$1.50 price target

this would be nice if PRA could hit some good grades on drilling this artlicle was back in 2011 from proactive investors article if they can prove up what they think they have in the ground today then who knows what could happen from here i know gold price isn,t where it was back then but its on the rise again i got told that the Cerro Curunday was to deep to mine so probably thats why the sp is where it is today with Alumbre its all near surface stuff so fingers crossed and HOPING for an announcement this week on drilling GLTA

12 Month Range: $0.08 to $0.70 back in 2011 could it happen again?

Promesa Ltd receives "buy" recommendation, $1.50 price target from BGF Equities
Wednesday, May 25, 2011 by Proactive Investors

BGF Equities has penned a research report on Promesa, citing 'expectations of a monster Epithermal Gold Resource in Peru'. Promesa's project is close to Lagunas Norte, Barrick's 9 million ounce gold project.

BGF Equities has penned a research report on Promesa, citing "expectations of a monster Epithermal Gold Resource in Peru". Promesa's project is close to Lagunas Norte, Barrick's 9 million ounce gold project.

The following is an extract from BGF Equities' research report on Promesa (ASX: PRA).

BGF Equities has placed a speculative buy on the stock with a $1.50 price target, a 150% premium on the current price of $0.60 per share.



Report extract

Promesa (ASX: PRA) has secured a very exciting epithermal gold project in Peru, similar and close to Lagunas Norte, Barrick's 9 million ounce gold project.

There is an element of expectation built into the share price already with the market capitalisation of around $90m (fully diluted).

Rather than say this looks pricey given that there have been no drill holes yet, we prefer to say this points to the expectations that PRA is sitting on a potentially huge gold discovery.



Promesa statistics

Share Price: $0.60
12 Month Range: $0.08 to $0.70
Market Capitalisation: $91 million
Listed Shares: 50.6 million
Unlisted Shares: 43.3 million
Listed Options: 43.6 million Dec 2012 $0.20
Unlisted Options: 43.3 million. Dec/Jan 2013 $0.20
Cash Balance: $1.9 million March quarter 2011 (Pre-placement)
Debt: Nil



Expectations of a monster Epithermal Gold Resource in Peru

Rather than say this looks pricey given that there have been no drill holes yet, we prefer to say this points to the expectations that PRA is sitting on a potentially huge gold discovery.

One could sit back and say “let's wait until there are a few drill holes in it” before buying, but before doing this consider those that took this approach with a company like Ampella Mining (ASX:AMX) in the pre-resource stage.

There is a big risk that if you don't get on board early, you will miss the train. The market will continually ratchet up the share price on the anticipation of continuing positive results. This is what speculative exploration stocks are all about.

If the exploration targets are achieved we see no reason why the market capitalisation could not exceed $400m within a year or two, incorporating equity issues of $10-20m over that period.

Exploration companies try to excite investors with the potential for a porphyry deposit at depth, but they don't know how deep it will be, or how expensive it will be to locate it.

Here, PRA has an epithermal zone at surface and it has already identified the porphyry system beneath it, 1,000m down the mountain slope. It has the whole box and dice - the entire geological model.

We rate PRA as a strong SPECULATIVE BUY at these levels, with an expectation that the commencement of drilling in June will accelerate turnover and share price performance.



Primary Points

- The market can pay premiums for promising gold exploration stocks, frequently $200-300 per ounce (oz) on ASX released resources.

- Transposing this to PRA, at $150/oz, says it only needs to find 600,000 oz to justify its market capitalisation.

- PRA believes it will find 2.5 Moz in the oxide zone alone, which would justify a share price approaching $2.00.

- Epithermal gold deposits can be higher grade than the typical West African Birimian deposits, often 1 gpt or more higher. This could justify an even greater EV/oz.

- Inspiration can be gained from another South American epithermal gold stock - Andean - which was taken over for $3.5bn with a resource of 2-3 Moz.

- Lagunas Norte, a nearby mine, has a resource of 210 mill. tons at 0.96 gpt. It processed 22 mill. tons at 1.21 gpt in 2010, to recover 808,000 oz at a cash cost of US$250/oz. Grades were higher in the initial years of production.

- Many companies excite the market with suggestions of possible copper porphyry mineralisation at depth, but with PRA there is no speculation. It has been observed 1,000m below the peak, exposed by adits into the side of the mountain.

- Projects like these are usually found in TSX listed companies. It is unusual, and a rare opportunity, for them to be available to ASX investors.