hartleys buy reccommendation

Dominion Mining Limited (DOM) - Buy



Breaks the 500koz Reserve Level; Continues Solid Production



Dominion Mining Limited (“Dominion”, “DOM”, “Company”) has delivered another excellent quarter producing 27.0koz at cash costs of A$306/oz. FY2007 production was 108.2koz at A$309/oz. The results highlight the quality of the Challenger deposit and operation with lowest quartile costs, generating very good margins of A$435/oz. The Company has also substantially increased reserves by 74% and Resources by 40%. We believe that the Company will be able to expand the Reserve inventory beyond this level over time, noting that the orebody is still open at depth.

Following the Reserve and Resource increase, we have raised our valuation for Dominion to $2.88/share. We have a price target for DOM of $3.60/share. We believe that the NPV premium is justified given the Company’s excellent low cost and consistent production history as well as exploration potential. DOM is one of our top picks in the Australian gold sector. We continue to rate Dominion Mining Limited as a BUY.



Investment Highlights

· Solid Production Continues – Quarterly production was 27.0koz at cash costs of $306/oz, a slight reduction on the previous record quarter of 30.9koz at $273/oz which had benefited from unusually high grades. FY2007 Production of 108.2koz at cash costs of $309/oz was similar to FY2006, highlighting the consistency of the Challenger mine. The average gold price received for the year was A$744/oz, giving excellent cash operating margins of A$435/oz

· Reserves Increased to 512koz - Dominion has increased Reserves by 74% to 512koz for Challenger. The Reserve will give the Company a 4.5+ year minelife at production current rates. However, we expect that with further increases, DOM will investigate options relating to increasing gold output. Resources have also been upgraded to 1.09Moz, an increase of 40%.

· Good Exploration Results at Depth - Ongoing drilling at depth continued to yield excellent results that highlight the quality of the deposit. All three main shoots, M1, M2 and M3, are still open at depth. Results during the quarter included good intersections from the M1 shoot including:

· 2.3m @ 257.3g/t Au

· 3.3m @ 374.0g/t Au

· 3.8m @ 169.5g/t Au