New Research Report out
http://www.rcresearch.com.au/
Full report: http://www.rcresearch.com.au/fdl?i=1299
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.
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