* Attractive A$2/ Resource oz. purchase price. As a comparative, MLX acquired the Higginsville and South Kalgoorlie assets from Alacer Gold in October last year for A$6/Resource oz (A$44m/7.24Moz)
* MKO’s 752koz in Reserves potentially adds to the 830koz and 670koz acquired at Higginsville and South Kalgoorlie.
* The real benefit to MLX in our opinion is that the acquisition can potentially fast-track the development of MLX’s Central Murchison Gold Project (CMGP), some 100km to the SE.
* The CMGP has 5Moz in Resources (61.2Mt @ 2.52g/t Au) including 1.2Moz of Reserves (15.5Mt @ 2.36g/t Au). A 2012 DFS on the Project indicated an NPV8 of A$142m based on a pre-production capital cost estimate of A$117m for a new plant. The acquisition of the Bluebird plant (for only A$7.7m) removes the significant Project capital cost (and construction risk) for marginally higher than forecast operating costs (~A$1,000/oz) due to cartage costs.
* We currently value the CMGP at A$42m (A$0.02ps) => ~50% of the A$91m MLX paid for the assets in mid-2012 (merger with Westgold). If MLX obtains the MKO assets -acquisition is conditional on obtaining FIRB approval and final approval by the creditors of GMKE – we believe that our valuation could be too conservative and offer significant upside potential. MLX plans to develop an operational strategy for the MGO and CMGP over the next six months with a view to recommence production in early calendar 2015.
* We maintain our Buy recommendation: TP A$0.32ps.
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