RE: Price target increase to $2.45NCP Northland raises its target price on ICI to $2.45
Link to the whole article:
https://stockgroup.stockgroup.com/baimg/img/inter-citic/img_082510/Intercitic-Mining_Minerals_IndustryPOV.PDF
Highlites:
VALUATION Our NPV (10% discount rate, US$1,000/oz gold [up from US$850/oz], FORECASTS
90% Inter-Citic interest) of $287.3M, or $2.29/share, for the Dachang Gold Project is
based on the preliminary economic assessment mine plan and its fully-funded shares
outstanding. Our NAV of $305.4M, or $2.43/share, includes adjusted working capital.
We have assumed the US$83.1M of development capital is funded with 70% debt
and 30% equity, with the equity portion financed at $1.25/share. Our price target is
based on a P/NAV ratio of 1.0x and working capital of
.15/share. Our P/NAV ratio
is below its normalized North American peers at 1.25x due to its project location
being in China.
INVESTMENT SUMMARY ICI is advancing its Dachang Gold Project in China
towards feasibility. We believe ICI presents an excellent opportunity to invest in a
potentially high-return, low-cost gold project in China — the world’s largest goldproducing
country. Due to the scarcity of large global mines, the project could be
attractive for a company already working in the region, a new entrant, or a Chinese
company. The share price currently reflects a discount to our development project
NPV estimate of $2.43/share, which only incorporates 57% of all resources in the mine
plan. Additionally, the shares currently do not reflect the value for inferred resources
being upgraded with infill drilling and the blue-sky exploration potential on identified
mineralized zones.
Zijin Mining Group (2899-SEHK, Not Rated), China’s largest gold producer, holds a
19.1% equity interest in Inter-Citic Minerals. Zijin has no direct interest in the Dachang
Project, which does not prevent another operating company from becoming
involved in the future. The 16M shares acquired by Zijin cannot be sold or transferred
for at least one year, and have a standstill for two years, preventing an unauthorized
takeover. Zijin is China’s largest gold producer, third largest copper producer and
one of the six major zinc producers, and provides geological and mining
consultancy services.