another broker note

Patersons

Investment Highlights

Standing and delivering. AMX reported a maiden Inferred Resource at its Batie West project in Burkina Faso of 18.6mt @ 2g/t Au for 1.194moz (1g/t Au cut-off). This significantly exceeded our expectations (c.750koz @ 1.5g/t Au) and sees Batie West emerging as a legitimate and under-explored gold province with only 3km of a 110km crustal shear meaningfully drill tested to date. The scale of the maiden resource has materially upgraded broader prospectivity and we anticipate increased market interest as a result.

A great start. While we remain focused on the wider project potential, in isolation, we view optimised resources of 1.5-2moz at c.2g/t Au as a reasonable hurdle rate to development. Post-resource, Konkera is further down the track that we would have envisaged and CY10 offers a real opportunity moving forward to establish a commercial mining inventory at low discovery cost (
Valuation impact. Applying the weighted sector average (EV:Resources) of A$96/oz for West African explorers/developers to Konkera resources derives a valuation of A$0.85/sh. We assign an additional A$30m exploration value (30% of mkt cap) to reflect AMXs control of a large greenstone package and in anticipation of further discovery elsewhere at Batie West. Our 12 month price target has increased to A$1.10/sh (+39%). On an implied basis (assuming no exploration value) the market is pricing in a maiden resource of 830koz (based on $79m EV) and we expect this gap to narrow.

Catalysts.

(1) positive discovery momentum during CY10 field program; (2) additional land acquisitions and satisfaction of earn-in terms,
(3) greater market recognition of the potential of Batie West.

Risks.

(1) Resources are currently Inferred with no consideration of project economics. CY10 infill drilling will progressively mitigate this risk;

(2) exploration and discovery risk as a junior explorer AMXs strategy has inherent discovery, metallurgical, geopolitical, and execution risk.