ties in with Capital Research April 2013 equities...

ties in with Capital Research April 2013 equities report:
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"Guildford, in a period of less than 3 years has advanced from explorer to developer and is on the cusp of production from its 100% owned Mongolian asset in South Gobi. The South Gobi project has a number of outstanding attributes including upside to its existing resource base, potential replication of additional pits including North, East, Central and West, the lowest quartile operating costs for coal mines (sub $35/t LOM) and close proximity to the Chinese border (<60km) with developing infrastructure nearby. These attributes will play a significant role in the coming months as South Gobi moves towards production in CY13.

We are initiating coverage with a BUY recommendation and price target of $0.90/share, which is 0.8x our base case DCF methodology of 3.6Mtpa over 10 years.

? Lowest quartile operating cost, a substantial buffer in current coal market:

GUF are targeting a low cost production model from the North pit and East pit.

This will allow GUF to take advantage of favorable labor rates through a truck and shovel operation from surface to allow for a low strip ratio and a low cost production model estimated at ~<$35/t LOM.

? Base case estimates: Our base case model includes the indicated resource in the North Pit ~39.7Mt at an average production rate of 3.6Mtpa over 10 years.

? Developing infrastructure within close proximity to China:

GUF’s Mongolian strategy is simple and within close proximity to end users in China ~ 60km from the Chinese boarder at Ceke. The current focus is to build a road that will enable GUF to transport its coal to the Chinese boarder, which will then be sold into the Chinese market.

? Financing in place provides greater flexibility during ramp up phase:

GUF recently entered into a convertible bond facility of up to $40m, with OCP Asia that materially extends the existing debt maturity for GUF out to eighteen months (Sep 2014), and gives the company flexibility during this pivotal start-up phase at South Gobi.

We see this as an important factor in moving GUF from developer to producer status and believe there should be a significant rerating once production and sales are achieved anticipated over the next six months.

? New Management in place to transition smoothly into Production: The hiring of Peter Westerhuis ex CEO of the Ensham Joint Venture who led the development and expansion of Ensham from a small open cut mine to a world class 9Mtpa operation will enable GUF to smoothly transition from developer to producer.

We are initiating coverage of Guildford Coal (GUF) with a BUY recommendation and price target of $0.90/share based on a conservative 3.6Mtpa DCF methodology. GUF is our preferred coal pick due to its near term low cost asset base with upside potential as pits get developed."