RE: Scotia - $2.00 Outperform target price Leily Omoumi, MBA - 416-945-4527
(Scotia Capital Inc. - Canada)
More High-Grade Intercepts from the South
Event
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Volta released the results of 34 holes from the high-grade target just south of its Kiaka
deposit. This is the second round of results released; initial results of the 37 holes were
released in late February 2012.
Implications
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Although the grades of the intercepts are consistently high, similar to last set of holes, the
company believes it will encounter narrower shoots than initially anticipated. However,
Volta expects to encounter similar high grades as drilling continues. The highlights from
today's release included 4.48 g/t over 9.8m and 8.1 g/t over 2.6 m. Recall the average grade
of the Kiaka deposit is ~1.0 g/t.
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We believe this could potentially feed higher-grade ore to the mill in the early years of
operation. Although it is too early to know its ultimate potential, a high-grade feed could
significantly improve the economics of the Kiaka project
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Our sensitivity analysis shows that, by processing only 1.0 M tonnes of ore at 3.0 g/t in year
one, our NAV3% estimate increases by 2.5% and increases by 6% if we use 1.0 M tonnes at
5.0 g/t.
Recommendation
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We have not made any modeling changes. We maintain our 1-SO. Volta continues to trade
cheaply at 0.37x NAV vs. peers at 0.60x NAV.