$1.60/share

Pattersons retain their price target of $1.60/share. This valuation is based on only half the production levels estimated by GUF....so there is plenty of room for an increase on $1.60!

With first coal production imminent GUF is looking pretty cheap! I don't think the chance to buy GUF for under 60c will be around for too much longer!

The Pattersons report is below for anyone interested.

Guildford Coal Limited (GUF) - BUY

Event - Maiden JORC and contractors secured for East Pit development

Guildford Coal (GUF) announced a number of developments on its South Gobi Project in Mongolia:

1. Long form agreement has been reached on terms and conditions for coal sale and purchases with end user Sojitz Corporation. The agreement is for a 5 year term and includes a $5M letter of credit (LC).
2. A maiden 40.5Mt JORC compliant Inferred Resource based on eighty-one (81) exploration boreholes drilled on the East Pit which consistently intersected coal seams within the Permian Deliinshand Formation.
3. A Mining Services Agreement has been executed with Leighton LLC (Leighton) the Mongolian operating subsidiary of Leighton Asia Limited.

Impact

- The agreement with Sojitz formalises the MOU signed earlier this year and we believe a $5M LC demonstrates Sojitz confidence in GUF producing the coal. It also reflects the demand for South Gobi coal in China. This demand has been escalated by a shortfall in supply due to the constrained operations of SouthGobi Resources, one of only two operating mines in an area 60km from the Chinese border.
- The JORC resource and finalising of the Mining Services Agreement will enable development of the East Pit to begin.
- GUF has ambitious production targets from both the North and East Pits,3-4Mtpa each.
- We see some risk in the structurally challenging nature of these coal fields and our price target of $1.60/share is based on half these production levels, 4Mtpa in total.

Accordingly we retain our Buy recommendation.

Orange