for AURICO GOLD INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -21.50% is in-line with the industry average.
- You can view the full analysis from the report here: AUQ Ratings Report