Tuesday, November 15, 2011 by Proactive Investors Hartleys has valued Mutiny Gold at more than double its current share price of $0.079 because of its potential to be a near-term gold producer, with a portfolio of projects that should deliver more resources. Mutiny Gold (ASX: MYG) has been issued a price target of A$0.17 by Western Australian broking firm Hartleys, which views the company as undervalued and offered a Speculative Buy recommendation.
The following is an extract from the report.
Developing High Grade Gold Opportunities at Gullewa
Mutiny Gold Limited (“Mutiny Gold”, “MYG”, “Company”) is looking to join the ranks of gold-copper producers, through the development of the Gullewa Project, located ~450km north of Perth, WA.
The Company currently has 70% of the project and plans to move to 100% ownership soon, through the final payment of A$4m, for a total acquisition price A$13m. The project vendors retain a 10% net profit royalty (payable after capital pay-back).
The Gullewa project contains the high-grade gold Deflector deposit, which contains a current mineral resource of 590Koz of gold (5.4g/t Au) and 25Kt of copper (0.8% Cu). The deposit is near-surface and is expected to offer open pit mining and overlapping underground mining opportunities, for an initial 10 year mine life.
Mutiny Gold expects both mine life extension and potential production growth as the deposit remains open along strike and at depth. The Company has a resource ‘exploration target’ of 1.65Moz to 2.5Moz for Deflector. Exploration upside outside of Deflector includes highgrade mineralised zones at Pieces of Eight and Spanish Galleon, both located within 1km of Deflector.
Gold production targeted for late CY2012
The Company is forecasting production in late CY2012 in excess of 50koz of gold and ~2Kt of copper per annum at low cash costs Pre-production capital requirements are estimated to be A$52m (fully scoped), with an estimated A$19m needed for the existing plant upgrade, which will include the addition of a flotation and gravity circuit to provide milling capacity for 320Ktpa.
Project loan and hedging facility secures 100% and DFS
Mutiny Gold acquired a 70% interest in the Gullewa gold-copper project in mid-2010 through the scheduled payment of A$9m. The Company recently announced a move towards 100% project ownership, funded through a A$11m loan and hedging facility established with Credit Suisse.
The loan provides funds for the remaining 30% of the project and working capital to complete the project?s definitive feasibility study (DFS), expected in the March quarter CY2012.
Initiate Coverage with a Speculative Buy Recommendation
We see Mutiny Gold as a near-term gold producer (with copper and silver credits), with a portfolio of projects that should deliver more resources. We see the Company producing over 50kozpa in FY?14 at low quartile cash costs from an initial good-grade open pit operation, followed by a longer life high-grade underground operation.
Through resource growth and a mill upgrade we believe production beyond 100Kozpa is achievable. The Company is trading at a large discount to our preliminary 15cps sum of parts valuation, which includes a fully funded and risked NPV12 Gullewa project valuation of A$153m (or 18cps).
Mutiny Gold compares favourably to peers on a number of key metrics, with a grade and cash costs advantage over many. With a Price Target of 17cps we initiate coverage of Mutiny Gold with a Speculative Buy recommendation.
MYG Price at posting:
7.5¢ Sentiment: Buy Disclosure: Held
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