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RCR company update note:

Minera Gold Limited (ASX:MIZ), 30 September 2014
Investment Points:

Column 1

0

Producing high grade (+10g/t Au) Torrecillas mine located in a prolific vein mining district of southern Peru, with many small producers (without plants) in the surrounding area. Projects historically sampled by mining, not drilling. Purchase of San Santiago gold and copper plant potentially transforms MIZ from a high grade producer to highly profitable toll-treatment operator, with a captive group of local miners and margins of ~US$250/oz for toll treatment. Government formalization of small mining sector prohibits mercury use, pushing all small miners to registered processing plants – creating an opportunity for MIZ to follow the path of established TSX toll-treater Dynacor (MCap US$65M). SilverStream has gold streaming on 10% of Torecillas gold production (@ 400/oz), providing US$4.4M funding for the San Santiago plant purchase, (no dilution) with US$1.1M from an existing shareholder as debt and convertibles. Torrecillas and San Santiago (both 100%) mining approvals are in place. Applications in place to increase milling rate from 350 to 700tonnes/day, with construction of an expanded tailings dam to accompany increased processing. Cost reduction associated with San Santiago acquisition, aims to reduce all in costs to ~$700/oz, while ramping production up to 1600oz/month, with an ultimate target of 2000oz/month. Potential to add additional production from unexploited Au veins at Torrecillas and new Cu veins at San Santiago currently exploited by local small miners. Exploration drilling 4Q14 on veins at Torrecillas aims to increase the resource base, backed by an experienced project team, working in Peru for 7 years. 4Q14 trenching followed by drilling on the Tumi IOCG project (JORC exploration target of 80-100Mt @ 0.8-1g/t and 0.2% Cu). San Santiago Cu veins high grade and attractive for processing with a larger IOCG Cu/Au target beneath the veins. MIZ investment case driven by processing of high grade Au and Cu veins from in-house resources and toll treatment, plus potential for larger discoveries longer term at Tumi and San Santiago. RCR risk adjusted valuation increases to $0.04/share with project de-risking.