"We believe the company is now planning a drill program that is adequately
scaled to define an initial resource estimate at Magambazi in Q1/12 and begin
testing targets elsewhere along the MK Trend this quarter. This follows a
period of what we view as slow news flow with the company being hampered
by a seasonal slow down in Q2/11 and a lack of assaying capacity in
Tanzania.
To clear the existing back log of drill core awaiting assay, which we
understand includes at least 50 holes, the company announced that it had
begun using a second assay lab in Tanzania in July and more recently it had
flown samples to another lab out of country. As part of today’s news, the
company also announced the construction of an on-site sample preparation lab
to expedite the assay process.
With the conclusion of the seasonally slow rainy season in July and
significant expansion of drilling and assaying capacity, we are hopeful that
the company can improve the quantity and frequency of its release of drill
results to the market. Moreover, we now have more confidence the company
has the capacity to complete enough drilling for an initial resource at
Magambazi in Q1/12 and begin testing targets elsewhere along the MK Trend
this quarter.
With no changes to our valuation, we maintain our 12-month target price of
$8.00/share and reiterate our SPECULATIVE BUY recommendation."