China Green Agriculture Inc T.CGA

CIBC

[amarksp]

CIBC report

https://rcext.cibcwm.com/DownloadItem.aspx?pubid=112418

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CGA Mining reported that the SAG mill repairs are almost complete with a return to full production expected this quarter (Q4/C11). We suspect that the final adjustments may drag into the new year, but we are confident that this is truly a short-term problem.

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Production for the quarter of 15K oz. at cash costs of $1,167/oz. slightly missed our conservative estimates of 18.5K oz. at cash costs of $943/oz. We have revised our production estimates down slightly for the next two quarters, which lowers our F2012 production estimate to 131K oz.

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With the stock down ~20% since announcing the SAG mill repairs, CGA is now trading at 2.5x 2013E CF, a significant discount to its peers. With repairs almost complete, catalysts on the horizon, and recent success through the drill bit, we think now is the time to own the stock.

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Our NAV estimate falls slightly from $3.30/share to $3.18/share due to our near-term downward production revisions but our long-term cash flow estimates are unchanged. CGA remains our top pick in the gold space and we continue to rate the stock Sector Outperformer with a C$4 PT.