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Message: mpv

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.

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