I posted this a while ago:Phoenix Gold (PXG)Analyst: Steuart...

I posted this a while ago:

Phoenix Gold (PXG)

Analyst: Steuart McIntyre, RBC Capital Markets

Recommendation: Outperform (initiation)

Price target: A35c

Thursday’s close: 14c

Reason: Below the radar but a potential rising star

Comments: The market for gold developers is extremely tough at present but we believe Phoenix Gold is one of the more promising emerging names. The Castle Hill gold project is located on approved mining leases, in a lower-risk jurisdiction than most and, on our estimates, the project has robust economics, with a post-tax internal rate of return of 31% at $US1400 per ounce gold. Phoenix Gold is an Australia-based gold explorer developing its flagship Castle Hill gold project around 50km northwest of Kalgoorlie in Western Australia. While market conditions remain tough for gold equities, particularly developers, in our view capital markets are likely to remain open for projects with sufficiently compelling economics. Failing an extended pullback in the gold price to sub $A1300/oz, we believe Phoenix's project is sufficiently attractive to secure investment capital. At the end of March, the company had $20 million in cash and was funded through to a final investment decision for Castle Hill. Phoenix is targeting an initial 100,000 ounce per annum carbon-in-leach operation with expected all-in costs of $900-950/oz over an initial mine life of 8-10 years and initial capex of $106 million. We assume more conservative all-in cash costs of circa $1100/oz and capex of $120 million. The company expects to add a 25,000ozpa heap leach operation for $25 million around 2.5 years after first production, which could improve group costs by around $50-75/oz. By December 2013, the company is targeting resource growth to 4 million ounces-plus (from 2.5Moz), reserve growth to 1Moz (from 550,000oz), as well as completion of a definitive feasibility study at Castle Hill. While the DFS is not due for completion until year-end and project metrics are yet to be finalised, based on the information to date we estimate the IRR for the combined Castle Hill mill and heap leach project at 31% assuming $US1400/oz gold and the $A forward curve to 2017 and 80c long-term. We regard Australia as a lower risk jurisdiction compared to many of Phoenix’s peers in Africa and other higher risk countries. Additionally, Phoenix already has approved mining leases over the three key mining areas. Phoenix is trading at a meaningful discount to peers with an enterprise value per ounce of $6/oz, compared to the peer average of $21/oz. If we assume the company can achieve its 4Moz exploration target by year-end, the company is trading on an EV/oz of just $4/oz. In theory, this suggests that if a third party bids for Phoenix today with a 35% premium, it could potentially acquire around 4Moz for close to the typical industry discovery cost of around $10/oz.


But now if you include the $3.3M coming in from the Blue Funnel development and the recent drop in share price due to the yanks thinking their dollar doesn't stink and the $20M still on hand, what you get is an enterprise value of $2.7M.

Add to that the resources of 2.5M ounces and you can get yourself a stake in a well run company with 2.5M ounces + + for around $1 an ounce.

Unbelievable...