80c price target (cormark securities, 26/2/13)

Investment Thesis:

Azimuth holds an attractive asset with potentially industry low OPEX in a mining friendly jurisdiction. West Omai (1.65 MMoz) has an average grade of 3.1 g/t (locally up to 5.6 g/t) making it one of the highest grade, undeveloped open-pit projects currently under exploration. The Smarts zone accounts for more than half the resource at superior grades (4.15 g/t). There is strong evidence for further resource growth which is currently exploited on surface by artisanal miners at the company’s 8,000 km2 land position.

Highlights:

• Preliminary Data Suggests High-Return, Capital-Efficient Project
Highlighting the release is the lower CAPEX estimate of US$150-170 MM versus our forecast of US$225 MM. The decrease is largely due to the engineers selecting a smaller scope of operations (1.5 vs. 2.0 MM t/year). Detailed met-testing shows recovery rates of 92% and includes an up to 50% gravity component which is partly responsible for the lower CAPEX number.

• Our Updated Model Generates A 61% IRR
After adjusting our mine model to include the lower throughput rates, we estimate the project generates a 61% after-tax IRR to produce on average 120 Koz of gold per year.

• Maintaining Buy (S) Rating And $0.80 Target
We continue to believe Azimuth holds one of the most “buildable” open-pit assets not yet in development. The CAPEX is manageable, especially when considering the higher grades encountered early on in the mine life.