"RBS have put out a research note 2 March 2012. It gives a discounted valuation and target of $2.34. I don't know if that's a short term target or 12 month."
Looks like their 75c for Burnakura ignores the heap leach potential; It’s the heap leach that boosts my valuation strongly so will be interesting to see what valuation they come up with once the heap leach studies are released by KGL.
“Based on the conversion of 70% of this higher grade resource to reserves and extraction, and using what we regard as conservative cash costs (A$1224/oz) we generate a value of A$80m – A$0.75/KGL share – for Burnakura. We have assigned an arbitrary valuation of A410m to the Gabanintha leases.” I assume the A410m should read A$10m
“The recent drill intercepts were reported from drilling to upgrade the resource status and for reserve definition in the proposed Lewis pits, and suggest that the grade will be significantly above the projected 1.65g/t gold, with a consequent increase in the likely production rate, and a reduction in costs per ounce of gold produced. We have not modeled a value for the heap leach, nor for the expansion of production to 500ktpy.”
Once they model the heap leach and the 500,000tpa expansion they would have to be at or above my base case value of at least $1.30 on Burnakura alone.
Re the target price, it seems to be what the analysts believes we should be trading at now, not in 12 months after adjusting for various risks and ignoring the heap leach and expansion for Burnakura and ignoring Jervois. Thats a lot of ignoring!
KGL Price at posting:
$1.46 Sentiment: Buy Disclosure: Held
