A2 Milk Company Ltd V.ATM

canaccord tgt 2.40 wow

[RockLobster1]

 Atacama Pacific Gold Corporation (ATM : TSX-V : C$0.65) - Speculative Buy - Target:C$2.40 Metallurgical results support potential for larger crush size  Investment recommendation We reiterate our SPECULATIVE BUY rating on Atacama Pacific Gold following the release of continued metallurgical work from Cerro Maricunga. The results released today are similar to previous testwork released in August 6, 2013, and support the potential for the company to move to a larger grind size. The next potential catalyst is expected to be the release of a prefeasibility study on Cerro Maricunga (Q3/14E) which is expected to report a lower upfront capital cost estimate versus that as reported in the PEA announced on January 28, 2013. Investment highlights Results from the latest six column percolation leach tests supports the company's view that it can move to a larger grind size with only a minor decrease in gold recoveries. Today's results show that moving from a 21 mm grind size to a 105 mm grind size would result in an approximate 2% decline in recoveries. These results continue to support the company's view that Cerro Maricunga could be operated  using a larger grind than used in the PEA. The PEA assumed a grind size of 19 mm and a recovery of 79.5%. We have already factored in the potential for a larger grind, and currently estimate a recovery rate of 73%. In this latest round of testing, the company also examined the impact of using HPGR on recoveries; and found no significant benefit. Atacama Pacific has been testing the potential for using a larger grind size to be incorporated into their upcoming prefeasibility study. The company is awaiting supplier quotes for fleet equipment and some infrastructure items. If all quotes are delivered by the end of June, the company expects that the results will be available for release in July 2014. The prefeasibility study will likely incorporate changes such as a valley fill heap leach (replacing the conventional leach pads in the PEA) and a simplified crushing circuit (replacing the 3-stage crushing in the PEA). These changes are expected to lower the upfront capital cost of the  project from the previous $515 million. Further cost reductions may also be achieved through the potential for a third party to construct the water pipeline from the City of Copiapo; with ATM using the pipeline through ongoing lease payments. Reflecting the potential for ATM to realize the upfront cost savings through the process changes, we currently estimate initial capex of $350 million. While we await the results of the prefeasibility study to revisit our valuation, we do note that a 1% reduction in recoveries from our current estimate would be worth approximately $0.50/share to our NAV estimate and a 10% reduction to our capex estimate would be worth approximately $0.40/share. Valuation Our target price of C$2.40 is based on 0.40x our 5%/project NAV estimate of C$5.98 plus working capital and other adjustments. Our 0.4x multiple reflects the financing risk in developing Cerro Maricunga as our valuation has not been diluted for a capital raise.