Gold Company Review Exploration and ... - baystreet.ca · Gold Company Review Exploration and...
Transcript of Gold Company Review Exploration and ... - baystreet.ca · Gold Company Review Exploration and...
Gold Company ReviewExploration and Development CompaniesSeptember Quarter 2009
Resource Capital Research
Resource Capital Research
Suite 1306 183 Kent Street Sydney, NSW 2000
Tel: +612 9252 9405 Fax: +612 9251 2859 Email: [email protected]: www.rcresearch.com.au
Resource Capital Research ACN 111 622 489
Gold Company ReviewSeptember Quarter 2009
Resource Analyst (Gold): Dr Tony Parry
Resource Analyst: John WilsonResource Analyst: Dr Trent Allen
This report is subject to copyright and may not be redistributed without written permission from RCR. The information contained in this report is for use by US and Australian residents only. Copies are available for purchase from RCR.
21 September 2009
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 2
Contents
Contents...................................................................................................................2 Overview and Investment Comment .............................................................................3 RCR September Quarter 2009 Featured Company Summary.............................................4 Comparative Charts....................................................................................................6 Financial Data............................................................................................................7 Company Statistics.....................................................................................................7 Reserves, Resources and Historic Mineralisation .............................................................8 Valuation and Performance Data ..................................................................................8
Exploration, Development and Production Companies
[Ampella Mining Limited ………………………………………………………………………………………………………………] Avoca Resources Limited.............................................................................................9 Catalpa Resources Limited......................................................................................... 11 [Chalice Gold Mines Limited ......................................................................................... ] [Cortona Resources Limited ......................................................................................... ] Eleckra Mines Limited ............................................................................................... 13 Kentor Gold Limited.................................................................................................. 15 Kingsgate Consolidated Limited * ............................................................................... 17 Korab Resources Limited ........................................................................................... 19 [Morning Star Gold NL ................................................................................................ ] Norseman Gold Plc * ................................................................................................ 21 North Queensland Metals Limited ............................................................................... 23 [Perseus Mining Limited .............................................................................................. ] [West Wits Mining Limited ........................................................................................... ] YTC Resources Limited.............................................................................................. 25
[Gold Market Fundamentals ......................................................................................... ] Selected Charts and Gold Sector Statistics ................................................................... 27 Report Contributors .................................................................................................. 29 Disclosure and Disclaimer.......................................................................................... 30
* Indicates companies with detailed financial projections and valuation available.
[This is the Abridged Report version of the September Quarter RCR Gold Company Review. The purchase price of RCR September quarter reports (gold, uranium and tin) which includes the comprehensive version of the Gold Company Review (57 pages) is A$2,200. There is also a Subscriber Report version (for gold, uranium and tin) which is available for A$110. Contents and purchase details can be found at www.rcresearch.com.au]
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 3
Overview and Investment Comment
Gold Price Performance Gold has been generating headlines recently after breaking through the US$1,000/oz level in Mid September. The current gold price has eased to US$998/oz (September 25), 1.9% below its three month high (US$1,017/oz on September 16), but up strongly (+9.8%) from the three month low of US$909/oz seen on July 8. The 10% rally in the gold price since early July has been driven primarily by a weakening US dollar, but also helped by sporadic headlines regarding future inflationary risks. In the last three months the US dollar, as measured by the Trade Weighted Index of major trading partners, has fallen by 6%. Equity markets have been rallying strongly (The Morgan Stanley World Index is up 18.9% in the last three months) which suggests that ‘crisis-driven’ safe haven buying, which was prevalent early in 2009, is not a key driver of the gold price. Gold prices for producers in Australia and Canada have gone nowhere in the last three months due to commodity-linked currency appreciation. Gold Market Fundamentals With improved equity market performance and reduced banking sector fears, flow of funds into gold backed Exchange Traded Funds (ETF’s) fell dramatically (down 88%) to 57 tonnes (gold equivalent) in 2Q09, after record 465 tonne inflows in 1Q09. Fortunately the slack was taken up by a rebound in jewellery demand (up 17% 2Q09 vs 1Q09). Much less scrap gold coming on to the market (down 41% in 2Q09 vs 1Q09) also supported the gold market fundamentals. Gold Price Outlook RCR expects gold to trade in the range of US$950/oz to US$1,000/oz in the next six months, supported by on going concerns over the US dollar, with the odd dash of inflation fear thrown in. The fundamentals, particularly reduced crisis-driven investment demand, do not suggest the price will sustain the push through US$1,000/oz. We see more risk on the downside towards US$900/oz if equity markets continue to rally. Inflation is not yet real enough to be a sustained driver of gold (this is expected in 2H10). Gold Equities Movements in Gold Share Indices
Current * 1 month 3 month 6 month 1 year
USA S&P 500 Gold Index na 15% 9% 12% 13%Canada S&P/TSX Gold Index na 14% 16% 9% 34%Australia S&P/ASX200 Gold Index na 17% 13% 13% 34%South Africa FTSE/JSE Gold Index na 11% 6% -7% 40%FTSE Gold Index FTSE Gold Index na 20% 20% 32% 44%
World Markets (all sectors) Morgan Stanley World Index na 9% 19% 44% -6%
*Table data as at September 21 2009 Source: Bloomberg, RCR
Gold has surged ~10% (now just below US$1,000/oz), from a three month low of US$909/oz in July. A weak US dollar has been the main driving force behind gold’s recent rally. For producers local currency prices have been flat. Flow of funds into Exchange Traded Funds has almost dried up after record levels in 1Q09. Anticipated trading range US$950 to US$1,000/oz over next 6 months, with more risk on the downside towards US$900/oz. On a 12 month view, (and in the last month with gold above US$1,000/oz), gold shares have out-performed strongly, but in the last six months the strong recovery in equity markets has outshone gold share performance as measured by the major indices.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 4
RCR September Quarter 2009 Featured Company Summary AUSTRALIA
Company Code Comment
Ampella Mining Limited AMX Early ExplorationAMX has made six gold discoveries in 12 months at the Batie West Project in Burkina Faso, where it isexploring 110km of strike. Results include 28.8m @ 3.7g/t Au with 4.1m @ 15.5g/t (Konkera). Drilling isunder way and a JORC resource is expected in FY10.
Avoca Resources Limited AVO ProductionTrident Gold Mine is now consistently meeting target costs and mining rates. 52.8koz Au was produced in2Q09 (annualised rate of 207kozpa) at opex A$442/oz. EBITDA 09/10F is A$114m. Attempted takeover ofDioro Resources closed Aug '09 with AVO owning 44.85% of DIO.
Catalpa Resources Limited CAH Plant Construction - Advanced ExplorationCatalpa's proposed merger with its major shareholder (Lion Selection) will boost projected gold output from95koz to 126koz (FY11), and importantly increase earnings per share. When the dust settles we expect thelarger merged group to re-rate towards A$0.19 share price.
Chalice Gold Mines Limited CHN ScopingA merger with Sub Sahara Resources (ASX:SBS) has added the Zara Gold Project (Eritrea) to CHN'sportfolio of Australian exploration assets (gold, base metals). Zara includes the Koka Deposit (944koz Au)and ~50km prospective strike. Share placement of A$4.4m in Sep '09.
Cortona Resources Limited CRC Advanced ExplorationAn intercept of 17m @ 7.44g/t Au at Dargues Reef, NSW, should boost the resource upgrade (to ~500kozAu) and Scoping Study expected 3Q09. CRC's drilling-focused exploration program is defining a large-scalemineralised system at Majors Creek.
Eleckra Mines Limited EKM Advanced ExplorationEKM's recent drilling should expand its 749koz gold resource in the underexplored Yamarna belt (WA).EKM shares are finally starting to reflect some value for the 6.2mlb Thatcher Soak U3O8 resource - a dealwith neighbour Uranex would trigger further upside to ~A$0.11/share.
Kentor Gold Limited KGL BFS, Project DevelopmentAmbitious Kyrgyz Republic-based KGL may have found its 'company maker' in the advanced ~A$70mcapex Andash Au-Cu project (1.15moz gold-equiv. resource, BFS completed) - can purchase 80% forUS$10m (~US$9/oz Au equiv. resource) plus US$5m for equipment.
Kingsgate Consolidated Limited KCN Production, Advanced ExplorationHigher grades (2.3g/t) have dropped 2Q09 opex to a low US$228/oz. FY09 production 93koz, to grow to137koz FY10 and 210koz FY11. The Sino Gold-Edorado merger should increase focus on KCN as a lowcost, potential >200koz quality SE Asian gold producer.
Korab Resources Limited KOR Definitive Feasibility StudyKOR has four projects near to production (gold, magnesium, phosphate) and is in the process of a uraniumspin-off. Current gold focus is on the Bobrikovo Project (Ukraine, target +640koz Au), where low-cost miningcould commence in 4Q09.
Morning Star Gold NL MCO Production, Advanced Exploration, After 16 years of refurbishment work and >A$23m spent, MCO has recommenced mining at Victoria'shistoric Morning Star underground mine (last mined 1963, past production ~900koz at 26g/t) with a verydifferent approach to Lihir Gold's Ballarat foray.
Norseman Gold Plc NGX Production, Advanced ExplorationNGX has produced a solid A$20m profit in FY09 from production of 81koz from the high grade Norsemanunderground operations (3.7moz resource). With spare mill capacity, plans to expand to ~120kozpa withadditional mining output are now being implemented.
North Queensland Metals limited NQM Production, Advanced ExplorationNQM's has reported a solid full year profit of A$5.6m from the 60kozpa Pajingo (QLD) gold operation (NQM60%). Pajingo cashflow will drive NQM's strategy to grow to a mid tier gold producer (~100kozpa in 5 years)from satellite ore bodies such as Twin Hills and Dotswood.
Perseus Mining Limited PRU Pre-FeasibilityPRU plans +300kozpa gold production from its Ayanfuri and Tengrela gold projects in west Africa. Currentequity resource base is ~6.3moz Au in open-pittable deposits. Ayanfuri DFS released July 2009. Recent highgrade hits (Tengrela) include 20m @ 65.5g/t Au.
West Wits Mining Limited WWI Advanced ExplorationWWI expects to be in small scale production (~20kozpa) by Dec '09 from the shallow Emerald deposit(124koz resource) on the Witwatersrand Basin. Cash flow will then fund exploration for major >4moz goldand >15mlb uranium targets on the Witwatersrand leases.
YTC Resources Limited YTC Pre-Feasibility StudyYTC plans to mine its A$12m acquisition, the Hera gold and base metal project (NSW), from Jan ’11. This issubject to a DFS (expected Feb ’10) and final permitting. Current gold-equivalent resource is ~510koz Au,with infill and expansion drilling to commence Oct '09.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 5
Explorer’s Development Cycle: Conceptual market capitalisation versus development stage; September Q 2009
Exploration DiscoveryResource expansion; Economic assessment
Project approvals; Funding Construction Commis'g
High risk/ High return
Declining exploration risk
AUS ATN CHZ SAU SGZ
CAN
AUSAMX
AVQ TGX TMX YTC
CAN
AUSKGL MLI
NAV RRL RED WWI
CAN
AUS AVO BCD CTO KCN HEG MLI
MUN MCONGX NQM
Production
AUS ADU AGD ALK AND AZM CHN CRC EKM GDR KALKOR IGR PRU YTC
AUS CAH AAM KRM
CAN ATW
Share Price
CAN SAC XRC
CAN FIU IAU UME
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 6
Comparative Charts
Explorers' & producers' cash balances(forecast end September 2009 quarter)
0 10 20 30 40 50 60 70
Morning Star Gold NL
Cortona Resources Limited
Korab Resources Limited
Eleckra Mines Limited
Kentor Gold Limited
West Wits Mining Limited
Ampella Mining Limited
North Queensland Metals limited
Chalice Gold Mines Limited
YTC Resources Limited
Catalpa Resources Limited
Avoca Resources Limited
Norseman Gold Plc
Kingsgate Consolidated Limited
Perseus Mining Limited
US$m
Percentage difference in share price from12-month low, as at September 21 2009
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
Avoca Resources Limited
Norseman Gold Plc
North Queensland Metals limited
Cortona Resources Limited
YTC Resources Limited
Kingsgate Consolidated Limited
Morning Star Gold NL
West Wits Mining Limited
Kentor Gold Limited
Chalice Gold Mines Limited
Eleckra Mines Limited
Korab Resources Limited
Perseus Mining Limited
Catalpa Resources Limited
Ampella Mining Limited
Per cent share price movement
Cash is flowing into the sector - most
explorers have raised cash through well supported equity issues, or are planning
to do so in the next 3 months.
Share prices recoveries have been spectacular with even the most subdued
having doubled from their 12 months lows.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 7
Financial Data
COMPANY Aust
Can
ada
USA
Euro
pe
othe
r
List
ed
optio
ns
Share Price (LC$/share)3
2 FullyDiluted
MarketCap Book Enterprise
ExchangesCode Status1 Yr End 52 week Current Shares Opt+W2 Other2 Shares (undiluted) Cash Debt Value Value21 September 2009 Hi Low (m) (m) (m) (m) (LC$m)3 (LC$m)3 (LC$m)3 (LC$m)3 (LC$m)3
AUSTRALIA (A$)
Ampella Mining Limited AMX E June ASX AMXO 0.66 0.04 0.55 129 28 0 157 70 5.7 0.0 5 70 Avoca Resources Limited AVO P June ASX No 2.17 0.88 1.65 272 11 12 285 448 32.0 46.3 157 495 Catalpa Resources Limited CAH I June ASX CAHO 0.15 0.02 0.13 1172 300 0 1472 152 17.0 0.0 41 152 Chalice Gold Mines Limited CHN E June ASX No 0.42 0.07 0.38 137 7 0 145 52 8.3 0.0 12 52 Cortona Resources Limited CRC E June ASX No 0.24 0.07 0.19 101 20 0 121 19 1.3 0.0 23 19 Eleckra Mines Limited EKM E June ASX No 0.13 0.01 0.07 170 73 0 244 11 2.0 0.0 8 11 Kentor Gold Limited KGL I June ASX No 0.15 0.02 0.11 143 12 0 155 15 2.1 0.0 5 15 Kingsgate Consolidated Limited KCN P June ASX No 8.39 2.20 7.89 96 6 0 102 759 35.7 2.1 245 761 Korab Resources Limited KOR I June ASX BE KORO 0.24 0.04 0.24 68 1 0 69 16 1.6 0.2 5 16 Morning Star Gold NL MCO I June ASX No 0.39 0.09 0.33 128 122 0 251 42 0.8 0.0 4 42 Norseman Gold Plc NGX P June ASX AIM No 0.91 0.45 0.88 96 6 0 102 85 32.2 4.7 68 89 North Queensland Metals limited NQM P June ASX No 0.34 0.14 0.28 199 1 0 200 55 7.9 0.0 38 55 Perseus Mining Limited PRU I June ASX FRA No 1.37 0.20 1.24 301 14 0 315 371 69.2 0.0 145 371 West Wits Mining Limited WWI I June ASX No 0.15 0.03 0.14 122 16 0 138 17 5.6 0.0 26 17 YTC Resources Limited YTC E June ASX No 0.47 0.08 0.26 154 5 0 159 40 12.7 0.0 6 40
Total: Australia 234.1 53.3 789 2205
Total: Global (US$)4 206 46 690 1912
(1) P: Producer; E: Explorer; I: Imminent - includes companies with bankable feasibility studies and likely to be in production within 3 years; IHC: Investment Holding Company(2) Fully Diluted (shares, options + warrants (opt. + w), convertible notes (Conv. N), other obligations)(3) L.C. - Local Currency unit (4) AUD/USD: 0.86; CAN/USD: 0.93
Exchanges
Company Statistics COMPANY
(A) Exploration (L.C.$m)7 (B) Corporate (L.C.$m)7Drilling ('000 m)Code Land (A)/(A+B) %27 September 2009 ('000 ha)6 Mar-09 Jun-09 2008 2009 Mar-09 Jun-09 2008 2009 Mar-09 Jun-09 2008 2009 Jun-09 2008 2009
AUSTRALIA (A$)
Ampella Mining Limited AMX 200 0.0 6.8 0.0 9.8 0.8 1.1 2.1 3.7 0.2 0.1 0.7 0.9 89.9 74.4 81.1Avoca Resources Limited AVO 348 12.0 12.0 60.1 60.7 2.5 0.9 11.0 8.0 0.0 2.3 3.2 2.3 28.5 77.5 77.9Catalpa Resources Limited CAH 88 4.5 4.0 11.0 16.0 1.1 2.5 2.0 5.4 0.5 1.3 1.4 2.7 65.5 59.5 66.7Chalice Gold Mines Limited CHN 150 0.0 0.0 0.0 0.0 0.2 0.1 0.4 0.7 0.3 0.3 1.1 1.4 15.9 25.4 32.9Cortona Resources Limited CRC 200 2.0 8.0 16.2 22.0 0.4 0.4 2.8 2.4 0.2 0.3 1.2 1.1 58.5 70.6 69.2Eleckra Mines Limited EKM 450 3.0 5.5 21.0 18.5 0.2 0.4 1.7 1.1 0.1 0.2 1.0 0.7 72.7 63.2 60.7Kentor Gold Limited KGL 200 2.0 1.5 1.0 4.5 0.0 0.2 0.0 0.7 0.4 0.2 0.4 1.5 44.3 0.0 32.0Kingsgate Consolidated Limited KCN 130 57.0 57.0 145.0 216.0 7.7 5.0 4.7 30.4 3.9 3.9 15.2 8.5 56.2 23.7 78.2Korab Resources Limited KOR 243 0.0 0.0 0.0 0.0 0.1 0.1 1.5 0.9 0.1 0.1 1.6 0.7 32.5 49.2 56.1Morning Star Gold NL MCO 22 0.5 0.6 6.8 2.4 0.1 0.2 2.9 1.6 0.2 0.2 0.5 0.8 45.2 84.5 67.8Norseman Gold Plc NGX 161 5.0 5.0 20.0 20.0 2.0 2.0 4.1 6.8 0.7 0.7 3.4 2.7 74.1 54.8 71.6North Queensland Metals limited NQM 151 3.0 5.2 2.0 15.3 0.3 0.8 4.0 2.3 0.4 0.5 1.7 2.3 61.5 69.8 49.9Perseus Mining Limited PRU 347 3.7 25.2 81.0 56.4 2.8 3.7 27.0 22.2 0.3 0.5 1.5 2.0 88.1 94.6 91.6West Wits Mining Limited WWI 0 2.2 4.0 10.9 20.2 1.0 0.9 1.6 5.6 0.3 0.3 0.4 1.3 75.0 79.6 81.3YTC Resources Limited YTC 180 3.0 3.0 20.0 14.0 0.1 0.1 2.4 1.1 0.3 0.4 1.2 1.4 11.5 67.7 45.3
Total: Australia 97.8 137.8 395.0 475.9 19.3 18.2 68.2 92.9
Total: Global (US$)4 17 16 59 80
(6) To convert hectares to acres, multiply by 2.47; eg 100 thousand hectares ('000 ha) = 247 thousand acres ('000 ac)(7) L.C. - Local Currency unit
(A) Exploration (L.C.$m)7 (B) Corporate (L.C.$m)7Drilling ('000 m)
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 8
Reserves, Resources and Historic Mineralisation COMPANY
Code Status1 Silver Other Silver Other Silver Other1 October 2009 koz t moz koz t moz koz t moz moz t
AUSTRALIA
Ampella Mining Limited AMX E 0 0.0 0 0.0 0 0.0 0 0.0 Avoca Resources Limited AVO P 646 20.1 1,448 45.0 0 0.0 1,448 45.0 Catalpa Resources Limited CAH I 886 27.6 1,735 54.0 0 0.0 1,735 54.0 Chalice Gold Mines Limited CHN E 0 0.0 755 23.5 0 0.0 755 23.5 Cortona Resources Limited CRC E 0 0.0 358 11.1 173kt Ni 0 0.0 358 11.1 Eleckra Mines Limited EKM E 0 0.0 749 23.3 6.2mlb U 0 0.0 749 23.3 Kentor Gold Limited KGL I 432 13.4 50kt Cu 579 18.0 62kt Cu 0 0.0 579 18.0 Kingsgate Consolidated Limited KCN P 1,393 43.3 3,163 98.4 0 0.0 3,163 98.4 Korab Resources Limited KOR I 0 0.0 306 9.5 0.3 7mt Mg 344 10.7 650 20.2 Morning Star Gold NL MCO I 0 0.0 910 28.3 0 0.0 910 28.3 Norseman Gold Plc NGX P 400 12.4 3,700 115.1 0 0.0 3,700 115.1 North Queensland Metals limited NQM P 61 1.9 31kt Cu 230 7.2 0 0.0 230 7.2 Perseus Mining Limited PRU I 1,927 59.9 6,269 195.0 0 0.0 6,269 195.0 West Wits Mining Limited WWI I 0 0.0 411 12.8 0 0.0 411 12.8 YTC Resources Limited YTC E 0 0.0 283 8.8 1.6 49mlb Sn 0 0.0 283 8.8
Total/Total Average 5,745 178.7 20,897 650.0 1.9 344 10.7 21,241 660.7
(1) P: Producer; E: Explorer; I: Imminent - includes companies with bankable feasibility studies and likely to be in production within 2 years; IHC: Investment Holding Company(2) Reserves, resources and mineralised material published by the relevant company. The applicable mineral resource codes are by country: Australian: JORC, Canadian: NI 43-101, South Africa: SAMREC
* Mineral resource estimates are inclusive of the mineral reserve.
(All Au Mineralisation)
Total Gold (Au)
Gold (Au) Gold (Au) Gold (Au)
Reserves (Equity)2 Resources (Equity)2 Historical/Mineralised Material (Equity)2
Valuation and Performance Data COMPANY EV-Cash EV-Cash EV-Cash
Code P/Book P/Net Cash /Reserves /Res'v+resources /Total Au21 September 2009 (x) (x) US$/oz US$/oz US$/oz 1 month 3 month 6 month 12 month Hi Lo
AUSTRALIA
Ampella Mining Limited AMX 13.4 12.3 na na na 51 58 319 761 17 1167Avoca Resources Limited AVO 2.9 -31.4 616.4 274.8 274.8 2 5 -5 -12 24 89Catalpa Resources Limited CAH 3.7 9.0 131.3 67.1 67.1 18 38 60 238 13 584Chalice Gold Mines Limited CHN 4.3 6.2 na 49.2 49.2 17 36 275 275 11 436Cortona Resources Limited CRC 0.8 14.4 na 41.9 41.9 28 3 -5 32 23 185Eleckra Mines Limited EKM 1.4 5.8 na 10.7 10.7 65 78 454 -46 51 450Kentor Gold Limited KGL 3.3 7.1 25.7 19.2 19.2 -19 163 289 31 28 400Kingsgate Consolidated Limited KCN 3.1 22.6 447.6 197.1 197.1 25 26 62 48 6 259Korab Resources Limited KOR 3.2 11.1 na 40.9 19.2 42 262 352 161 2 518Morning Star Gold NL MCO 9.8 51.6 na 38.7 38.7 41 103 160 103 17 282Norseman Gold Plc NGX 1.2 3.1 122.7 13.3 13.3 50 na na na 3 96North Queensland Metals limited NQM 1.4 6.9 657.3 174.6 174.6 34 2 6 14 19 104Perseus Mining Limited PRU 2.6 5.4 134.7 41.4 41.4 45 49 67 65 10 521West Wits Mining Limited WWI 0.7 3.1 na 24.0 24.0 77 27 87 47 3 383YTC Resources Limited YTC 6.6 3.2 na 83.0 83.0 -4 0 117 -25 45 229
Total/Total Average 305.1 76.8 75.3 32 61 160 121 18 380
(%)
Share Price Performance Current Share Price
% off 12 month
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 9
Avoca Resources Limited
2.17
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) Drilling - RAB (m)Price/Book (x) Listed company options: Land holding ('000 ha)** Convertible at A$1.72/share; coupon rate 6% *Tenements applied for or granted. Quarters based on calendar year end. Total 05/06 prod'n w as 82koz Au, AVO 48.5%.
ReservesHigginsville Gold ProjectResources (includes proved and probable reserves)Higginsville Gold Project Meas, ind + infMineralised Material (est., non compliant w ith JORC)Resources - Uranium Hillview Inferred
Contacts DirectorsMr Rohan WilliamsManaging DirectorTel: 61 (0) 8 9226 0625West Perth, WA, Australiawww.avocaresources.com.au
Analyst: Dr Trent Allen
LocationType
Aus (WA)
Status
Early Expl.Production
10.6
Early Expl.na
Eqty lbsEquity Mt U3O8 % U3O8 % kt mlbs
40%,20%Au,Ni
J Castro (Non-Exec)Mt Fischer
Sandstone
12.3
4.4100%
JV Target
D Quinlivan (Non-Exec)
1,4480.0
c/offg/tg/t koz
0.8-3.0
(JORC)
20%
CILna
27.6 0.017
Metal
3.7
Process
100%
Project Option
0.01
na
Partner100%
Greenstone100%
Gold
45.3
Mt
20.1
Equity
4.6
0.0
4.8
Encounter JV
0
AuAu
Route
na
Greenstone
646646
2.1
Aus (WA)
1,448
koz
Reserves and Resources/Mineralised MaterialClassification Project Ore Eqty
40.416.4
22.8-6.0
165.3165.3
01070
33.822.8
-5
2007a
120.9
-280
-23.2
-116-740
33.6
CFPS (A¢/share)
A$ 1.65
-1666.7
64
Avoca Resources Limited
Trident Gold Mine is consistently meeting target costs and miningrates. 52.8koz Au was produced in 2Q09 (rate of 207kozpa) at opexA$442/oz. EBITDA 09/10F is A$114m. Attempted takeover of DioroResources closed Aug '09 with AVO owning 44.85% of DIO.
4793.3
0Commonw ealth Bank of Australia (7.5%)7
Production and Financial Forecasts
2011F2008a 2009a 2010F
0.0
-137.2Yield (%)
PER (x)P/CF (x)Major shareholders: Pala Investments AG (22.5%)
0
-1.9
Market capitalisation (undiluted) (A$m)EPS (norm) (A¢/share)
-0.8-1.4
448.4
5.1
-2.2-1.7
-3
-950
-20504
-264.2
5
YEAR END: June1.650.88
EBIT (A$m)12
Equity Production (koz)
Net Profit (norm) (A$m)296
-4.0
21 September 2009
272
Shares in convertible bonds (m)*
Share price (A$)
Options and warrants (m)
25.9
0Dividends (A¢/share)46.3
EV/EBITDA (x)
AVO.AU
13
Gold, UraniumAustralia (WA)ProductionExchanges: ASX:AVO
Capital Profile
52 week range (A$/share)Number of shares (m)
to
U ENR
Au
29
Fully diluted (m)
494.8
na
Code for reporting mineral resources - Australian:
2.4 Drilling - Other/Diamond (m)
100% focus on gold exploration and production.
Trident undergrond gold mine (Higginsville) - first newgold operation in WA since 2001.
Gold production commenced at Trident June '08;ramping to 190koz Au FY10. Target cash cost<A$450/oz.
2Q09 output 52.8koz Au, above target rate of 170kozpa.
Higginsville resource base 1.45moz. Material extensionsto Trident likely. Resource conversion to reserve at 89%.
Exploration upside in Higginsville area could be >4mozAu - current budget ~A$11mpa, drilling ~50,000m.
Several new mine feasibility studies expected in 2009.
Acquired 44.85% of Dioro Exploration (ASX:DIO) intakeover attempt, share now worth A$11m. Three of AVO board are now DIO board members (Sep '09).
Investment Points Company Comment
328No 348 37037048,000
00 060,14312,000 60,731
370
S Unwin (Non-Exec)
R Reynolds (Non-Ex Chair)R Williams (MD)
Higginsville
t
Ownership/
Au
032.014.0
8Exploration and Evaluation (A$m) 8 110
1010
0.0
Aus (WA)
Key Projects
48,000
4.3
Project
Overview: Avoca Resources listed on the ASX in April 2002. It is focused on developing its recently commissioned Trident gold mine and adjacent tenements in the Higginsville district of the Eastern Goldfields, WA, which is between the St Ives and Norseman goldfields that have produced +20moz Au. Higginsville Gold Project (Au, WA): 2700km2 holding, 180km south of Kalgoorlie. Avoca controls the greenstone belt between the +15moz St Ives and the +6moz Norseman gold fields. 75% of all gold from St Ives and Norseman is from underground. Prior to Trident’s discovery, only 5% of gold at Higginsville and Chalice was from underground. The project includes the Trident Underground Gold Mine - resource 0.95moz at 6g/t, with 89% conversion rate of initial Indicated resource to reserve (0.65moz to 0.58moz). The resource is open along strike and at depth. Capital mine development began Feb ’07 and first gold pour from new CIL plant was in Jun ’08. Aim is for 10+ year mine life, producing 160-200kozpa Au by processing 1.2mtpa. Wide intersections show potential for large high-grade stopes, eg 24.1m @ 36.4g/t(Athena), 48.3m @ 7.1g/t (Western Zone). Production FY09 was 1.1mt for 120.9koz Au, target 190koz in FY2010. Production (treated) in 2Q09 was 301kt @ 5.5g/t for 52.8koz Au (rate 206.4kozpa), an 83% increase on 1Q09 ounces. Cash cost was A$442/oz, down from A$762/oz due to increase in head grade. Recovery in 2Q09 was 97.5% (65% gravity). AVO cash cost estimate for reserve life is ~A$450/oz. Plant has 10mw power station (dual gas/diesel) and 1.5gl borefield. Capex A$77m; 10+ years mining. Higginsville exploration: Estimated exploration budget is ~A$11m for CY09. The Graveyard to Trident trend has >6km strike of gold-bearing lodes and is open along strike and has little previous testing below 300m depth. The Chalice Leases, acquired Jul. ’07 for $6m scrip, include the Chalice mine, which produced 556koz Au at 5.6g/t. Underground inferred resource of 123koz grading 5.2g/t Au. PFS (3Q08) projects 3.5yrs production at 150-350kt for 25-60koz Au, subject to resource upgrade drilling and DFS(expected 4Q09). Fairplay, 2km south of Higginsville plant, has a 2Q09 DFS for open cut production from a reserve of 64koz grading 1.9g/t Au. Other mine feasibility studies planned for 2009 include Two Boys(U/G) and Musket (O/P). The latter, 40km SE of Trident, includes 18m @ 10.9g/t Au from 68m; the known deposit is 300m long by 120m deep and open– potential open cut mine, focus of ongoing drilling. Attempted takeover of Dioro Exploration NL (ASX:DIO): In Apr ’09, AVO launched an all-scrip takeover offer for WA-based gold company DIO (assets include JORC resources 2.15moz Au and the 1.2mtpa Jubilee Mill). The offer closed in Aug ’09 with AVO holding 44.85% of DIO. Investment Comment: Avoca’s Trident gold mine reached nameplate output, and target mine-life cash costs, in 1H09. There is exploration upside at Trident at depth and along strike and the Higginsville region is prospective for further Au discoveries, with a target of ~4moz Au. Avoca has borrowings of A$46.3m (Sep 09F): ongoing repayments (Tranche 2) amount to ~A$10m every six months to end 1Q11, which is co-incident with repayment of Tranche 1 (A$23m, extendable to Mar ’12). These should be readily met by Higginsville cash flow. An AVO net asset value based on Trident with current resources is A$302m (5% discount, gold price US$850/oz). With JV projects, the shares in DIO and exploration ounces, we estimate Avoca’s NPV as A$437m or A$1.61/share (undiluted), close to the current share price.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 10
AVOCA RESOURCES LIMITED VALUATION
TargetPrice (Low) (High)
Equity Gold Valuation A$m A$m A$mProjects (moz) US$/oz
+ Higginsville - Trident 100% 0.98 232 290 290 369+ Higginsville - Other 100% 0.47 116 70 323+ Regional Exploration 100% 2.55 30 77 51 102+ Joint ventures Various - 20 10 30
Sub Total 457 351 824
+ Cash 32.0 32.0 32.0+ Tax Losses 2.5 2.5 2.5- Debt (incl convertible note) 62.0 62.0 62.0- Corporate 2.6 2.6 2.6
Sub Total -30.1 -30.1 -30.1
11 11 11AVO NET ASSET VALUE 437 332 805
Capital StructureShares 272 272 272Fully Diluted Shares 296 296 296
AVO NET ASSET VALUE PER SHARE :A$/share 1.61 1.22 2.96AVO NET ASSET VALUE DILUTED :A$/share fully diluted* 1.48 1.24 2.72
*incl. conversion of A$20.2m in convertible notes at A$1.74/share
HIGGINSVILLE GOLD PROJECTEquity
LONG TERM GOLD PRICE^ :US$/oz 600 800 1000 1200 1400EXCHANGE RATE :AUUS 0.78 0.78 0.78 0.78 0.78LONG TERM GOLD PRICE :A$/oz 769 1026 1282 1538 1795
HIGGINSVILLE GOLD PROJECT NPV @ 5% NOMINAL*:A$m 100% 290 376 482 587 692HIGGINSVILLE GOLD NPV @ 5% NOMINAL* :US$m 100% 226 294 376 458 540NPV/SHARE :A$/share 1.07 1.38 1.77 2.16 2.55
^ Calendar year gold price forecasts are US$950/oz in 2H09, US$900/oz in 2010, thence long term price indicated.
HIGGINSVILLE GOLD PROJECT KEY ASSUMPTIONS DERIVED FROM BFS*
RESOURCE ESTIMATESConceptual Gold Target
Mt gt koz
Current resource (Higginsville - Trident) 5.2 5.8 977Current resource (Higginsville - other) 7.0 2.1 471Subtotal 12.3 3.7 1448
Higginsville, regional exploration 21.5 3.7 2552
Total conceptual resource 33.7 3.7 4000
Dec '06 reserve (Trident, A$800/oz) 3.4 5.3 581
MINING METHOD Underground
PROCESS METHOD Dedicated Gold PlantSingle ball mill, gravity or carbon-in-leach (CIL)
PRODUCTION RATE :mtpa 1-1.1 Initial and expansion:kozpa 170-190 Based on reserve grade 5.3g/t Au
CAPITAL COSTS :A$m 77 Plus sustaining capex of 4%RECOVERY - GOLD :% 95OPERATING COSTS :A$/t 69
US$/oz 452TAX :% 30ROYALTY (WA) :% 2.5MINE LIFE :Years 10+ Based on total Higginsville resourceCOMMISSION DATE : 2Q08
* These figures are based on the BFS and ongoing production. Some refinement may result as production and exploration proceed.
Valuation Sensitivity
Sensitivity
Gold
... plus shares in Dioro Exploration
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 11
Catalpa Resources Limited
0.15Gold Price (US$/oz)
Revenue (A$m) 173.3
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x)Price/Book (x) ASX-listed options:
Cracow **Total
Cracow **
* Resources includes reservesMineralised Material (est., non compliant with JORC)
(no estimates of mineralised material available).
Contacts Directors Key ProjectsMr Bruce McFadzean Ownership/Managing Director ProjectTel: 61 (8) 9321 3088 Edna May
Cracow ** Cracow subject to proposed LST merger.
925
34.8
4.1
58.2
898
178.7128.1
899
28.3
73823.0 738
5.04.0
56.133.5
10.0
7%
29.0
53.1-2.6
6.912.2 80.4
0.0
121
** Assumes Cracow merger proceeds - Cracow data from NCM release 17.8.09
0.53.1925.8
Location
1,73572.0
42.5
1.6
AuAu
145
16.9
Status
1,366
55.1
4%1.6
0.5
21 September 2009
Proposed Lion Selection (ASX:LST) merger will injectCracow JV (30%), boost CAH gold production by 30% to~130kozpa.
Cracow JV is a quality profitable asset (NCM managed) -LST merger will be EPS positive for CAH.
Share register will be more open with LST gone, largestshareholder will have 6.5%.
Our accelerated med-term share price expectation isA$0.19 if merger proceeds, with ~130koz productionlooming 2Q10. (NAV is A$329m, A$0.195/share).
Current P/E ratio for FY11 less than 5x.
Edna May forward sales (~70% for 5 yrs) locked in atA$1,557/oz: adds A$91m or A$0.08/share to NPV.
Construction of A$92m Edna May plant on track for firstproduction 2Q10.
Total A$106m debt and equity raised to fund A$92m EdnaMay capex.
N Johnson (Non Exec Dir)
Analyst: Dr Tony Parry
naNCM
IRG/reefepithermal
RouteProject
0.0 0.0
OperatingCILAus (WA)Aus(QLD)
17.0
Reserves and Resources/Mineralised Material
JV
CAHO
8.6
121
B Sullivan (Non Exec Dir) 30%
Ore
Partner
886
Au Eqty
32.6
A$ 0.13
Process
8.1
2.5
145
0
Target
1,366
Shares on Issue (EOP) 345
100%100%
Gold (long term from FY13) = US$850/oz; A$/US$=0.78 (long term).Key Assumptions: Assumes Cracow merger proceeds 4Q09 - 1:11 share consolidation by end 4Q09
Code for reporting mineral resources - Australian:
Greenfinch
t
3.8
Gold
AuAu
Company Comment
Major shareholders: Lion Selection Holdings (49.3%),
48
www.catalparesources.com.auPerth, WA, Australia
100%
Total
Resources *
J Rowe (Non Exec Ch)B McFadzean (MD) Metal
EPS (norm) (A¢/share)Market capitalisation (undiluted) (A$m)
0.0
Option
Reserves
Classification
P/CF (x)
EV/EBITDA (x)Yield (%)
-728.3
M Pollock (Non Exec Dir)
Fully diluted (m)146.51472.2
6.9
Investment Points
697.2
Greenfinch Meas+Ind+Inf 1.18
na0
-0.2
00
na
-0.1
0
GoldAustralia (WA)Plant Construction - Advanced Exploration
1172Number of shares (m)52 week range (A$/share) to
Exchange: ASX:CAH
4.9
0
-0.1
Capital Profile
2009F 2010F2008a
Net Profit (norm) (A$m)
Convertible notes (m)Options and warrants (m)
0.2
834 886
0.0 0.1
0.00
na
-0.2
-2.6
na
CFPS (A¢/share)Dividends (A¢/share)
Goldrich Holdings Pty Ltd (3.1%), Zero Nominees (1.7%).
146.5
PER (x)
CAH.AU
Production and Financial Forecasts
2012F
-0.2
YEAR END: June0.130.019
Share price (A$)
EBIT (A$m)
300
Catalpa Resources Limited
Catalpa's proposed merger with its major shareholder (Lion Selection) willboost projected gold output from 95koz to 126koz (FY11), and importantlyincrease earnings per share. When the dust settles we expect the largermerged group to re-rate towards A$0.19 share price.
22.30.0 0.0Equity Production (koz) 125.8
2011F
Edna May Proven & probable 100% 19.10
30%Proven & probable2.00
38.24
0.70 7.20
1.11
21.10
79na
Mt g/t
1.20 0.5
231
Au
11.2145
g/t
(JORC)Cut Off
-56.61172
Project
Proven & probable 100%
Edna May Meas+Ind+Inf
koz
1,048
Construction
791.22 0.5 2.5
TypeCIL
koz
82.5
2.4
Equity
828 248Meas+Ind+Inf 3.14 8.20 na30%2,31544.57
CAH - Catalpa Resources Limited
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
Sep
-08
Oct
-08
Dec
-08
Jan-
09
Feb-
09
Mar
-09
May
-09
Jun-
09
Jul-0
9
Aug
-09
Sep
-09
Shar
e Pr
ice
($/S
hare
)
Source: Bloomberg
Overview: CAH was listed on the ASX in Aug ’02, after purchasing the Edna May mining tenements(310km E of Perth) in ’94. The company is on track to re-commence production at Edna May by mid 2010 at a rate of ~100kozpa. The A$90m Edna May Project is fully debt and equity funded. CAH is now intending to proceed with a proposal to merge with its largest shareholder Lion Selection (ASX:LST). The Cracow Merger Proposal: The Cracow joint venture (70% Newcrest (ASX:NCM), 30% Lion Selection (ASX:LST)) is a key asset of CAH’s current major shareholder, LST. It is proposed that LST merge with CAH through an offer of 1 CAH share for each LST share – after CAH has undertaken a 1:11 shareconsolidation, and LST has demerged its other assets (apart from A$1.5m cash). The CAH options LST holds will be cancelled. In essence CAH shareholders will get the 30% Cracow JV, pre-emptive rights over NCM’s 70% of the JV, plus A$1.5m cash for an effective increase in CAH shares (after consolidation) from106m to ~145m (i.e. ~59m additional shares after 1:11 consolidation). The Cracow Joint Venture: Situated in S Queensland, Cracow is a high grade underground mining field based on an epithermal system that has yielded over 1.1moz since 1932. NCM commenced recent operations in 2004. In FY09, 423kt of ore was treated to produce 99koz at an average head grade of 7.3g/t. Cash costs were A$530/oz. Total reserves are 231koz (7.2g/t) and resources 828koz (8.2g/t) – sufficient for ~7 years further operation if all resources are converted to mineable reserves (we have assumed 80% conversion). Based on the long history of the ore body production and rolling reserve increases, and recent discoveries of new shoots (e.g. Kilkenny) it is likely that the mine will have a life well in excess of 10 years. Cracow JV Forecast : We are forecasting FY10 output of 101koz for the Cracow JV with treatment of 440kt of ore grading 7.8g/t. Cash costs A$530/oz (A$120/t of ore treated). Effect of LST Merger: (see Table on opposite page): Our assessed net asset value of the Cracow JV (assuming 80% resource conversion to reserves) is A$170m (@5% discount rate), giving A$51m for the 30% LST stake. The merger increases our CAH valuation from A$277m to A$329m. The NAV/share decreases slightly from A$0.217/share to A$0.215/share (pre-merger shares), however this is based on afairly conservative assumption of 6.5 year Cracow mine life. The merger is EPS positive, with EPS in FY11increasing from 2.7c to 2.9c, and importantly CAH is pushed higher up the mid tier producer ranks, with FY11 production forecast to increase to 126koz from ~95koz pre merger. Investment Comment:. With the Edna May plant being built and the market now focused on 2Q10 commissioning, the LST merger is a positive development that will increase gold output and EPS and should accelerate CAH’s re-rating towards a more lofty ~130koz producer status (100koz pre merger). Post merger our base case NPV is A$0.215/share fully diluted (US$850 long term gold, A$/US$ 0.78). The shares have moved towards our previous A$0.15 target, we now see a six month pre-commisioning target of A$0.19/share (A$2.09 post 1:11 consolidation) if merger proceeds .
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 12
CATALPA RESOURCES LIMITED VALUATION
Pro FormaEquity Resource Current Post
Gold Resource Valuation Pre Merger MergerEquity (moz) US$/oz A$m ^ A$m ^
Projects+ Edna May Gold Project 100% 1.48 98 185 185+ Cracow JV 30% 0.25 160 51+ Regional Exploration 100% 10.0 10.0
Sub Total 195.0 246.0
+ Cash (est Sep '09) 17.0 18.5+ Tax Losses 5.8 26.5+ Discounted Value of Forward Sales (5% nominal) 91.0 91.0- Debt (est. Sep '09) 0.0 0.0- Corporate 17.4 17.4
Sub Total 96.4 118.6
CAH NET ASSET VALUE 131 291.4 364.6
Capital StructureShares (m) 1172 145Fully Diluted Shares (m) 1472 161
CAH NET ASSET VALUE PER SHARE :A$/share 0.249 2.51CAH NET ASSET VALUE DILUTED :A$/share fully diluted 0.217 2.37
:A$/share (fully dil.)pre-consolidation 0.215^Valuation based on RCR long term gold price forecast of US$850/ounce, A$/US$ = 0.78.
EFFECT OF LION SELECTION MERGER ON CAH PRODUCTION & PROFIT
Financial Year: 2010/2011 2011/2012 2010/2011 2011/2012
Gold production (koz) 125.8 128.1 95.4 97.1
Group Revenues (A$m) 168.5 173.7 133.0 138.0
EBIT (A$m) 75.5 77.6 59.4 61.9
Net profit (A$m) 49.7 51.6 38.4 40.7
Shares on Issue (m)
EPS (cents) 31.4 32.6Equiv. EPS (pre 1:11 consol) 2.9 3.0 2.7 2.9
P/E RATIO (@A$0.13 share price) 4.6 4.4 4.8 4.5
Forecasts based on US$850 long term gold price and A$/US$ = 0.78
With LST Merger Without LST Merger
145 1172
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 13
Eleckra Mines Limited
0.13
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) Cash (A$m)Price/Book (x) Company options: Net asset backing (Ac/share)
*Gold and uranium prospective tenements, both held and under application.
Reserves
Contacts DirectorsMr. Ian Murray(Executive Chairman)Tel: 61 (0) 8 9486 4144West Perth, WA, Australia
15,500 12,00015,000
0.0
749
6.2
0.5
2.71000.017
23.31.00
Aus (WA)
Location
Aus (WA)Aus (WA)
0.0
0.0
U3O8
K Hart (Non-Exec Dir)
koz
Status
0.0
mlb
0.0
1.78
Golden Sands 100%Yamarna: Thatcher Soak
Yamarna - Gold regional
R Davis (Non-Exec Dir) Project
Analyst: Dr Tony Parry
www.eleckramines.com.auAlk. Leach
0 0
g/t g/t
(JORC)
EquityOre Au
Partner
0
Adv. Expl. Aus (WA)
Mid Expl.
6.2
00.00
2.5
na
2.0
Reserves and Resources/Mineralised Material
Key Projects
749
AuMt
0.32.5
Type
Early Expl.
heap leach
ox/sulpMid Expl.
Calcrete
ox/sulpRoute
1.1 2.5
Gold Au
ox/sulp naAu none
Early Expl.Lake Rason + Lake Wells
Yamarna - Attila
nonenone
100%
100%100% none
100%
JVOption
AuMetal
Uranium Resources Mt
100%
16.1100%
13.1
EquityProject
I Murray (Exec Chairman) Ownership/
1.4
Company Comment
4.5
Thatcher Soak
Yamarna - Attila-Alaric Inf., Ind. & Meas.
Mineralised Material (est., non compliant with JORC)
Project
4.8
EKM's focus is gold and uranium in WA. Explorationbudget is ~A$1.5mpa mostly directed to gold.
Strategic position (~2,500km2) in remote under-exploredYamarna greenstone belt in Yilgarn Craton.
Yamarna (Attila-Alaric) gold resource 749koz Au nearsurface - many untested targets along 17km strike.Currently drilling untested nearby targets.
2Q09 Central Bore RAB drilling produced promising new300m new mineralised zone - 5,000m RC drill 3Q09.
Golden Sands project covers unexplored ground nearAngloGold's Tropicana discovery (5moz resource).
Recent partial takeover of WA uranium hopeful (EnergyMetals) has renewed interest in WA uranium.
If EKM does a deal with Uranex on Thatcher Soak, wewould expect shares to trade at ~10-11cents.
Code for reporting mineral resources - Australian:
5.8
Investment Points
1.3No
71
2.0
61
-
2,000
0.600.150.40
1.6
ProjectProcessTarget
0.21.4
450- -
62.1
0.00
Au noneU
22
Fully diluted (m)
11.2
U
Inferred
Calcrete Alk. Leach Aus (WA)
170.4170.4
0.0
t
9.7
-HSBC Custody Nom's (4.6%), Haifa Pty Ltd (4.0%).
17,400
2.662.50Capital raisings (A$m)
3,000450
0.0
450
3,000
Convertible notes (m)243.5
0.0 73Exploration/(Expl.+ Corporate) (%) 73Funding duration at current burn (years)
Market capitalisation (undiluted) (A$m)
Major shareholders: Perth Select Seafood (5.9%), Troyleigh Inv. Ltd (4.8%)
11.2 170.4
Drilling - Other/Diamond (m)Land holding ('000 ha)*
Drilling - RAB (m)Shares on issue (pr end) (m shares)
05,500
170.4Options and warrants (m)
0.070.0152 week range (A$/share)
200
EKM.AU
73.1
Gold, UraniumAustralia (WA)Advanced ExplorationExchanges: ASX:EKM
Capital ProfileShare price (A$)
Number of shares (m)to
21 September 2009
0.6170.4
0.00
4503,550
Production and Financial Forecasts
2010FSep-09F 2008aJun-09a 2009F
0.710.9963
Eleckra Mines Limited
EKM's recent drilling should expand its 749koz gold resource in theunderexplored Yamarna belt (WA). EKM shares are finally starting toreflect some value for the 6.2mlb Thatcher Soak U3O8 resource - a dealwith neighbour Uranex would trigger further upside to ~A$0.11/share.
1.71 1.501.100.40Exploration and evaluation (A$m)
A$ 0.07
YEAR END: June
Funding from JV partners (A$m)
0.15
4.7
0
Tenement costs ($k per year) -
4.8
Corporate (A$m)
Cash backing (Ac/share) 1.4
Resources
kozCut Off Au EqClassification
Eqty mlbU3O8 Cut Off U3O8
ktppm%U3O8
EKM - Eleckra Mines Limited
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
Sep
-08
Mar
-09
May
-09
Jul-0
9
Aug
-09
Shar
e Pr
ice
($/S
hare
)
Source: Bloomberg
Overview: EKM listed on the ASX July ‘06. The company’s highest priority is the Yamarna Greenstone Belt where it has established the 749koz (1.78g/t) Attila gold deposit, and a 6.2mlb shallow calcrete U3O8resource, an extension to the Thatcher Soak drainage channel (20mlb global resource). Yamarna project (WA): (2,500km2, gold) EKM has defined an initial gold resource along the Yamarna shear zone - a regional scale mineralised trend considered prospective for multi-million ounce discoveries. EKM’s 749koz resource defined to date occurs in the Attila-Alaric zone along a 17km strike length. There are gaps in drill coverage with over 50% of the strike length untested. The deposit is open at depth and along strike. Anticipated resource conversion is ~50% with EKM aiming to achieve resources of 1moz – 1.5moz Au before commencing a PFS. Preliminary metallurgical testing has indicated good heap leach characteristics. Recent Drilling: In 2Q09 EKM conducted a 5,500m, 310 hole RAB drilling campaign on 5 new unexplored gold anomaly target areas parallel to the existing Attila resource. Best results were reported at Central Bore (3.7km E of Attila) over a 300m zone with some good hits (e.g. 4m @ 4.01g/t from surface, 4m @ 14.14g/t from 16m). A 7,000m follow up RC drill program for Central Bore is planned for 3Q09, which will include holes to test the depth potential for higher grade gold shoots already identified. Golden Sands (WA): (1,500km2, gold) EKM has recently been granted largely unexplored exploration tenements between Yamarna and the tenements to the south of the AngloGold Ashanti/Independence Group Tropicana gold project (5moz resource – currently subject of a PFS for a ~400kozpa operation). EKM is planning an initial program comprising airborne magnetic and radiometric surveys. Thatcher Soak Tenements: (500km2, uranium) EKM holds Eastern portion of the Thatcher Soak calcrete uranium prospect, (total 20mlb global resource - Uranex NL (ASX:UNX) 14mlb and EKM 6.2mlb). The grades are low (170ppm, @ 100ppm cut off), but deposit is shallow, easily mined. UNX is pushing ahead and is nearing completion of a scoping study. Recently UNX purchased small part of Thatcher Soak resource from South Boulder mines which valued resource at ~A$0.75/lb. UNX’s intent seems clear – strategically they would be in a stronger position through owning the full resource. Best opportunity for EKM to unlock U value would be to sell to UNX. Corporate: EKM raised A$2.7m in 2Q09 to maintain gold exploration momentum during FY10. Investment Comment: With an established 749koz resource, newsflow from drilling of new Yamarna belt targets, cash ~A$2m, and renewed market interest in WA uranium deposits, EKM is trading at a significant discount to our assessed value. Based on UNX recent purchase, we think a deal with UNX could value Thatcher Soak at min.~A$1.00/lb, and if gold resource was valued at modest ~A$10.00/oz,then UNX would be trading at ~11cents/share.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 14
EKM’s Yamarna tenements (red boundary) include the 6.2mlb U3O8 Thatcher Soak resource and the 749koz Attila gold resource and numerous advanced gold drill targets. Further south, the newly acquired Golden
Sands tenement north of AngloGold’s 5moz Tropicana discovery is unexplored.
Eleckra has commenced drilling new gold targets adjacent to the Attila gold resource. RAB drilling in 2Q09 at Central Bore (4km from Attila) produced promising hits over a 300m zone. A 7,000m RC drilling
campaign commenced in 3Q09, which will include testing of higher grade potential of Yarmana Deeps.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 15
Kentor Gold Limited
0.15
Debt (A$m) - Sep 09FEnterprise value (A$m)Major shareholders: Macquarie Bank (10.9%), Directors (3.0%),
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) Cash (A$m)Price/Book (x) Listed company options: Net asset backing (Ac/share)
* Gold and geothermal tenements held or applied for.
0.16
* Andash acquisition subject to US$10m option payment* Andash ore reserve includes 63kt cont. Cu, (477koz Au equivalent), resource includes 77kt cont. Cu (392koz Au equiv.)
Mineralised Material (est., non compliant with JORC)
Contacts DirectorsMr Simon MilroyManaging DirectorTel: 61 (0) 7 3121 3206Brisbane, QLD, Australiawww.kentorgold.com.au
Analyst: Dr Tony [email protected]
1.15
Route
naGeothermal energy 80%/49%
54321.1 679
0.00.0 0.0
StatusJV
koz
432
36
Au Eqty
porphyrygranites
naAurum
qtz vein
KyrgyzJ Taylor (Non Exec)
2.1
Key Projects
Au
540
22.2
6.24.3
mtEquity
80%
Aut
Aug/tAu
Kentor Gold Limited
Ambitious Kyrgyz Republic-based KGL may have found its 'companymaker' in the advanced ~A$70m capex Andash Au-Cu project (1.15mozgold-equiv. resource, BFS completed) - can purchase 80% for US$10m(~US$9/oz Au equiv. resource) plus US$5m for equipment.
3.32 2.201.530.20
A$ 0.11
77
Jun-09a 2009aYEAR END: December
1.1657
Exploration and development (A$m)0.99
44 67
(JORC)
3.050
Code for reporting mineral resources - Australian:
242Tenement costs ($k per year)
95.1Market capitalisation (undiluted) (A$m)
Share price (A$) 0.11
5.1
01,500
760.25
1,500
0Options and warrants (m)
Exploration/(Expl.+ Corporate) (%)Convertible notes (m)
KGL.AU
12
Gold, Base Metals, Geothermal EnergyKyrgyz Republic, Central AsiaBFS, Project DevelopmentExchanges: ASX:KGL
Capital Profile
52 week range (A$/share) toNumber of shares (m)
242
Funding duration at current burn (years)
Drilling - Other/Diamond (m)
15.1156
0.0 0
0.02
0.25143
Corporate (A$m)
21 September 2009
143.4
Land holding ('000 ha)*
Drilling - RAB (m)Shares on issue (pr end) (m shares)
0.80
Production and Financial Forecasts
2010FSep-09F 2008a
2.1 2.21.2
Ore
1.5
Project
1.8 1.0
Reserves and Resources/Mineralised MaterialGold
0
1.4
0
0.3221.2
0
0.795.1
2,000
-
Metal
7.2
Investment Points
2.1No
-
Classification
Funding from JV partners (A$m)
0.3
6,0000
Au
14.8
Fully diluted (m)
15.1
Reserves
KGL is focussed on Tien Shan gold belt projects in theKyrgyz republic, Central Asia.
Kyrgyz Republic has medium sovereign risk, now politically stable and keen to attract mining investment
KGL's local base and Russian speaking Kyrgyz-basedmanagment is key to progress in that country.
Andash gold-copper project (option to purchase 80%)based on 1.1moz gold-equiv. resource - BFS completed.
Andash economics look sound, capex est. ~A$70m?
Option to purchase Andash for US$10m (~US$9/oz Auequiv. resource) plus US$5m equipment.
Savoyardy Au Project purchase option US$1.25m. Small10kozpa output for cashflow, now a distraction?
If KGL (with Mac Bank help) can raise ~A$20m andpurchase Andash, stock will re-rate, (LOM revenue~A$100mpa, project NPV probably >>A$200m?)
Proven + Probable
Cut Off
5.55
242-
200
1.7
1.1
-
0
Adv. Expl; BFS KyrgyzAdv. Expl;PFS
0
ProjectLocation
1.10
221.2
Resources
Partner
19.36
Type
6.76
Biox/leachAu/Cu float'n/conc.
na PAX
Savoyardy
Early Expl
Kyrgyz
Inferred
S Milroy (MD)Ownership/
Option
Savoyardy ^
Total
J Barr (Non Exec Chair.)Project
H McKinnin (Exec Dir)Andash
0/100%A Daley (Non Exec) 0/80%
ProcessTarget
1.10
^ Savoyardy subject to US$1.25m purchase payments
579714
4,000
16.8
3.0
3.9
242
0
g/t
-5.00
koz
Company Comment
0.3
Capital raisings (A$m) 0.00
4.8Cash backing (Ac/share)
4.02
Andash * 1.05
19.201.1 36
16.0
100%Meas. + Ind.Andash * 80%
KGL - Kentor Gold Limited
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
Sep
-08
Dec
-08
Feb-
09
Apr
-09
May
-09
Jul-0
9
Aug
-09
Shar
e Pr
ice
($/S
hare
)
Source: Bloomberg
Overview: KGL was formed in 1998 to explore for gold in the Kyrgyz Republic and listed on the ASXin 2005 to further that aim. It is now seeking to acquire two advanced gold and copper-golddevelopment projects. Importantly, KGL’s local credentials are sound - it has a long established basein the Kyrgyz Republic and a Russian-speaking Exec Director based there. The Kyrgyz Republic: Also known as Kyrgyzstan, a former Soviet Union State in Central Asiabounded by China, Kazakhstan, Tajikistan and Uzbekistan. A small mountainous landlocked country,population ~5.3m. The 1,500km Tien Shan belt (which hosts multiple major mesothermal type golddeposits) passes through the country from Uzbekistan in the west thence into NW China Existing Mining: Gold mining is a significant contributor to the economy, The country’s majoroperation is the Kumtor mine in the near the border with China, operated by Centerra Gold Inc.(TSX:CG). Kumtor has yielded over 6moz from 1997 - 2007. Grades are ~3.8g/t, output is ~560kozpa. Andash Project: A major ‘development ready’ project currently owned 80% by Aurum Mining plc(AIM:AUR), KGL has secured a purchase option from AUR for its 80% for US$10m, plus US$5m forequipment already purchased. Payment timetable is tight, with impending payment deadline of Dec ’09(option period extension). AUR is a seller post ‘GFC’ after spending ~US$30m and completing a BFSin 2007. Andash is located in the Tien Shan gold belt approx. ~180km W of the capital Bishkek. It iswell served with infrastructure and water availability is good. Apart from established reserves andresources (see table below) the surrounding EL contains highly prospective ground for additionalAu/Cu resources. Andash BFS: The 2007 BFS (done by Wardell Armstrong International) and beingupdated by KGL was based on a 2mtpa operation, LOM 8 years, producing ~50kozpa Au and ~4ktpaCu (gross revenue ~A$100mpa at current prices), capex US$55m, opex US$9.60/t (US$223/Au ozequiv.),strip ratio 0.8:1, simple crush/grind/flotation flowsheet to produce a Cu/Au concentrate. KGL’soptimised approach is to start at 1.5mtpa (to reduce initial capex) and then expand to 2.5mtpa in yr 3(~60koz Au and 5ktpa Cu), also an interim open pit to access higher grades earlier. Savoyardy Project: KGL has option to acquire 100% from fellow Kyrgyz explorer Manas Resources(ASX:MSR) for US$1.25m (2 staged payments). Situated in S of country modest 35.5koz JORCinferred resource. KGL undertook PFS early in 2009 for a small low capex (US$1.2m) 3 year 10kozpaoperation (Biox + leach, opex ~US$370/oz). Could start 4Q10 but cashflow is modest (~A$5mpa?). Corporate: KGL recently raised A$1.05m through a placement at A$0.04/share, and subsequently aplacement @ A$0.09 to raise A$2.0m, (SPP now impending). This brought Macquarie Bank on boardas a shareholder – a positive for funding the US$15m (A$18m) Andash option payments. Investment Comment: Can a small ~A$15m market cap Australian company purchase an advanced,major ~A$70m capex gold-copper project in little known Kyrgyz Republic for only ~US$9/containedounce equivalent, and get into production in 2 years? It will probably have to raise ~A$20m in the next3 months to do it, and a further ~A$25m equity alongside a debt facility in mid 2010. If the perceivedsovereign risk can be addressed and the already completed BFS stacks up, then KGL, with input frommajor shareholder Macquarie Bank, is likely to get its company maker.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 16
The map below shows the Tien Shan gold belt which runs from Uzbekistan, through the Kyrgyz Republic and into NW China. The belt host the 1.1moz Au equiv Andash Au-Cu deposit (KGL option to purchase 80%) plus many world class operations including Kumtor, Kyrgyz’s only major gold mine (560kozpa).
KGL’s projected development schedule for Andash shows potential production in 3Q11. The immediate focus is to complete due diligence and raise ~A$20m (probably utilising Macquarie Bank) to complete the
purchase by Dec ’09.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 17
Kingsgate Consolidated Limited *
8.39
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) Drilling - RAB (m)Price/Book (x) Listed company options: Land holding ('000 ha)
** Net profit after extraordinaries for FY08 was A$36m after A$44.4m pre tax profit on sale of shares in Andean Resources Ltd
$11M exploration budget for 2008.
Experienced board and management.
Resources (includes proved and probable reserves)
Mineralised Material (est., non compliant with JORC)Reserves and Resources as at 30 June 2008
Contacts DirectorsMr Gavin Thomas(MD, Chief Executive Officer) G Thomas (MD)Tel: 61 (2) 8256 4800 P McAleer (Non Exec Dir)Sydney, NSW, Australia C Carracher (Non Exec Dir)
13.6
2.0%
85,000
6.55
88,000
130
0PER (x)
Exploration and Evaluation (A$m)
Production
69022.0
3
140,000
92.191.9
Au none
Eqty
100% 0.0333.9
2.9g/t
2.10
1.101.2033.9
(JORC)Au
15.7100%
www.kingsgate.com.au
StockpilesTotal
Chatree
R Smyth-Kirk (Chairman)
Total
Chokdee 100%
100%100% 0.0
0.0
3,163
65.3
3,163
0.0
81.0
0.0
0.51.10
Reserves
Chatree North
Code for reporting mineral resources - Australian:Classification
Chatree
Gold
Meas+ind+infMeas+ind+inf
Dividends (A¢/share)
100%Chatree 100%Project
Chatree North
Stockpiles Meas+ind+inf
Au
TotalTotal
OptionOwnership/
60,000
Convertible notes (m) 0.0
P/CF (x)
EV/EBITDA (x)Yield (%)
130140,000
1688,000
30 16
2.5%
Company Comment
130,000Drilling - RC/Diamond (m)
7.03.2% 3.2%5.6
130
5
58.1
25113.1
258.6 11.1
Reserves and Resources/Mineralised Material
40.70.5
g/t0.5 100
Au
Chatree North
c/off
1.4Total 100%100%
AuMt
CFPS (A¢/share)
5.26
t
16
EquityOre
86,000
Project
130
8.00
EPS (norm) (A¢/share)Net Profit (norm) (A$m)** 32.5 72.5
72.734.3-8.1-8.2
-97.3 10.88.5
20
16.27
23.016.3
15
50.580.0%
Exchanges: ASX:KCN
Capital Profile
52 week range (A$/share)Share price (A$)
to7.872.20
KCN.AUGold, SilverThailandProduction, Advanced Exploration
21 September 2009
96.1Options and warrants (m) 5.9
102Fully diluted^ (m)
Number of shares (m)
0.0Market capitalisation (undiluted) (A$m)
756.3
756.3
Major shareholders: Gold 2000 Ltd. (6.3%), Jabre Capital (6.5%)
Thailand-based KCN is an unhedged mid tier goldproducer in a strong growth phase.
Production 93koz in FY09, forecast 137koz in FY10,increasing to ~210koz FY11 (plant expansion from 2.6 to5.0mtpa).
Solid FY09 profit and resumed dividend, profit expected todouble in FY10.
Transition to new Chatree North leases has dramaticallylifted grades (2.3g/t 2Q09), gold output and profitability.
Excellent drilling results from resource drilling Chatree N -indicates likely higher resource grades.
Highly grade sensitive - every 0.1g/t increase in long termreserve grade adds A$1/share to NPV.
Regional exploration success - Chokdee discovery couldunderpin 10moz province (curent 3moz resources).
Current cash ~A$36m. Profit growth and l.term gradeupside potential could drive stock towards A$10/share.
.
15
21.2
Investment Points
3.3No
Directors (6.3%).
35.7
3
6902,47078.4
30.01,39343.7
Location
as aboveThailandProductionThailand
Analyst: Dr Tony Parry
na
Process
0.5
Route
1.20
Target
A$ 7.87
79.7
2011F
112.8
Higher grades (2.3g/t) have dropped 2Q09 opex to a low US$228/oz. FY09production 93koz, to grow to 137koz FY10 and 210koz FY11. The SinoGold-Edorado merger should increase focus on KCN as a low cost,potential >200koz quality SE Asian gold producer.
137.5
Kingsgate Consolidated Limited
210.5
Key Projects
MetalJV
Partner Typenone
AuThailand
noneCIL 2.4mtpa
0.5
0.50.51.20
1.40
88,000
1,393
100
2,470
1.20
70.7
Mid Expl.
ProjectStatus
0.0
1,290
140,000
koz
130
2008a 2012FYEAR END: June
5.7188.1
EBIT (A$m)93.0Equity Production (koz)
48.2
74.134.9 86.7
92.7
Production and Financial Forecasts
2009a 2010F
100.4
70.4
141.1
0.5
koz
3
1,290
KCN - Kingsgate Consolidated Limited
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Sep-
08
Oct
-08
Nov
-08
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
Sep-
09
Shar
e Pr
ice
($/S
hare
)
Overview: Kingsgate re-listed on the ASX in 1988, focused on gold mining and exploration in Thailand where it has benefited from its first mover position. KCN’s Chatree mine has been in production since 2001 and is now a leading example of a low cost, efficiently operated SE Asian gold mining operation, benefitting from a low tax regime. Chatree Production has Soared: After low production (17koz) and operating losses in 2H08, the opening of the Chatree N leases has boosted production which has soared to 76koz in 1H09 due mainly to much higher grades from Chatree N in 1H09 (2.3g/t in 2Q09 and 1.7g/t in 1Q09 versus 1.0g/t @2H08). The production plant has been running at full capacity (~2.6mtpa)since Mar ’09. Opex has fallen dramatically. 1Q09 cash costs (incl. royalties) are down to US$228/oz in 2Q09 versus US$364/oz 1Q09, confirming KCN currently in the lowest quartile of global gold producers.Outlook: As we have seen from the past two quarters, the key to future performance is all about grades,and secondly future plant expansion. We are expecting grades to come back to around 1.85g/t averagefor FY10, still well above the reserve grade of 1.2g/t. with annual production of 137,000oz forecast, and EBIT of A$80m, net earnings more than doubling to A$0.73/share. A review of the proposed plant expansion to 5.0mtpa is underway – decision expected 4Q09. We have assumed that expansion will proceed at a capital cost of A$130m (50% debt funded, balance funded by cashflow), start up by 4Q10. This will bring production up to around 210kozpa in FY11. In FY12 production drops to 188koz assuming grades come back to current reserve grades (but will they?). Chatree N Resource Drilling:Total reported reserves (Chatree and Chatree N at 30 June 2008) are 1.39moz and resources 3.16 moz at a grade of 1.2g/t. KCN expects an increase in resources and reserves in the next 24 months with an on-going drill program (5 drill rigs, >100,000m pa). The high grade intersections being reported at Chatree N are encouraging for longer term increases in reserve grades. Grade Sensitivity: Our modeling indicates that a 0.1g/t increase in reserve grade (or US$100/oz increase in the gold price) increases the NPV by ~A$1/share. This is a key issue to watch. Regional Exploration: 1300km2 surrounding Chatree, with many drill ready targets. Chokdee 20km N of Chatree, has resulted in a major new discovery, could rival total Chatree resources of 5moz to date. Investment Comment: Our NPV is A$6.26/share, (5% DR, US$850/oz long term Au, A$/US$=0.78, 65% resource conversion) or A$8.11/share at Au price of US$1,000/oz. In the longer term the higher grades from Chatree N resource drilling could have a A$2–A$3/share effect on valuation due to possible lifting of longer term resource grades. KCN is a stand-out low cost dividend-paying Asian producer now coming into the range of institutional funds as it approaches A$1bn market cap.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 18
Kingsgate Consolidated Limited
ASSUMPTIONS 2008a 2009a 2010F 2011F 2012F FINANCIAL RATIOS 2008a 2009a 2010F 2011F 2012FA$/US$ 0.90 0.75 0.80 0.79 0.78Gold Price (US$/oz) 834 886 925 900 899 Net debt/equity (%) -5% -4% 5% -8% -16%Gold Price Realised (US$/oz) 854 875 933 900 899 Net debt/ net debt + equity (%) -6% -4% 5% -8% -19%
Current ratio (x) 7.0 3.3 2.8 10.5 14.7EBIT/interest (x) 3 19 32 25 22
EQUITY PRODUCTION Debt/operating cashflow (%) 0% 12% 64% 43% 45%Chatree Production (koz) 74 93 137 211 188 Exploration/total overhead (%) 2% 3% 17% 17% 17%
EV/EBITDA (x) 50.6 16.3 8.0 5.3 6.6KCN Equity Production Gold (koz) 74 93 137 211 188 Market cap/net cash (x) 18.8 27.5 -19.7 12.8 6.3Cash Costs (US$/oz)** 457 479 335 323 401 Market cap/book (x) 4.2 3.1 2.5 2.0 1.7 ** Cash Cost is direct operating cost before royalties and by product credits
PROFIT AND LOSS (A$m) FINANCIAL SENSITIVITIESRevenues 76 117 170 252 233Operating costs (direct) -42 -53 -58 -86 -96 % Change in EPS for a 10% increase in:Depreciation/amortization -9 -12 -15 -31 -29Exploration Expensed 0 0 -2 -2 -2 AUD/USD -58% -17% -21%Corporate -15 -8 -8 -8 -8 Gold Price 64% 19% 23%Other (incl. Royalties) -4 -9 -8 -12 -11EBIT 6 35 80 113 87Interest 2 2 2 4 4 % Change in NPV for a 10% increase in forecast minelifeOperating profit/loss 3 33 77 108 83 commodity assumptions for:Tax -12 -1 -5 -16 -12 Base + 10%Minorities 0 0 0 0 0 A$/share A$/share %Net profit/loss -8 33 72 92 70 Gold Price US$850/oz 6.26 7.31 17%Net abnormals/extaordinaries 44 0 0 0 0Net profit/loss (reported) 36 33 72 92 70
BALANCE SHEET (A$m) VALUATION (A$m) Q3 08 Cash and deposits 40 30 24 119 170Total current assets 57 58 34 129 180 Assumptions Base "What if" PP&E 140 200 315 298 277 Long Term Gold Price :US$/oz 850 1,000Total non-current assets 147 213 344 343 338 Long Term AUUS 0.78 0.78Total assets 203 271 378 472 518 ProjectsTotal current liabilities 16 17 12 19 17 Chatree and Chatree North 100% NPV@5% A$112/oz 313 389 Reclamation reserves 0 0 0 0 0 Based on reserves only Long term debt 2 0 60 58 48 Resources and ExplorationTotal non-current liabilities 6 8 69 66 56 Chatree and Chatree North 100% NPV@5% A$91/oz 289 377Total liabilities 22 26 81 85 73 Regional Exploration 100% 50 75Equity 181 245 297 387 445
OtherTotal debt 0 2 63 60 50 AssetsNet debt -40 -28 38 -59 -120 Cash and deposits (3Q09) 36 36Average shares (fully diluted) (m) 101 102 102 102 102 Rehabilitation Fund 0 0
Other -26 -26FLOW OF FUNDS (A$m) LiabilitiesEBITDA 15 46 95 144 115 Debt 0 0Cash flow from operating activities Corporate -57 -57 Operating surplus 20 34 109 162 127 Reclaimation Reserve 0 0 Corporate -15 -8 -8 -8 -8 Net Assets 604 793 Net borrowing cost -6 -2 -5 -7 -11 Net tax paid 0 -7 -2 -12 -11 Fully Diluted Shares (m) 102 102 Net exploration paid -5 -30 -16 -16 -16 Net assets/share (A$/share) 6.26 8.11 Other non cash items 24 32 19 22 30Net cash from operating activities 19 18 97 141 111Cash flow from investing activities Valuation/Reserve oz :US$/oz 169 222 Capital expenditure -20 -12 -130 -14 -8 Valuation/Reserve & Resource oz :US$/oz 149 196 Asset Sales & Other 57 -36 -26 -16 -16Net cash from investing activities 37 -48 -156 -30 -24Cash flow from financing activities Net proceeds from issue of shares 0 16 0 0 0 Dividends paid 0 0 -24 -19 -24 Net proceeds from borrowings -20 0 63 -3 -10Net cash from financing activities -20 16 38 -22 -34Net change in cash 36 -14 -20 89 53
PRODUCTION STATISTICSChatree 100%Ore Treated (kt) 2,000 2,405 2,560 4,500 5,000 Head Grade (g/t) 2.40 1.20 1.85 1.62 1.30Recovery (%) 90 90 90 90 90Recovered grade (g/t) 2.18 0.96 1.67 1.46 1.17Gold Produced (koz) 140 74 137 211 188Equity Production (koz) 140 74 137 211 188Cash Costs (US$/oz) 206 462 335 323 401Production Costs (A$/t) 16.09 19.08 22.47 19.09 19.28 EBIT (A$m) 17.4 -13.2 62.3 118.3 86.8
It's All About GradesOur modelling predicts 1.16g/t residual reserve grade in 3Q10.
The sensitivity of KCN NAV to better grades is significant
Year YearYEAR END: June
EFFECT OF LONG TERM GRADE ON NET ASSET VALUE
6.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
1.16 1.26 1.36 1.46 1.56
Long Term Resource Grade (from 3Q10 on)
Net
Ass
et V
alue
(A$/
shar
e -
fully
dil.
)
Gold US$850/oz Gold US$1,000/oz
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 19
Korab Resources Limited
0.24
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) Cash (A$m)Price/Book (x) Listed company options: Net asset backing (Ac/share)
*Gold prospective tenements only, both held and under application. Quarters stated on calendar year basis.
ReservesResources MelroseMineralised Material (est., non compliant with JORC) Bobrikovo, oxide high grade Bobrikovo, oxide low grade Bobrikovo, sulphide TotalOther JORC resources: Winchester, 16.6mt grading 42% Mg. Other mineralised material: Bobrikovo, 328koz Ag grading 45.2g/t.
Contact DirectorsAndrej K Karpinski(Executive Chairman)Tel: 61 (0) 8 9474 6166South Perth, WA, Australia
Batchelor - UAUMelroseBatchelor - SundanceBatchelor - Winchester BFS
na Carbonate na AUS (NT)100% Mg na na na AUS (NT)
Adv ExplToll Scoping AUS (WA)
Multiple
Au
9.5
na
0.0
344.3
Location
Adv Expl AUS (NT)na
kozEqty
Reserves and Resources/Mineralised MaterialCode for reporting mineral resources - Australian:Gold
(JORC)Classification Au
Ownership/
Gravity
Project
Quarry DFS
Au
JV TargetOption
nana
100%100%
U
UkraineStatus
306.0 306.0
0 0
Project Ore
7.3
0.2
Company Comment
4.7
243243 200-
0.123.07-
2.00
1.6
Production and Financial Forecasts
2010F
Exploration and evaluation (A$m)
4932
243
67.5
74
78.0
KOR.AU
0.600.70
A$ 0.24Korab Resources Limited
KOR has four projects near to production (gold, magnesium,phosphate) and is in the process of a uranium spin-off. Current goldfocus is on the Bobrikovo Project (Ukraine, target +640koz Au),where low-cost mining could commence in 4Q09.
1.570.15
Jun-09a
0.43
2009F
1.52 1.700.89
Sep-09F 2008a
0.05
Capital Profile
Options and warrants (m)
52 week range (A$/share) to
0.5
Gold, phopshate, uranium, magnesiumAustralia (NT,WA), UkraineDefinitive Feasibility StudyExchanges: ASX:KOR, Berlin:C6S.BE
Convertible notes (m)
YEAR END: July0.240.04
Corporate (A$m)0
Share price (A$)
Number of shares (m) 68.0
21 September 2009
2.00
74Exploration/(Expl.+ Corporate) (%)
- -243
16.068.5
0.1056
068.0 78.0
0
0.3
00.20
1.368.0
7,5000
0.1
00
0Market capitalisation (undiluted) (A$m)
Funding duration at current burn (yrs)
Drilling - Other/Diamond (m)Land holding ('000 ha)
2.3 Cash backing (Ac/share)
Funding from JV partners (A$m)
Drilling - RAB (m)Shares on issue (pr end) (m shares)
Chancery Holdings (8.4%)3
Fully diluted (m)
16.1
KORO
Focussed on gold (Ukraine,WA,NT), phosphate,magnesium and uranium (all NT).
Bobrikovo Au (Ukraine): mining of 84-104koz Au inshallow oxide ore planned from 4Q09, processing fromlate 2010; opex US$280/oz, start-up capex US$2.8m.
Potential to develop Bobrikovo sulphide ore: near-termtarget 640koz Au to 200m depth, exploration target 4moz Au to +3,000m depth. Spin-off likely 2009-10.
Other gold projects include Melrose (WA): resource306koz Au, initial capex A$2m for mining from 2010,potential to toll treat at nearby gold plants.
Batchelor Project (NT): plans to mine phosphate(Geolsec) and Mg (Winchester) from 2010. Spin-off ofRum Jungle uranium assets (UAU) planned for Oct '09.
Ongoing share purchase plan at A$0.2/share could raiseup to A$2m in working capital.
Investment Points
2.9
Tenement costs ($k per year)
g/tAu
Au,Ag
0
0.0
7.32.1
0
0.3
Capital raisings (A$m)
12.0
0.0
c/off
1.68.7
t koz
3.8
0
Aus (NT)DFS
344.3
Partner Type
10.7
1.1
-
navarious
Batchelor - GeolSec74% Orogenic
100%
Shear100% AuAnalyst: Dr Trent Allen
JM McKenzie (Non Exec)
0.2
0.04
g/tEquity Mt
Process
Key Projects
Major shareholders: AK Karpinski (30%), Merril Lynch Nom (9.6%)
RouteAK Karpinski (Exec Chair)RH Skeet (Non Exec)
www.korabresources.com.au
ProjectBobrikovo
Phosphate
0
Metal
0.3
1.69.8
7.2 1.6 52.6
100% 6.7 1.43 na
37.471% 1.0 1.6 51.7 36.771%
170.571% 3.20 7.5 240
Overview: Korab listed on the ASX in August 2005. It is a diversified mining and exploration company with operations in Australia and the Ukraine, focused on gold, rock phosphate, magnesium and uranium. Bobrikovo (Au/Ag; Ukraine; KOR 74%): Operated by 74%-owned subsidiary Donetsky Kryazh Ltd (DKL) and held by 96% owned Lugansk Gold Ltd (LUG). The deposit, located in the Tethyan gold province and similarin style to Sukhoi Log (57moz Au, Russia), is in free milling quartz carbonate veins (7m-25m wide). The ore zone is 2.5km-3km long (within an 11km structure) and 0.9km-1km wide. There is an oxide zone to 30-40m depth, underlain by sulphides to +3,200m. Historic, non-JORC gold reserves within the oxide zone (C2 by Russian classification) include 52.6koz Au in higher grade ore @ 7.2g/t, and 51.7koz Au in lower grade ore @ 1.0 g/t, with 328koz silver @ 45.2g/t. There is also a non-JORC historic resource within the deepersulphide zone, of 240koz Au grading 3.2g/t to a depth of 150m, and ~640koz Au to a depth of 200m. KOR has an exploration target of 4moz Au for Bobrikovo. Campaign mining (free digging at 1.2mtpa) and stockpiling is planned from 4Q09, with Stage 1 processing from late 2010 or early 2011 by gravity tables(recoveries 63%-76%), rate 0.12mtpa, head grade 4.2g/t Au (blending high and low-grade ore); year 1 production ~12koz Au. There is potential in Stage 2 to expand to +300ktpa, boost recoveries and process lower grade oxide ore (~1g/t Au) blended with Stage 1 tailings (~1.2g/t Au). Metallurgy demonstrates oxide and sulphide recoveries up to 97%-98%. Sulphide ore is non-refractory. Stage 1 opex US$280/oz Au (DFSrevised Aug ‘09). Stage 1 capex is ~US$2.8 million. In the mid-term, the sulphide ore could be mined at opexUS$400-$500/oz, financed by debt or a spin-out of LUG – announcement expected 2H09. Melrose (Au; WA; KOR 100%): 170km N of Leonora. An advanced project: mining could begin 2010. TotalJORC resource of 306koz Au averaging 1.43g/t over three deposits. Possible opex A$550/oz Au, capex A$2m, production +20kozpa Au. Ore could be toll treated (e.g. at Bronzewing, Darlot). Drill intercepts outside the resource envelope include 56m @ 3.6g/t Au from 49m depth and 5m @ 11.0g/t from 120m depth. Batchelor Project (Phosphate,Mg,U,Au; Australia [NT]; KOR 100%): ~65km south of Darwin. This project includes the GeolSec Phosphate and Winchester Magnesite operations, which could both be mining in2010. KOR projects GeolSec gross profit of A$26-$27 million over first 3 years (15ktpa-30ktpa, margin A$350-400/t). There are also uranium assets (Rum Jungle Mineral Field), held by subsidiary Uranium Australia Ltd (UAU) – an A$11m IPO is planned for Oct ’09, with existing KOR investors receiving free shares (1.37 for each KOR share, including new SPP shares), ex date is October 8, record date October 14. Investment Comment: KOR has plans for four new mines, one spin-off in progress (UAU) and another planned for 2010 (LUG). At US$850/oz Au and using DFS parameters, NPV of Bobrikovo oxide operation is A$6m (5% discount rate), with upside from developing the sulphide; GeoSec, at 30ktpa, margin A$350/t, for 5 years (and 5% disc), has NPV A$20.6m – a combined A$26.6m or A$0.33/share for these operations. With several advanced projects, exploration properties in WA (gold, iron ore, uranium), and a market cap of A$16m, KOR appears under-rated. UAU and LUG spin-outs could help unlock some of this latent value.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 20
Bobrikovo Au-Ag deposit oxide and upper sulphide ore zones (concentrations of Au): the oxide zone extends to a depth of 35m and has historic (non-JORC) reserves of up to 104koz Au. It could be mined from
4Q09 and the ore processed from late 2010. The underlying sulphide zone is open below 200m depth.
Location of the GeolSec rock phosphate deposit: quarrying at the project could commence in 2010, to
supply the demand for rock phosphate from organic farming. KOR projects cash flow of A$26-$27 million over first 3 years (30ktpa). Exploration target 1mt of phosphate, based on historic (non-JORC) resource.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 21
Norseman Gold Plc *
0.92
Cash Cost (A$/oz)
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x)Price/Book (x) Drilling - RAB (m)Listed company options:
Land holding ('000 ha)
$11M exploration budget for 2008.
Experienced board and management.
Resources (includes proved and probable reserves as above)
Mineralised Material (est., non compliant with JORC)
Contacts DirectorsMr Barry Cahill(Chief Executive Officer) B Cahill (CEO)Tel: 61 (8) 9473 2200 D Steinepreis (Non Exec Dir)South Perth, WA, Australia M de Villiers (Non Exec Dir)
G Steinepreis (Non Exec Dir)P Bilbe (Non Exec Dir)
1.3
0%
20,000
171.9
0
161
0PER (x)
Exploration and Evaluation (A$m)
1,10033.6
0
24.914.3
Eqty
1.4
12.0100%
Analyst: Dr Tony Parry
9.30
www.norsemangold.com
Total
Norseman - Open Pit
V Pendal (Chairman)
TotalReserves and Resources as at 31 March 2009
Meas+ind+inf3,700
8.43,70020.0
100%2.80
P/CF (x)
Shares on Issue (EOP) (m)
Norseman U'ground
Code for reporting mineral resources - Australian:Classification
Norseman - Open Pit
Gold
Meas+ind+inf
Norseman 100%Project
Au
Proven + Probable
OptionOwnership/
Dividends (A¢/share)
20,000
0%
0
161
60
81.0
0
0%3.270.4
0%
Norseman - U'ground
c/off
0.44
06.1
Drilling - RC/Diamond (m)
0%81.0
Yield (%)
20,000
g/t453.20
161
Company Comment161
Reserves
(JORC)Au
1.4g/t
Reserves and Resources/Mineralised Material
10.901.00
4
Proven + Probable 100%100%
AuMt
7 6
CFPS (A¢/share)
171.9
t
6
EquityOre
0
Project
161
171.9
EPS (norm) (A¢/share)Net Profit (norm) (A$m)** 20.3 19.9
11.516.6-10.2-8.7
-8.6 7.73.8
05.33.4
0
Exchanges: ASX:NGX; AIM:NGL
Capital Profile
52 week range (A$/share)Share price (A$)
to0.880.45
NGX.AUGoldAustralia (WA).Production, Advanced Exploration
21 September 2009
96.1Options and warrants (m) 6
102Fully diluted (m)
Number of shares (m)
Convertible notes (m) 0
4.7Market capitalisation (undiluted) (A$m)
89.3
84.6
Major shareholders: Sprott Asset Managment (11.6%),
Profitable unhedged mid tier gold producer entering astrong growth phase.
Norseman field has long history of high grade quartz reefmining since 1894 with >5.5moz extracted
NGX is operating two underground mines - high gradenarrow quartz reefs.
Reserves 400koz, total resource base 3.7moz, conversionsubject to mine development.
FY09 production 81koz @ A$715/oz cash cost, net profitA$20.3m, ave grade 6.04g/t
Production expansion to ~120kozpa forecast usingexisting mill capacity, subject to 3rd mine startup.
Our assessed NAV is A$1.18 (US$850 long term goldprice) or A$1.69/share @ US$1,000/oz (A$/US$=.0.78).
Prospective P/E ratio only 6.1x for potential 120kozpaproducer (FY11), cash of ~A$32m
5.3
2.6
Investment Points
1.2No
Baker Steel Capital Managers (9.2%), Directors (10.2%).
32.3
40012.3
1,1002,50078.1
0.0
LocationAus(WA)Productionqtz vein Gravity/CIL
Target
A$ 0.88
28.6
2011F
35.6
NGX has produced a solid A$20m profit in FY09 from production of 81koz from the high grade Norseman underground operations (3.7mozresource). With spare mill capacity, plans to expand to ~120kozpa withadditional mining output are now being implemented.
95.3
Norseman Gold Plc
8.90
Key Projects
MetalJV
Partner Typenone
400
2,500
ProcessRoute
5.50
0.0
350
20,000
koz
10.9
Au
0.0
ProjectStatus
YEAR END: June
-7.7
123.1
EBIT (A$m)
80.7Equity Production (koz) 123.1800 715
2008a
25.9
77.7
22.3 36.7
22.9
Production and Financial Forecasts
2009a 2010F
45
111.7
25.7
27.8
koz
350
14.828.9
06.03.0
695 702 709
2012F
NGX - Norseman Gold Plc(listed on ASX June 2009)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Sep-
08
Mar
-09
May
-09
Jun-
09
Aug-
09
Shar
e Pr
ice
($/S
hare
)
Overview:. NGX acquired the historic Norseman gold operations, 725km East of Perth, in April 2007, from the former Croesus Mining Linmited (now Sirius Resources). NGX was originally listed on the AIM (London) market and since June 2009 has been dual listed on the ASX. History: The Norseman operation is Australia’s longest continually running gold operation with aproduction history that dates back to 1894 when gold was first discovered at Norseman. An estimated5.5moz of gold has been extracted from the field, most in the last 65 years of production. Current Operations: NGX is currently sourcing ore from two underground high grade narrow quartz vein mining operations – The Bullen decline and Harlequin decline. Ore is treated though the 700ktpa capacity Phoenix gravity/CIL mill. The mill is currently only running at ~70% capacity (~400ktpa) due to haulage limitations from the two existing mines. In FY2008 415kt was milled for 77.7koz of production at a head grade of 6.02g/t. In FY09 gold output improved to 80.7koz from 398kt of ore milled at an average grade of 6.04g/t. Average cash cost of production in FY09 was A$715/oz (down to A$636/oz in 2Q09 with grades increased to 6.66g/t). A net profit of A$20.3m was recorded in FY09 (EBIT of A$22.3m), compared to a loss of A$8.7m in FY08. Current Reserves & Resources: Current reserves (prov. + prob.) are 400koz (grade 8.9g/t), ~80% of which is derived from the two current underground mining operations at Bullen and Harlequin. The totalJORC resource is 3.7moz at a grade of 5.5g/t, 67% of which is an underground resource (grade 9.3g/t) and 33% an open pit resource (grade 2.8g/t). The complexity of the mineralisation (particularly at Harlequin with a high ‘nugget’ effect), means that underground resources can only be converted to reserves through mine development, and the correlation between estimated resource grades and actual head grades is difficult to accurately predict, and is only confirmed by extraction and ore treatment. Future Expansion: NGX’s strategy is to expand mine output to increase ore treatment rates to more fully utilize the Phoenix mill capacity of 700ktpa. To do this, NGX will need to commence a third miningoperation, likely in the next 12 months. Exploration and resource drilling is focused on 3 areas: the OK Decline (OK Deeps – various target areas below and to the W of historical OK mine workings), North Royal (open pit potential plus u/g remnant pillars) and the Crown Reef (potential 1moz resource in pillars from historical workings). A decision on opening up one of these areas is likely in the next 6 months. RCR Modeling Assumptions: Our forecasts assume mill throughput is expanded to 620ktpa by 2Q10and gold output increases to 123kozpa, recovery 98%. We have assumed longer term head grades of 6.3g/t, opex A$135/t which gives ~A$700/oz. Sustaining (mine development) capex of A$16mpa with an additional A$10m in 1H10 to develop the third mine. Total mine life of 10 years assumed. Investment Comment: After losses in FY08 and a patchy prior history (Croesus as operator), it has been a major milestone in FY09 for the NGX team to show that the Norseman operations can beoperated more efficiently with a solid A$20m profit, with recent cash costs well below A$700/oz. The potential expansion to ~120kozpa is now the main focus – as it looms nearer we would expect a major stock re-rating with a current FY10 P/E of only 7.7x and our assessed NAV of A$1.18/share based on US$850 long term gold and A$/US$=0.78 (A$1.69/share with long term gold @ US$1,000/oz).
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 22
Norseman Gold Plc
ASSUMPTIONS 2008a 2009a 2010F 2011F 2012F FINANCIAL RATIOS 2008a 2009a 2010F 2011F 2012FA$/US$ 0.90 0.75 0.80 0.79 0.78Gold Price (US$/oz) 834 886 925 900 899 Net debt/equity (%) 18% -30% -33% -59% -86%Gold Price Realised (US$/oz) 821 894 930 900 899 Net debt/ net debt + equity (%) 15% -44% -49% -143% -590%
Current ratio (x) 0.8 2.4 2.0 3.6 5.2EBIT/interest (x) -4 39 215 na na
EQUITY PRODUCTION Debt/operating cashflow (%) na 27% 0% 0% 0%Norseman Production (koz) 78 81 95 123 123 Exploration/total overhead (%) 0% 44% 16% 16% 16%NGX Equity Production Gold (koz) 78 81 95 123 123 EV/EBITDA (x) 84.2 2.8 2.2 1.8 1.8Cash Costs (A$/oz)** 800 715 695 702 709 Market cap/net cash (x) -5.5 3.3 3.0 1.7 1.2Cash Costs (US$/oz)** 717 571 556 556 555 Market cap/book (x) 3.3 1.2 0.9 0.7 0.6 ** Cash Cost is direct operating cost before royalties.
PROFIT AND LOSS (A$m) FINANCIAL SENSITIVITIESRevenues 72 97 113 142 145Operating costs -64 -62 -66 -86 -87 % Change in EPS for a 10% increase in:Depreciation/amortization -9 -10 -12 -13 -14Exploration Expensed 0 -2 -1 -1 -1 AUD/USD 5% -15% -36%Corporate -3 -3 -3 -3 -3 Gold Price 13% 17% 39%Other (incl. Royalties) -4 1 -3 -3 -4EBIT -8 22 29 36 37Interest 2 1 0 0 0 % Change in NPV for a 10% increase in forecast minelifeOperating profit/loss -9 22 28 36 37 commodity assumptions for:Tax 0 -2 -9 -11 -11 Base + 10%Minorities 0 0 0 0 0 A$/share A$/share %Net profit/loss -9 20 20 25 26 Gold Price US$850/oz 1.18 1.47 25%Net abnormals/extaordinaries 0 0 0 0 0Net profit/loss (reported) -9 20 20 25 26
BALANCE SHEET (A$m) VALUATION (A$m) Q3 08 Cash and deposits 7 33 28 50 72Total current assets 17 40 28 50 72 Assumptions Base "What if" PP&E 28 32 50 53 55 Long Term Gold Price :US$/oz 850 1000Total non-current assets 49 62 86 95 103 Long Term AUUS 0.78 0.78Total assets 66 102 114 145 176 ProjectsTotal current liabilities 21 20 17 17 17 Norseman Operations 100% NPV@5% A$210/oz 167 253 Reclamation reserves 0 0 0 0 0 Assumes 10 year LOM @ 6.3g/t grade Long term debt 15 3 -4 -4 -4 Resources and ExplorationTotal non-current liabilities 19 14 8 8 8Total liabilities 41 34 24 25 25 Regional Exploration 100% 25 30Equity 25 68 90 120 151
OtherTotal debt 22 7 0 0 0 AssetsNet debt 15 -26 -28 -50 -72 Cash and deposits (3Q09) 31 31Average shares (fully diluted) (m) 85 124 176 176 176 Rehabilitation Fund 0 0
Other 3 3FLOW OF FUNDS (A$m) LiabilitiesEBITDA 1 32 40 49 51 Debt -5 -5Cash flow from operating activities Corporate -18 -18 Operating surplus 6 33 45 53 54 Reclaimation Reserve 0 0 Corporate -3 -3 -3 -3 -3 Net Assets 203 294 Net borrowing cost -2 -1 -2 -2 -3 Net tax paid 0 -2 -11 -9 -9 Fully Diluted Shares (m) 176 176 Net exploration paid -4 -7 -6 -6 -6 Net assets/share (A$/share) 1.18 1.69 Other non cash items 3 5 11 10 12Net cash from operating activities 0 26 34 44 45Cash flow from investing activities Valuation/Reserve oz :US$/oz 396 573 Capital expenditure 0 -5 -30 -16 -16 Valuation/Reserve & Resource oz :US$/oz 43 62 Asset Sales & Other -4 -7 -6 -6 -6Net cash from investing activities -5 -12 -36 -22 -22Cash flow from financing activities Net proceeds from issue of shares 0 20 0 0 0 Dividends paid 0 0 0 0 0 Net proceeds from borrowings -5 -11 -5 0 0Net cash from financing activities -5 9 -5 0 0Net change in cash -10 24 -7 22 23
PRODUCTION STATISTICSNorseman 100%Ore Treated (kt) 415 423 480 620 620 Head Grade (g/t) 6.07 6.06 6.30 6.30 6.30Recovery (%) 96 98 98 98 98Recovered grade (g/t) 5.82 5.93 6.17 6.17 6.17Gold Produced (koz) 78 81 95 123 123Equity Production (koz) 78 81 95 123 123Cash Costs (US$/oz) 717 571 555 556 555Production Costs (A$/t) 154.00 137.00 137.93 139.28 140.68 EBIT (A$m) -8.0 23.0 38.2 44.8 44.4
Year YearYEAR END: June
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 23
North Queensland Metals Limited
0.37Gold Price (US$/oz)Equity Production (koz)
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)Cash (A$m) - Sep 09FPrice/Cash (x) EV/EBITDA (x)Price/Book (x) Listed company options:
Total
Mineralised Material (est., non compliant with JORC)
Contacts DirectorsMr John McKinstryCEOTel: 61 (0) 7 3666 0510
26.0
7.4
Au Au Eqty
Baal Gammon probable ore reserves 3.31mt @ 0.93% Cu, 0.20% Sn, 32.0g/t Ag, 29.3g/t In.
0.8
Pajingo Proven & Probable 0.5
(JORC)
12.08.18.0
1.48
IndicatedInferred
Code for reporting mineral resources - Australian:GoldReserves
1.7
3.25.90
Shares on Issue (EOP)
10.1
float
na??Aunaepithermal
* NQM holds option to purchase 100% of Dotswood
0/100% Au mid expl.Heemskirk
na
214.8
0.0
StatusProject
0.0
Aus(QLD)mid expl.
epithermal
volcanicsfloat
Aus(QLD)
Aus(QLD)
Productionvolcanics
Aus(QLD)
Twin Hills 60%
RouteProcessTarget
Partner
7.02.0
4.92.6
A$ 0.27
NQM focus is to grow its gold production (current~36kozpa) to become a mid tier (~100kozpa) producer.
NQM is 60% owner of the Pajingo gold operation -epithermal gold system (2.3moz production to date).
Pajingo production ~60kozpa, opex ~A$700/oz.
Option on new QLD gold project (Dotswood) and TwinHills purchase aimed at mining within 2 years, NQMproduction to ~100kozpa?
Dotswood ore treated 2Q09 - confirms Pajingo millexpansion potential to 500ktpa ore.
Twin Hills Project recently acquired - potential for majorhigh grade (7.5g/t) ore source to Pajingo.
New Pajingo style epithermal discovered at nearbyMoonlight.
11.1
198.95.5
Investment Points
18.0No
147.2 198.9
3.8
7.2
6.9
8.0
55.037.2
2.03.9
3.4
21 September 2009
53.7
16
Fully diluted (m)Market capitalisation (undiluted) (A$m)
0.0
Major shareholders: D Walker (27.2%), Newmont Capital Pty Ltd (10.3%)
6.8
100% naSn,Cu,Ag,In
Sn,Cu
60% 11.21.39
Analyst: Dr Tony ParryDotswood*
PajingoResources
53.7
7.9
Dividends (A¢/share)
Company Comment
CIP
384.0
0.0
Key ProjectsProject
60%
Ownership/
358.0
Cut Off
60%g/tMt
Yield (%)
23.016.6P/CF (x)
0
EPS (norm) (A¢/share)1.61.2
0.0
14.4
10.2 13.7
Reserves and Resources/Mineralised Material
144.6
5.67.25.5
11.06.8
CFPS (A¢/share)1.8 3.0
NQM.AU
0.8Number of shares (m) 198.9Options and warrants (m)
Gold, Tin, Copper, Silver, Indium
Share price (A$)
0.0
Capital Profile
Australia (QLD)Production, Advanced Exploration
52 week range (A$/share) to
Exchanges: ASX:NQM
Convertible notes (m)
899
YEAR END: June0.270.16
Revenue (A$m)
2010F
886 925834
2008a 2009a
12.4 31.5
North Queensland Metals Limited
NQM's has reported a solid full year profit of A$5.6m from the 60kozpaPajingo (QLD) gold operation (NQM 60%). Pajingo cashflow will driveNQM's strategy to grow to a mid tier gold producer (~100kozpa in 5 years)from satellite ore bodies such as Twin Hills and Dotswood.
Production and Financial Forecasts
2012F2011F
Pajingo
www.nqm.com.au
Type
M Tilley (Non Exec Dir)
D Walker (Non Exec Dir)B Kay (Non Exec Dir) 60% Au,Ag
naEinasleigh
100%
Option Metal
Equity
Brisbane, (QLD), Australia
Pajingo
HerbertonHeemskirk
JV
199.6 7.12
Classification Project
EBIT (A$m) 10.76Net Profit (norm) (A$m)
N Thomas (Non Exec Ch)
Drill Investments Pty Ltd (5.7%), Robin Scrimgeour (3.4%)
koz
0.08
3.73.9
5.0
PER (x)
6.7
20.63
4.0
61.2
2.02.63.9
Aut
Orekoz
102.0
adv expl. Aus(QLD)early expl.
Location
230.4
15.6
g/t
63.1
198.9
14.8
15.76
900
Au
9.65
49.512.5 56.436.3 42.8
NQM - North Queensland Metals Limited
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Sep-
08
Nov
-08
Dec
-08
Feb-
09
Mar
-09
Apr
-09
Jun-
09
Jul-0
9
Aug-
09
Shar
e Pr
ice
($/S
hare
)
Source: Bloomberg
Overview: NQM was listed on the ASX in Dec ‘06. with a focus on tin/silver/indium deposits in N Qld, In2008 it joined the ranks of gold producer with the purchase 60% of the Pajingo mine. The strategy now isto extend minelife and expand production by bringing new regional resources into production. Pajingo Gold Mine: The Pajingo mine is 53km S of Charters Towers in Central QLD. Initially an open cut,it has operated as an underground mine (ave. grades 11g/t) since 1996, yielding 2.3moz. NQMpurchased a 60% stake from Newmont Australia in Dec ‘07 for A$18m (cash and shares). The Pajingoore body comprises a series of steeply dipping narrow epithermal quartz veins. Mining is by a series ofdeclines extending over 4km strike length. Ore is processed through a 500ktpa CIP plant. Currentreserves and resources are 2.01mt @ 7.5 g/t for 486 koz (21% in reserve category). Ore throughput rateis 300 ktpa. In the 2Q09 grades dropped and costs rose to A$853/oz, partly due to excessive dilution.NQM is rectifying this with improved mine planning and a shift to narrow vein mining equipment. Pajingo Resource Exploration: Mine life is ~5 years on current resource base. NQM plans to replaceresources, extend mine life by drilling defined ‘brownfields’ epithermal targets in the immediate vicinity.NQM believes the Pajingo field has strong potential to increase resources. Recent drilling at Moonlight(~2km S of existing mine) has confirmed a new gold mineralised system (veining similar to the Pajingoepithermal veining), 350-400m below surface. Promising results have also been generated at Janet G(14m @ 12.5g/t) and Ralph Porter (see map next page), potential open cut ore sources? Dotswood Gold Project Option: This is the first stage of a focused strategy aimed at becoming a midtier ~100kozpa producer within five years. In 1Q09 NQM announced it had secured a 6 month option over100% of the Dotswood Gold Project north of Charters Towers (80km by road). NQM describes Dotswoodas an ‘advanced’ gold exploration project, having a history of modest gold production (open pit in 1986-1987, and high grade underground 2000-2004). During 2Q09 NQM treated parcels of Dotswood oxide ore(2.1g/t grade) through the Pajingo mill with good results – confirming the mill could gear up to 500ktpatreatment rate. NQM is undertaking resource definition drilling, establish an initial resource statement andundertake a scoping study on production. Initial mining targeted in late CY10. Dotswood ore couldsignificantly boost gold output. NQM will pay the vendor A$1.9m in cash, 1 million NQM shares and a 1%LOM royalty (A$2.5m cash/share value plus royalty) to exercise option in 4Q09. Twin Hills: Could be a major boost to expansion plans, 190km S of Pajingo, this project has beenacquired by the JV partners for A$1.75m cash. NQM quote a non JORC ‘drill defined mineralisationtarget’ of 800-850kt @ 7.0-7.5g/t Au. NQM has commenced FS on trucking up to 200ktpa ore to Pajingo. Corporate; NQM recently raised A$3.9m net through a share placement 20.5c. and a SPP raised A$6.2mat 20.5c. This will ensure NQM’s project acquisition and exploration strategy is funded. Investment Comment: NQM’s strategy is to increase gold production from the highly prospectiveDrummond Basin. Our NPV of Pajingo stake (5%DR, 60% resource conversion, long term Au priceUS$850/oz) is A$54m, plus Dotswood, Twin Hills and Herberton tin/base metals gives NAV of A$0.38 pershare. Prospective P/E for FY10 is ~8x with plenty of future growth. Our 6 month share price target isA$0.35 if Dotswood delivers promising drilling results as expected.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 24
NORTH QUEENSLAND METALS LIMITED VALUATION
Target^Price (Low) (High)
Equity Gold Valuation A$m A$m A$mProjects (moz) US$/oz
+ Pajingo Gold Project ^ 60% 0.48 146 54 44 60+ Baal Gammon Project 100% (2% of gross in ground value - multi metal resource) 8 3 15+ Herberton Regional Tin Expln 100% 3 2 5+ Twin Hills (major potential ore source, currently non JORC, @ ~7.5g/t) 5 3 10+ Dotswood Gold Project Option (Lower grade (~3g/t), potential open cut oxide ore) 4 0 8
Sub Total 74 52 98
+ Cash (Est Sep '09) 7.9 7.9 7.9+ Tax Losses 2.2 2.2 2.2- Debt 0.0 0.0 0.0- Forward Sales Discount 0.0 0.0 0.0- Corporate 7.7 7.7 7.7
Sub Total 2.4 2.4 2.4
NQM NET ASSET VALUE 76.4 54.2 100.4
Capital StructureShares (m) 198.9 198.9 198.9Fully Diluted Shares (m) 199.6 199.6 199.6
NQM NET ASSET VALUE PER SHARE :A$/share 0.38 0.27 0.51NQM NET ASSET VALUE DILUTED :A$/share fully diluted 0.38 0.27 0.50
^Pajingo target price based on NPV @ 5% DR, RCR long term gold price forecast of US$850/ounce, A$/US$ = 0.78
Valuation Sensitivity
NQM’s exploration of the Pajingo epithermal system is starting to show there is excellent potential for major additions to ore resources in areas such as Moonlight (underground ore potential) and Janet/Ralph
(open cut ore potential).
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 25
YTC Resources Limited
0.47
Debt (A$m) - Sep 09FEnterprise value (A$m)
Avg monthly volume (m)
Cash (A$m) - Sep 09FPrice/Cash (x) Cash (A$m)
Price/Book (x) Listed company options: Net asset backing (Ac/share)
Quarters stated on calendar year basis.
Mineralised Material (est., non compliant w ith JORC)
Contacts DirectorsMr Rimas KairaitisChief Executive OfficerTel: +61 (0)2 6361 4700Orange, NSW, Australia
R Chambers (Non Exec)
Ausmindex, NMG Cobar na Mid Expl. Aus (NSW)
Doradilla Project tin resource is 7.8mt @ 0.28% for 49.2mlbs Sn
Porphyry
Pre-feasibility Aus (NSW)
ProjectLocation
Nymagee
70%100%
Hera 100%
Sn (W)100%
Au-base
Tallebung80% Au-base
Indicated + inferred 100% 1.8 6.70 2.5g/t AuEq 12.0
Cobar
385 385
Kadungle
Baldry
2.2
Hera (CBH, 2007) ^
Ownership/
Key Projects
12.8
G Zhang (Non Exec)www.ytcresources.com S Woodham (Non Exec)
Project
3.0
Investment Points
2.1
Focused on gold and base metal exploration in NSW,including recently acquired flagship, the Hera Gold andBase Metal Project near Cobar.
Hera Project and Nymagee JV: purchased 3Q09. Hera isan advanced stage, undeveloped gold and Cu-Pb-Zndeposit; current AuEq resource of 510koz Au.
Hera's Main Lens could provide 7 years undergroundproduction of 39kozpa Au, with natural hedge from basemetal co-product (e.g. Zn 6700tpa). Opex A$360/oz AuEq
NSW exploration portfolio includes early to advancedstage prospects for gold (Baldry, Kadungle) and tin.
Strategic alliance with China's Yunnan Tin Group (YTG) - world’s largest tin producer.
Cash Sep 09F is A$12.7m after A$22.6m shareplacement and ongoing spp. Possible A$1.5m fee forfacilitating 50% sale of Renison (ASX:MLX) to YTG.
0
Wenxiang Gao (Chair)A Wehby (Vice Chair)R Kairaitis (CEO)
Aus (NSW)
Aus (NSW)
4.2
0
5.9
koz
Aus (NSW)
Status
20,000
-
2.67
0.0
koz
11.78.2
Au Eqty
0.5
43.8
Au
185
4,000
0
Au
13.9
9.8
Adv Expl.Mid Expl
25.92
1.3
Aus (NSW)Aus (NSW)
180#####
100%
Sn, Ni
Giant's Den
100%
Doradilla
Sn (Au)Au, Ag
Skarn na
Mid Expl.Early Expl.none
none
Au, Cu
naGCP,SRL
Epitherm.
Equity Mt g/t
na
RoutePartner
3.3
na
na
Type
none
JV
nonena
Gravity/float
283
0.00.0 0.0t
8.8 283
5,000
0.0 0.0
g/t
154Options and warrants (m)
Classification(JORC)
Project
2.913.9
12.7
Reserves and Resources/Mineralised Material
No
16
Fully diluted (m)
38.5
Funding duration at current burn (yrs)
Land holding ('000 ha)
Drilling - RAB (m)Shares on issue (pr end) (m shares)
Drilling - Other/Diamond (m)
159
Locksley Holdings Pty Ltd (7.5%), Smiff Pty Ltd (7.2%)
Exploration/(Expl.+ Corporate) (%)Convertible notes (m)
YEAR END: June0.25
0.08
Corporate (A$m)
0
toExploration and evaluation (A$m)
Share price (A$)
YTC.AU
5
Gold, Base Metals, SilverAustralia (NSW)Pre-Feasibility StudyExchanges: ASX:YTC
Capital Profile
52 week range (A$/share)
21 September 2009
Number of shares (m)
0.0Market capitalisation (undiluted) (A$m)
Major shareholders: Yunnan Tin Aust. (25.8%), Yunnan Tin YTC Hold. (11)
25.8
23.16
5,000
185-
1802,0001,000
0.00
Option Metal
Reserves
Indicated + inferred
^Other metals: Cu 0.18%; Pb 2.72%; Zn 3.35%; Ag 15.13g/t. ^^Other metals: Cu 0.2%; Pb 2.5%; Zn 2.8%; Ag 14g/t
7.5% ZnEq
Hera (Triako, 2004) ^^
Cash backing (Ac/share)
20,000
2.760.00
00
-Tenement costs ($k per year) -
Funding from JV partners (A$m)
Capital raisings (A$m)
0.5
-166
5,000 15,000
40.043.8
12.7
Company Comment
Cut Off
13.2
1.7
Tin
2.9
AuOre
1.3
167.2
1.140.06
Production and Financial Forecasts
2010F
0.500.25
Sep-09F 2008aJun-09a
0.43 1.381.16
7845
1.00
67 6812
154.1
YTC Resources Limited
YTC plans to mine its A$12m acquisition, the Hera gold and basemetal project (NSW), from Jan ’11. This is subject to a DFS (expectedFeb ’10) and final permitting. Current gold-equivalent resource is~510koz Au, with infill and expansion drilling to commence Oct '09.
2.43 3.55
A$ 0.25
2009F
Analyst: Dr Trent AllenC Ng (Non Exec)
Mid Expl.
R Hill (Non Exec)
Target
Lode, alluv.
Process
Code for reporting mineral resources - Australian
Resources100%
Lode, porph.
Overview: YTC listed on the ASX May ’07. It is focused on the exploration and development of gold and base metal projects, especially tin, in the New England and Lachlan Fold Belts of New South Wales. Hera Project and Nymagee JV (Au, Ag, Pb, Zn, Cu): Located 100km SE of Cobar, central NSW, Hera is an advanced but undeveloped gold, silver and base metal (Cu-Pb-Zn) deposit. It is Cobar-style deposit consisting of 1-12m wide sub-vertical lenses. Known mineralisation extends from surface to +500m depth, and measures 800m (strike) by 300m (width). Hera was discovered by Pasminco (2001). Triako then held the project (2003), outlining a JORC resource (on Main and 1530 lenses) of 1.79mt @ 6.7g/t Au, plus significant Ag-Pb-Zn-Cu (e.g. 2.8% Zn). It also completed a PFS. When Triako was bought by CBH in 2006 for A$70m scrip (to obtain its Pb-Zn projects), Hera was its primary asset. CBH expanded the resource to 3.3mt @ 2.67g/t Au in 10 mineralised lenses (with a zinc-based cut off), and obtained a permit for a decline. Mining Evaluation: To date, YTC has evaluated the Main Lens (600m strike), which could be mined via conventional bench stoping (+150m depth). Some parts of the lens are high grade, e.g 16.7m @ 70g/t Au, 8.5% Pb, 11.1% Zn and 38g/t Ag (CNYDD017). YTC has defined a Mining Inventory for Main Lens of 1.14mt @ 6.7g/t Au, 14.9g/t Ag, 0.2% Cu, 2.27% Pb and 3.72% Zn. This could be mined over 7 years, with annualproduction 39koz Au as both bullion and in concentrate, along with concentrates containing Ag (77kozpa), Zn (6700tpa), Pb (3800tpa) and Cu (330tpa). Gold could be produced from a gravity circuit and as a concentrate either at Hera or, for example, at CBH’s Endeavour plant (150km by road, spare capacity ~75%). YTC estimates opex A$360/oz AuEq. Initial capex could be A$23.4m including A$5m for the DFS and exploration, A$11.8m underground development and A$3.5m for a gravity circuit. Of the 9 lenses other than the Main Lens, the 1530 Lens (drilled 22.8m @ 7.1g/t Au from 361.4m) and Far West Lens (drilled 7.8m @ 15.2g/t Au and including 12.5% Zn) could provide early mine life extensions. YTC plans to mine Hera, commencing Jan’11. A DFS and resource update are expected Feb ’10. Hera exploration: Resource infill and expansion drilling should commence Oct ’09. Hera is open below ~500m depth, and along strike. The 1km-distant Hebe Prospect has drilling 7m @ 3.26g/t Au and +2% Pb and Zn, while the underground Nymagee Copper Mine (Nymagee JV) produced 0.42mt @ 5.8% Cu in 1880-1917. The 5km Hebe-Nymagee strike corridor is underexplored. A gravity survey is planned (Oct ’09). Hera Valuation: At a gold price of US$850/oz, based on YTC’s parameters of the Hera Evaluation Study, and the Triako-defined resource (Main and 1530 lenses) we estimate Hera project NPV (5% discount rate) tobe A$108m, or A$0.68/share (fully diluted) including cash. This assumes a 30% pre-DFS discount. Corporate: YTC bought Hera and an 80% interest in the adjacent Nymagee JV from CBH Resources Ltd (ASX:CBH) for A$12m plus 5% royalty (Jun ’09) and is funded by a A$22.6m share placement (Aug ’09) and ongoing A$2.7m spp to existing shareholders. Investment Comment: YTC’s acquisition of Hera was the culmination of a 2 year search for an advancedproject that could be put quickly into production yet had good exploration potential. Based on the current (1.8mt) resource, our Hera-NPV (5% disc) is A$108m or A$0.68/share, which takes no account of the large NSW exploration portfolio. Based on the Mining Inventory, short-term target is A$0.50/share. Near-term price catalysts could include results of the Hera drilling program and a DFS and resource upgrade in 1Q10.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 26
YTC plans to put the Hera Gold and Base Metal Project (western NSW) into production in early 2011. Exploration and resource infill drilling should commence in Oct ’09 as part of the DFS. The project already
has a permit for an exploration decline.
Hera Project valuation based on Triako’s JORC resource (2.5g/t Au cut off) is A$92m at US$850/oz Au, or A$0.68/share (fully diluted) including cash. As well as Hera, YTC has a large portfolio of exploration assets
in NSW, prospective for metals including gold, tin, silver and nickel.
HERA PROJECT VALUATIONEquity
LONG TERM GOLD PRICE^ :US$/oz 600 800 1000 1200 1400EXCHANGE RATE :AUUS 0.78 0.78 0.78 0.78 0.78LONG TERM GOLD PRICE :A$/oz 769 1026 1282 1538 1795
RESOURCE (MAIN + 1530 LENS) @ 5% NOMINAL** :A$m 100% 64 85 113 142 171RESOURCE (MAIN + 1530 LENS) @ 5% NOMINAL** :US$m 100% 50 66 88 111 133NPV/SHARE :A$/share 0.40 0.53 0.71 0.90 1.08
** Includes a pre-DFS discount of 30% of the project valuation: 30%^Gold price forecasts are US$950/oz in calendar 2009 to 2010, thence long term price indicated. Co-products held f ixed at US$800/oz Au Equivalent.
HERA PROJECT, KEY ASSUMPTIONS
RESOURCE ESTIMATES(Gold only)
Mt g/t koz koz
YTC Mining Inventory (Base Case) 1.1 8.8 324 246Rest of Hera Resource, Main+1530 Lens 0.7 8.8 185 388
Total 1.8 8.8 509
MINING METHOD Underground
PROCESS METHOD Separate gravity circuit, flotation (at third party plant)
PRODUCTION RATE :mtpa 0.16:kozpa Au 39 plus Ag 77kozpa, Zn 6700tpa, Pb 3800tpa, Cu 330tpa
CAPITAL COSTS :A$m 23.4 Plus A$20.2m sustaining for LOM
RECOVERY - GOLD :% 92 50% gravity, remainder as concentrate:% 95
CASH COSTS US$/oz 288 A$360/oz Au at US:AU 0.8
TAX :% 30ROYALTY :% 4 New South WalesMINE LIFE :Years 7+
Sensitivity
Gold Equivalent*
* These figures are early stage in nature and are intended to provide only a general indication of project potential scale and economic robustness. Considerable refinement may result from ongoing feasibility studies in 2009 and 2010.
Gold Targets
*Base case and Triako Resource use 2.5g/t Au Eq cut off . YTC metal price assumptions for Au Eq: Au = US$800/oz, Cu = US$4,000/t, Pb = US$1,300/t, Zn = US$1,300/t, Ag = US$12.5/oz
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 27
Selected Charts and Gold Sector Statistics Precious metal prices, interest rates, and oil price charts.
Gold Price (Spot US$/oz)
0
200
400
600
800
1000
1200
Sep
-99
Jun-
00
Mar
-01
Dec
-01
Aug
-02
May
-03
Feb-
04
Nov
-04
Aug
-05
Apr-
06
Jan-
07
Oct
-07
Jul-0
8
Apr-
09
Gol
d Pr
ice
(US$
/oz)
Source: Bloomberg
Silver Price (Spot US$/oz)
0
5
10
15
20
25
Sep
-99
Jun-
00
Feb-
01
Nov
-01
Jul-0
2
Apr
-03
Dec
-03
Sep
-04
May
-05
Jan-
06
Oct
-06
Jun-
07
Mar
-08
Nov
-08
Jul-0
9
Silv
er P
rice
(US$
/oz)
Source: Bloomberg
Platinum Price (Spot US$/oz)
0
500
1000
1500
2000
2500
Sep
-99
Jun-
00
Mar
-01
Nov
-01
Aug
-02
May
-03
Feb-
04
Oct
-04
Jul-0
5
Apr
-06
Jan-
07
Sep
-07
Jun-
08
Mar
-09
Plat
inum
Pric
e (U
S$/o
z)
Source: Bloomberg
Palladium Price (Spot US$/oz)
0
200
400
600
800
1000
1200
Sep
-99
Jun-
00
Apr
-01
Jan-
02
Oct
-02
Jul-0
3
Apr
-04
Dec
-04
Sep
-05
May
-06
Feb-
07
Oct
-07
Jul-0
8
Mar
-09
Palla
dium
Pric
e (U
S$/o
z)
Source: Bloomberg
NYMEX WTI Crude Oil Futures(US$/barrel)
0
20
40
60
80
100
120
140
160
Sep
-99
Jun-
00
Mar
-01
Dec
-01
Sep
-02
Jun-
03
Mar
-04
Dec
-04
Sep
-05
May
-06
Feb-
07
Nov
-07
Aug
-08
May
-09
(US$
/bar
rel)
Source: Bloomberg
US Federal Funds Rate (%)
0
1
2
3
4
5
6
7
Sep
-99
Jun-
00
Feb-
01
Oct
-01
Jul-0
2
Apr-
03
Dec
-03
Sep
-04
May
-05
Jan-
06
Oct
-06
Jun-
07
Mar
-08
Nov
-08
Aug
-09
(%)
Source: Bloomberg
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 28
Gold production by country (calendar year 2007).
Country t moz %China 280.5 9.0 11.3South Africa 269.9 8.7 10.9Australia 246.3 7.9 9.9United States 239.5 7.7 9.7Peru 169.6 5.5 6.9Russia 169.2 5.4 6.8Indonesia 146.7 4.7 5.9Canada 101.2 3.3 4.1Top 8 1,622.9 52.2 65.5
Rest of World 853.0 27.4 34.5
Total 2,475.9 79.6 100.0
Gold Mine Supply 2007
Source: Newcrest, GFMS
Gold production by producer, 4Q08 and calendar 2008
Company Company
Barrick Gold 2,100 Barrick Gold 7,663 Newmont Mining 1,337 Newmont Mining 5,180 AngloGold Ashanti 1,265 AngloGold Ashanti 4,979 Gold Fields 839 Gold Fields 3,329 Goldcorp 692 Goldcorp 2,323 Kinross Gold 550 Kinross Gold 1,840 Freeport-McMoRan 466 Newcrest Mining 1,751 Harmony Gold 392 Harmony Gold 1,661 Newcrest Mining 383 Freeport-McMoRan 1,255 Lihir Gold 315 Buenaventura 1,212
Total 8,339 Total 31,193
Top 10 4Q08 (koz) Top 10 2008 (koz)
Source: GFMS
Top ten gold producers by market capitalisation.
Company
Barrick Gold 22.9 Goldcorp 19.5 Newmont Mining 17.1 Freeport-McMoRan 14.1 AngloGold Ashanti 11.2 Kinross Gold 10.0 Newcrest Mining 9.5 Gold Fields 7.3 Agnico Eagle Mines 7.2 Yamana Gold 5.6
* as at March 12 2009
Market Capitalisation (US$ billion) *
Source: GFMS
China emerged as the world’s largest gold producer in 2007 – production 280.5t. The top 10 global producers’ output of 31.2moz in 2008 represents 40% of total global production (est. 77.7moz).
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 29
Report Contributors Tony Parry: Tony has extensive experience in metallurgical process development, (working with MIM Limited for five years) and in mining equity research, equity sales and mining corporate finance (working in London for five years and subsequently Perth). He was a founding Director and CEO of an ASX listed exploration company and has been engaged extensively as a strategic planning consultant to many small-medium enterprises. Tony’s qualifications include a BSc (Hons) in Metallurgy and a PhD in Metallurgy from the University of NSW. John Wilson: John has a background in mining, finance and equity research. He worked on Wall Street for 6 years and has covered US, Australian and Latin American mining stocks. He has also worked with BHP in their minerals division. Qualifications include an MBA from the Wharton School of the University of Pennsylvania and a Bachelor of Engineering from the University of Sydney. Trent Allen: Trent has a BSc (Hons) and a PhD from the University of Sydney, specialising in the petrology, trace-element geochemistry and economic geology of alkaline igneous rocks. His Australian mining industry experience includes several years with Newcrest’s Cadia Valley gold/copper mines, where he was engaged in resource definition and geotechnical engineering. Trent has also worked as an exploration consultant, university lecturer in geology and civil engineering, and as a newspaper editor with Fairfax in Sydney.
Resource Capital Research
September Quarter 2009 Disclaimer and disclosure attached. Copyright© 2009 by Resource Capital Research Pty Ltd. All rights reserved. 30
Disclosure and Disclaimer
Resource Capital Research ACN 111 622 489 www.rcresearch.com.au
Suite 1306
183 Kent Street Sydney, NSW 2000
Tel: +612 9252 9405
Fax: +612 9251 2859 Email: [email protected]
Disclosure and Disclaimer Important Information
Resource Capital Research Pty Limited (referred to as “we”, “our”, or “RCR” herein) ACN 111 622 489 holds an Australian Financial Services Licence (AFS Licence number 325340). General advice is provided by RCR’s Authorised Representatives Dr Tony Parry (Authorised Representative number 328842) and Dr Trent Allen (Authorised Representative number 331960). The FSG is available at www.rcresearch.com.au. All references to currency are in Australian dollars unless otherwise noted. This report and its contents are intended to be used or viewed only by persons resident and located in the United States and Australia and therein only where RCR’s services and products may lawfully be offered. The information provided in this report is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject RCR or its affiliates to any registration requirement within such jurisdiction or country. This report and its contents are not intended to constitute a solicitation for the purchase of securities or an offer of securities. The information provided in this report has been prepared without taking account of your particular objectives, financial situation or needs. You should, before acting on the information provided in this report, consider the appropriateness of the purchase or sale of the securities of the companies that are the subject of this report having regard to these matters and, if appropriate, seek professional financial, investment and taxation advice. RCR does not guarantee the performance of any investment discussed or recommended in this report. Any information in this report relating to the distribution history or performance history of the securities of the companies that are the subject of this report should not be taken as an indication of the future value or performance of the relevant securities. In preparing this report, RCR analysts have relied upon certain information provided by management of the companies that are the subject of this report or otherwise made publicly available by such companies. The information presented and opinions expressed herein are given as of the date hereof and are subject to change. We hereby disclaim any obligation to advise you of any change after the date hereof in any matter set forth in this report. THE INFORMATION PRESENTED, WHILE OBTAINED FROM SOURCES WE BELIEVE RELIABLE, IS CHECKED BUT NOT GUARANTEED AGAINST ERRORS OR OMISSIONS AND WE MAKE NO WARRANTY OR REPRESENTATION, EXPRESSED OR IMPLIED, AND DISCLAIM AND NEGATE ALL OTHER WARRANTIES OR LIABILITY CONCERNING THE ACCURACY, COMPLETENESS OR RELIABILITY OF, OR ANY FAILURE TO UPDATE, ANY CONTENT OR INFORMATION HEREIN. This report and the information filed on which it is based may include estimates and projections which constitute forward looking statements that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by RCR. Estimates and projections contained herein, whether or not our own, are based on assumptions that we believe to be reasonable at the time of publication, however, such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from the estimates and projections provided to RCR or contained within this report. This report may, from time to time, contain information or material obtained from outside sources with the permission of the original author or links to web sites or references to products, services or publications other than those of RCR. The use or inclusion of such information, material, links or references does not imply our endorsement or approval thereof, nor do we warrant, in any manner, the accuracy of completeness of any information presented therein. RCR, its affiliates and their respective officers, directors and employees may hold positions in the securities of the companies featured in this report and may purchase and/or sell them from time to time and RCR and its affiliates may also from time to time perform investment banking or other services for, or solicit investment banking or other business from, entities mentioned in this report. Catalpa Resources Limited, Eleckra Mines Limited, Kentor Gold Limited, Kingsgate Consolidated Limited, Korab Resources Limited, Norseman Gold Plc, North Queensland Metals Limited and YTC Resources Limited commissioned RCR to compile respective company reviews in the 3Q09 gold report. In consideration, RCR received from each company a cash consultancy fee of less than $15,000. In the case of Korab Resources, RCR received equivalent payment in shares in a Korab subsidiary. The RCR analyst for YTC undertook consulting work for YTC in the past 12 months for a cash consultancy fee of less than $15,000. RCR may receive referral fees from issuing companies or their advisors in respect of investors that RCR refers to companies looking to raise capital. Those fees vary, but are generally between 0 - 1% of the value of capital raised from referrals made by RCR. RCR received referral fees in relation to recent capital raisings for Globe Uranium Limited, PepinNini Minerals Limited and Uranex NL and Adamus Resources Limited and may receive fees in relation to Toro Energy Limited and Eleckra Mines Limited. At the date of this report, neither RCR, nor any of its associates, hold any interests or entitlements in shares mentioned in this report with the exception that either or both of John Wilson (either directly or through Resource Capital Investments Pty Limited (RCI)), or RCI, as trustee of the Resource Capital Investments Fund owns shares in BHP, Rio Tinto, Kingsgate Consolidated, Adamus Resources, Ampella Mining, Azumah Resources, Chalice Gold Mines, Citigold Corporation, and Gryphon Minerals. Analyst Certification: All observations, conclusions and opinions expressed in this report reflect the personal views of RCR analysts and no part of the analyst’s or RCR’s compensation was, is, or will be, directly or indirectly related to specific recommendations or views expressed in the report. Officers, directors, consultants, employees and independent contractors of RCR are prohibited from trading in the securities of U.S. companies that are, or are expected to be, the subject of research reports or other investment advice transmitted to RCR clients for a blackout window of 14 days extending before and after the date such report is transmitted to clients or released to the market. Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred Resources: RCR publishes mineral resources based on standards recognized and required under securities legislation where listed mining and exploration companies make their exchange filings and uses the terms “measured", "indicated" and "inferred" mineral resources. U.S. investors are advised that while such terms are recognized and required under foreign securities legislation, the SEC allows disclosure only of mineral deposits that can be economically and legally extracted. United States investors are cautioned not to assume that all or any part of measured, indicated or inferred resources can be converted into reserves or economically or legally mined. We recommend that US investors consult Securities and Exchange Commission Industry Guide 7 – “Description of Property by Issuers Engaged or to Be Engaged in Significant Mining Operations” for further information about the use of defined terms and the presentation of information included in this report.
Resource Capital Research Suite 1306 183 Kent Street Sydney, NSW 2000
T: +612 9252 9405 F: +612 9251 2859 E: [email protected]
ACN 111 622 489
www.rcresearch.com.au