mpv
posted on
Nov 13, 2012 03:45PM
Edit this title from the Fast Facts Section
National Bank just put this report out after the Tuzo drill results.
Gotta like the share price target once in production... !
Macro diamond counts point to option value not yet priced in.
Following the Tuzo Deep drill programme that was completed earlier
this year to test for extensions of the Tuzo kimberlite pipe to depth,
the company has provided an update regarding the micro diamond
counts from that drilling. The Tuzo Deep drilling successfully
extended the pipe another 214 m from the bottom of the resource or
approximately 10 million tonnes (assumes 2.4 t/m3). This drill
program returned 5.7 macro diamonds per kg vs 3.7 macro
diamonds per kg in the upper parts of Tuzo (Exhibit 1).
Consequently, we believe this data to be a small positive indication
of the potential for Tuzo to add to the existing reserve.
? Rights offering to help fund winter program, which includes the
construction fleet. We still assume a larger equity financing to help
fund the project construction will be done at $4.50 per share once
the permits have been received in 2013 (30.7 mln shares at $4.50
per share plus US$225 mln in debt at LIBOR +5%). Importantly, the
winter program includes the construction fleet so as to expedite the
process upon receipt of the permits.
? Permitting progression should allow for project re-rating. A
Record of Decision is expected shortly, which should lead to
commissioning in late 2014 and commercial production in 2015.
We believe the market will be willing to pay 15x CFPS once up
and running or approximately $12-15 per share.
? We reiterate our Outperform Rating and $7.00 target. Catalysts
to look for include: 1) Successful completion of environmental
review, and 2) Gahcho Kué resource update – late 2012 or early
2013.