Exco Resources Australia - stock looks the wrong price. BUY We...

Exco Resources Australia - stock looks the wrong price. BUY

We met the team from Exco Resources late last year and really liked them and the company. Below is an extract from today's Fairfax Mining Research.

This stock looks the wrong price to me and technically the chart looks set to break out.

Buy


Exco Resources (EXS LN) A$0.52 mkt cap A$178m - White Dam Resource upgrade

A resource upgrade for the Vertigo deposit has converted 50% of the inferred resource to indicated totaling 2.45mt at 1.04g/t Au for 82,100oz contained (0.4g/t cutoff). Of which the indicated portion stands at 1.22mt at 1.18g/t Au for 46,200oz contained. As part of the resource re-calculation was a reduction of the cut off grade from 0.7g/t Au to 0.4g/t Au.

The conversion of these resources forms part of the company's strategy to extend the mine life of White Dam. A mining lease application for the Vertigo deposit has been submitted to Primary Industry and Resources South Australia for approval that is expected to be completed in Q2.

Reserve calculations and detailed pit design will be undertaken following metallurgical test work due for Q2. Final mine scheduling and planning is also aimed to be completed next quarter.

Production at the mine remains above expectations with 40,000oz produced this year at an average cash cost of A$600/oz providing very healthy cashflows fro the group when the average sales price achieved for the project to date stands at A$1,373/oz. Exco's stake in the project stands at 75%.

Conclusion: We note that Exco's flag ship project is its Cloncurry Copper project in Australia that contains 519,400t of copper and 500,000oz Au which the company aims to get into production by 2012 with a definitive feasibility study in progress. Alternatively the asset could provide a welcome ore source to Xstrata's Ernest Henry Mine. However, White Dam has proved to be a valuable asset, generating cash and demonstrating operational competence.