A quite in depth article on MYG posted on proactive investors earlier, for anyone interested:
"Mutiny Gold?s (ASX: MYG) recently announced new high grade gold intersections to the north of its Deflector Gold Deposit have again added length to the Deflector Deposit mineralisation.
The high grade intercepts are being achieved in multiple locations.
They predicate likely extensions to the planned open pit and, also, importantly, confirm the down plunge continuity with depth of high grade shoots that can be included in underground mine planning
The results provide further confirmation of the exploration potential of the Deflector Corridor but they are likely to be just the tip of the iceberg as far as upside in exploration target and production ounces.
- 12 metres at 11.6g/t gold and 2.2% copper in 11DRC048; - 4 metres at 8.0g/t gold and 3.3% copper in 11DRC050; and - 3 metres at 8.8g/t gold and 0.3% copper in 11DRC066.
The north of the Deflector Deposit is in an area that previously had not been adequately drill-tested and would seem to offer significant potential for further exploration success
Additionally, 140 metres to the north of the new high grade discoveries returned the high result of 3 metres at 9.9g/t.
The Western Lode intersections to the north of the existing Deflector resources include 3 metres at 42.1g/t gold and 2.3% copper in 11DRC053.
New results in the south of the existing Deflector resources extend known depth of high grade mineralisation and include a super high grade intersection of:
- 1 metres at 72.2g/t gold and 1.2% copper in 11DRC074.
What does this all mean?
- The Deflector Corridor is vastly under-explored; - Its full potential is now just being realised with these early results; - However, the latent and emerging potential of the Deflector project is best exemplified by the intercept of 3 metres at 1.3 ounces per tonne; - What is the Exploration Target potential? The current target of 2.5 million ounces is on the low side and is likely to be easily surpassed. By how much?; and - Based on results to date and these latest results, the Project could have as much as 4-5 million ounces and a production profile of 120,000 -150,000 ounces of production per year.
Even this could be dwarfed given the potential of the Deflector Corridor which has been previously under-explored.
Exploration is underway to the north of the main known area of mineralisation of the Deflector Deposit. Such is the prospectivity of the ground held by Mutiny Gold, ongoing exploration is likely to result in new discoveries and a large boost to Mutiny?s Exploration Target that will underpin expansion of the project to a production level significantly greater than the Scoping Study rate of +100,000 ounces of gold production per annum.
We believe there could be potential for some extremely high grade zones north of the current deposit. If drill results confirm this, there is likelihood the current resource parameters, project cash flows and the paradigm of how large the Deflector project is will be turned on its head.
Ultimately the current valuation for Mutiny Gold will look like ?small potatoes?.
Already, the results received from 30 reverse circulation holes of the ongoing drilling program which recommenced in early May have again added length to the Deflector Deposit mineralisation.
The length has more than doubled to 300 metres, since the onset of this drill phase. These results will be incorporated into the revised resource estimation to be carried out at the conclusion of the current reverse circulation and diamond drill programs.
Checking off key milestones
While the market has been in the doldrums and likely fretting over the capital raising, the company has been ticking boxes as it picks up the pace of exploration and the road to production.
- Underwriting agreement to underwrite the listed $0.10 options due to expire on 30 June to raise $500,000 - Strong Scoping Study results. Gullewa Project to deliver highly robust returns; IRR of 83% for project - Exploration success and news flow is continuing - Capital raising is underway, likely to be completed early July. The pullback in equity markets delayed the raising as share prices pulled back. Funds need to be in by October to move project along on time frame - Resource upgrade on completion of drilling program ? August / September - Pre-Feasibility Study (PFS) due for completion in July 2011. Will provide more information on costings and modelling on mining and pit shell optimisation model. Item by item GRES handling the work - Bankable Feasibility Study due in October 2011 - Diamond Drilling program is critical to BFS, as current reserves of 250,000 ounces can be increased to 400,000 ounces of reserves - Increasing reserves to 400,000 enables greater mix of debt financing for project, up to $80m - Delivered resource upgrade - Resource target of 2.5Moz gold for Deflector and 80,000t copper - Increased the mineralised length by 50% - Unveiled the potentially rich adjacent Gold-Copper discovery of Spanish Galleon - Additional income stream from treatment of White Well gold concentrate at Gullewa mill - On track to become a significant gold producer in the Murchison region - Exploring regional prospects to take advantage of existing mine infrastructure - Existing infrastructure in place ? saves time and CAPEX
Scoping Study - Recap
- IRR of 83% - NPV of $187 million ? likely to increase significantly - Cash surplus of A$427 million after payback of capital costs - Capital cost of $52 million and State Royalties including A$19 million for plant upgrade and A$12 million for the first three months working capital - Annual production of 50,000oz gold, 2,000 tonnes copper and 34,600 ounces silver - Cash costs over first ten year life of mine estimated at AUD$524 / ounce - Contained gold ounces of 578,000 ounces (comprising 100,000 ounces open pit and 478,000 ounces underground) - Estimated average production grade of ore ranges from 4.1g/t gold to 6.5g/t gold
Production profile ? likely to be increased
- Short Term production target at 50,000 ounces per annum - Belief the mine will go down to 160 metres, and ultimately 220 metre to increase tonnages - Open pit production of 3 years of 70,000 ounces - Underground production of 3 years of 50,000 ounces - 20,000 ounces production pa at White Dam - Increase open pit mining from 50,000 to 70,000 ounces - Increase mine life from 6 years to 9 years - 120,000 ounces per annum production in year 3, length of Deflector production maybe longer
Project Financing
- Is available - Banks visiting site - Numerous banks discussing debt finance - Waiting on completion of equity raising and increase in reserves
An off take agreement is not an issue, as the project will produce gold concentrate and copper concentrate
- Payment deadline to Sherwin to be extended - Resources and Scoping Study: 590,000 ounces current resource
Spanish Galleon prospect (nearby to Gullewa) ? potential for large resources
- Initial drill-hole into nearby Spanish Galleon Prospect intersects high-grade gold mineralisation The intersection included 3m at 6.6g/t Au and 0.37% Cu including 1 metre at 20.4g/t gold, 0.3% copper and, - Provides second mine potential not given any value in market value of Mutiny Gold - Second mine potential (with real potential) with highly prospective mineralised targets to be tested now - Discover ounces at Spanish Galleon Prospect. Drill programs commenced. - Based on Geochemistry undertaken at Spanish Galleon, this nearby prospect (to Deflector), looks to be even larger than Deflector, and could herald a resource of many times the size of Deflector - Looks to have a larger resource and exploration target potential than Deflector which has 2.5m ounces - Spanish Galleon could conceivably look to kick in after 3 years of production from Deflector - Drilling to start today at Spanish Galleon
Mutiny?s large copper ?footprint? at Gullewa is also not taken into account by the market. Interestingly, this is located next door to the Golden Grove copper mine owned by China?s Minerals and Metals Group.
On the Scoping Study results, Mutiny will be a low cost and profitable gold/copper producer of 50, 000 ounces of gold pa, 2,000 tonnes of copper per annum and 35,000 ounces of silver per annum for 10 years from an open pit then underground operation.
However, this is likely to be increased significantly given recent drilling results and the emerging potential of the deposit. MYG could have production profile of 100,000 ? 150,000 ounces per annum.
Mutiny Gold could pay dividends as early as 24 months from production
Unlike many explorers, Mutiny Gold has personnel with a strong production profile including:
- Allan Brown from Golden Crown, Wiluna, Cobar; - John Burgess from both Big Bell and Golden Crown; and - James Stewart from Homestake, Newmont and Deltagold.
Blue Beard Corridor ( More exploration upside )
- Targeted by Sons of Gwalia and reaffirmed by Mutiny this corridor represents a large regional dilation zone in a mafic sequence against felsic intrusive masses with a strong multiphase hydrothermal character.
- Over 8 vein stages and at least 4 superimposed, significant hydrothermal breccia pulses indicates a proactive multistage gold copper mineralisation even on a par with classic EGF Achaean and fertile intrusive concepts.
- Consequently, in addition to the barely explored Spanish Galleon and PO8 Anomaly clusters there are a number of very carefully selected additional target zones such as contact lodes (Magellan and Flinders) and Reflector. Each of these zones, whilst still exploration targets, are priority 1 (as ranked against Yilgarn Craton Gold Endowment) ? with a high probability of yielding additional multimillion oz gold ? copper discoveries
Gullewa Banded Iron Formation
- Not factored into Mutiny Gold valuation - Potential for iron resources within Gullewa - Extensive unexplored BIF, units (over 150km) - At up to 42% iron grade, is actually higher than nearby Gindalbie at 34% iron - Non-core for Mutiny Gold - At right time, likely to be spun out to MYG shareholders
Catalysts
- Drill results - Capital raising completion - Pre-Feasibility Study completion - Project financing - Purchase of long lead items for plant - Pre-strip for mine - Exploration news at Spanish Galleon
Summary and Valuation Guide
We believe production is still possible by mid 2012. However, critical lead time plant orders would need to be made by December 2011; pre-stripping could commence by Jan 2012, and Mutiny would need three months ore supply at the ROM, enabling first ore to be extracted out of the mine by March 2012.
Mutiny Gold has ticked just about every box to date, except finalisation of the equity raising ? which is in progress ? and delayed by the current market slowdown.
The market appears to have adopted a wait and see attitude to Mutiny Gold; waiting for the completion of the capital raising and Pre-Feasibility Study as signalling time to invest.
The market also appears to be treating the exploration upside and production profile as known and already factored in to the current valuation.
However we think Mutiny Gold is a standout opportunity NOW ? primarily due to clear exploration upside not being factored into the current valuation of $29 million.
The exploration upside and hence production profile are likely to be significantly greater than many would expect.
In short, the Mutiny Gold share price should be significantly higher than current $0.11. In fact, the recent pullback in share price of Mutiny Gold to $0.11 affords an excellent buying opportunity.
We believe Mutiny Gold should be a 5-6 bagger (or $0.50-$0.60) within 12-15 months, based on market recognition of the potential still untapped from the significant exploration upside as it translates into higher resource inventory.
There could also be a higher production profile than previously assumed. An Ev/Ounce comparison with Mutiny?s peers also supports the case for a re-rating from the current Mutiny Gold valuation."
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