OTCPK:CFMSF - Post by User
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tooclassyon Jan 16, 2013 1:30pm
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Post# 20845915
Report from LOM analyzes PEA results
Report from LOM analyzes PEA results
Tuesday, January 15, 2013
Research Spotlight
Clifton Star Resources Inc. (CFO-TSXV)1
Speculative Buy.Target:$5.96
January 14/13 closing price: $0.87
Michael Fowler, M.Sc MBA
416-964-4440
Clifton Star Tables A Robust PEA- IRR Of 15.4%-- Positive: The company announced the results of a PEA study, which was overseen by InnovExplo. The study considered an open-pit scenario relating to the mineral resources at Duparquet. The highlights of the study were as follows:
· Average yearly production of 104,400 ounces with the first 5 years averaging 144,800.
· Average cash cost is estimated at US$726 per ounce.
· Mine life is 16 years.
· Pre-production capital cost of $370 million.
· Recovered gold is 1.67 million ounces.
· Mine recovery is 90.9% and the hard rock mill recovery is 93.9%. Dilution is estimated at 10%.
· Gold price used US$1472 per ounce. Pre-tax NPV (5% discount rate) is $382 million and IRR is 19.5%. Post tax it is 15.4%.
· At US$1325 the pre-tax IRR falls to 13.8%- still economic.
· Process recovery utilizes a pressure oxidation circuit.
· The underground resources were not considered.
· Total measured and indicated resources are estimated at 2.4 million ounces grading 1.62 g/t. Inferred resources totaled 1.47 million ounces grading 1.43 g/t. Cut-off grades are 0.45 g/t open pit and 2 g/t underground.
The press release indicates that this is a comprehensive study and importantly the measured and indicated component is approximately 70% of the resource base, which is much higher than typical PEA studies. This indicates that the confidence of the resource base is high. In addition the measured and indicated resource base has increased by 40% over the last resource update in July 2012. The bottom line is that these are positive results and the study should interest the attention of other mining companies in seeking acquisitions or joint ventures.
The stock is inexpensive; trading at a resource EV/oz of $21(includes option payments). If we just took the NPV from the study, this number would equate to $10 per share of value. We have a speculative buy on the stock with a $5.96 per share price target.
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