report in full

Thor Mining
Update
2nd July 2012
Economically robust project
Speculative Buy Target price 4.1p Key data Price 1.30 52 week high/low 2.28/0.95 Primary exchange AIM EPIC THR Shares in issue 806 m Market Cap £10.5 m Sector Mining Valuation EV/EBITDA n/a P/E n/a NAV / Share 1.16p TNAV / Share 0.20p Share price chart Previous note Healthy newsflow developing with completion of the Molyhil DFS to come Future event Negotiating Molyhil concentrate sales and finance agreements Analyst details Michael Green +44 (0)207 562 3370 [email protected] Emanuil Manos Halicioglu +44 (0)207 562 3368 [email protected] Affiliations: None Important: All disclaimer information can be found on the last page of this document
Thor Mining, the Australia focused gold and base metals explorer, has just announced the Definitive Feasibility Study (DFS) on its 100%-owned Molyhil tungsten-molybdenum project in Australia’s Northern Territory. The DFS reveals that Molyhil can deliver attractive financial returns as well as the early payback of the capital required for its development. On the back of the value that is in the process of being unlocked at the company, our recommendation is speculative buy.
Molyhil DFS
The project has been estimated to have a 21 month payback period based on Earnings Before Interest and Tax (EBIT) and an Internal Rate of Return of 24% after tax. The calculations of the DFS outcomes were based on a four year ore reserve and so there is substantial upside potential available based on optimising the pit design parameters to extend the mine life. To put it mildly there is substantial upside potential as only 35% of the resource tonnage was included in this initial reserve.
Gold exploration
Over the past two years has seen Thor acquiring stakes in two impressive projects which both seem to offer the potential to be multi-million ounce properties. The agreement concerning Spring Hill could give the company an 80% holding for a project that currently has a JORC Indicated Resource of 274,000 ounces of gold. Exploration work over the coming season may allow the revaluation of both these gold assets to begin to be accelerated.
Valuation
Thor’s two gold projects at Spring Hill and Dundas both have multi-million ounce potential and a JORC resource of that order is being currently valued at around £25 million on the back of AIM and when these elements are added together, it is not too difficult to place a valuation of £32 million based on the potential value of the gold interests and risking the NPV for Molyhil, which equates to a target price of 4.1p.
Table: Financial overview Year to 30th June 2009A 2010A 2011A 2012E Revenue (£m) 0.00 0.00 0.00 0.00 PBT (£m) 1.23 1.76 2.85 3.00 EPS (p) 0.77 0.79 0.65 0.40 Dividend (p) 0.00 0.00 0.00 0.00 Yield (%) 0.00 0.00 0.00 0.00
THR29/6/1029/6/12'12'11Jul Thor Mining PLC& FTSE 350 Sector MiningOct Apr Oct Apr Pence 1 week closeOrd4.03.53.02.52.01.51.04.03.53.02.52.01.51.04040Volume (Daily) - M'sScopeShareChart (c) www.sharescope.co.uk
Update ¦Thor Mining
2
Molyhil DFS reveals an economically robust project
Thor Mining, the Australia focused gold and base metals explorer, has just announced the Definitive Feasibility Study (DFS) on its 100%-owned Molyhil tungsten-molybdenum project in Australia’s Northern Territory. The DFS reveals that Molyhil can deliver attractive financial returns as well as the early payback of the capital required for its development. The project has been estimated to have a 21 month payback period based on Earnings Before Interest and Tax (EBIT). The all equity Net Present Value (NPV) came out at A$28 million (£18.3 million) with an Internal Rate of Return of 24% after tax. The calculations of the DFS outcomes were based on a four year ore reserve and so there is substantial upside potential available based on optimising the pit design parameters to extend the mine life. Last month the board unveiled a new reserve ore estimate of 1.64 million tonnes @ 0.42% tungsten and 0.13% molybdenum, as well as reporting a tungsten grade in the reserves of 50% better than the resource estimate grade. In fact, the reserve provides for a four year initial mine life at Molyhil with substantial upside potential to extend the project life because only 35% of the resource tonnage is included in this initial reserve.
Moving ahead at Molyhil, the next steps will involve securing off-take sales of concentrates agreements and the finance for project development. Once those stages have been complete, the company will begin the detailed engineering studies together with onsite civil works in preparation for the mine and process plant construction and development. There is obvious potential beyond the current estimated mine life for three reasons. Firstly, extending the open pit or underground operation to include the 65% of resource that is not yet includes in the ore reserve. Secondly, potential production exploration targets which includes some that have been recently identified within a few kilometres from Molyhil. Thirdly, there is potential from a recently identified large magnetic target below the known Molyhil resource. With such factors in mind Mick Billing, Executive Chairman, was able comment that “We are now approaching the development phase for Molyhil and pleased that the DFS has so clearly defined the economic viability as well as the opportunity for an early payback on capital required for its development. At the same time, we have identified ways to improve the mining life of Molyhil significantly and identified a large magnetic target below the known Molyhil resource and believe this may sustain a much longer term mining operation.”
Valuation
The move into gold over the past two years has seen Thor acquiring stakes in two impressive projects which both seem to offer the potential to be multi-million ounce properties. The agreement concerning Spring Hill could give the company an 80% holding for a project that currently has a JORC Indicated Resource of 274,000 ounces of gold. A peer comparison analysis with exploration companies listed on AIM would suggest that Thor’s 80% stake in that project could be valued at £5.9 million. However to get to that stage, the company would need to satisfy the full terms of the earn-in deal which requires to spend A$2.0 million plus the issue of more shares to the vendor. The board of Thor believes that there is the multi-million ounce potential at both Spring Hill and Dundas. A JORC resource of that order (one million ounces) of gold is being currently valued at around £25 million using AIM peer comparisons. Exploration work over the coming season may allow the revaluation of both these gold assets to begin to be accelerated.
Molyhil’s DFS made for good reading. This study was prepared by the company using data supplied by third party consultants for the key components including: resources estimates and the open pit reserve statement, mine planning, capital and operating costs, commodity prices and exchange rates and environmental studies.
The all equity NPV of $28 million was using a discount rate of 8% (and came out at A$23
Update ¦Thor Mining