Intchains Group Ltd V.ICG

Jennings Capital: Buy rating and $0.90 target for ICG

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According to Jennings Capital:

https://personal.crocodoc.com/W9nHZbH

September 4, 2014

INTEGRA GOLD CORP.

(TSXV-ICG C$0.25)

Recommendation: SPECULATIVE BUY

Revised 12-Month Target: C$0.90

Previous 12-Month Target: C$0.50

Risk Rating: ABOVE AVERAGE

TRANSFORMATIONAL TRANSACTION

The stock was halted for most of yesterday, and after market close, Integra announced it has an agreement to purchase all of the historic Sigma-Lamaque assets out of receivership (formerly owned by Century Mining).

- The purchase includes a permitted 2,200 tpd mill and tailings facility, permitted underground infrastructure including three portals, mechanical shop, office, dry and other equipment, and all mining concessions and mineral claims on the past-producing Sigma-Lamaque Mines.

- Integra reports that WSP Canada Inc. ("WSP"), an independent engineering firm, estimated the replacement value of the milling and tailings infrastructure at approximately $100 million.

- The aggregate purchase price is $7.55 million, consisting of $1.8 million in cash and 25 million common shares of Integra valued at $5.75 million (based on share price of $0.23 per share).

- ICG has made a concurrent agreement with Waste Rock Company (“WRC”), whereby Integra will receive $1,025,000 in cash, in exchange for access to and ownership of the waste rock on the historic Sigma-Lamaque property. Net cash outlay to Integra for the acquisition is $775,000.

- In the current PEA, a toll-milling scenario was envisioned, using approximately $46/tonne for milling and transportation costs. This amount estimated a toll surcharge of $15 to $20 per tonne, which will now no longer be applicable. The PEA envisioned total milling costs over the four-year mine life to be $89.4 million. We now estimate Integra’s milling cost at $25/tonne, which reduces total milling costs over the life of the project by $40.5 million to $48.9 million. The $40.5 million differential in milling costs will flow directly to Integra’s EBITDA.

- The acquisition comes with a considerable amount of surface infrastructure. Integra’s PEA includes approximately $13 million for pre-production infrastructure. Our view is that almost the entire pre-production surface infrastructure is no longer required, thereby reducing our estimate of initial start-up capital from $110 million to $97 million.

On the basis of this transformational transaction, we have adjusted the inputs to our valuation and continue to recommend Integra as a SPECULATIVE BUY, and we are raising our 12-month target price to C$0.90 from C$0.50.

Near Term Catalysts

• Ongoing Drill Results – Ongoing

• Resource Update - Q3 / 2014

• Pre-Feasibility Study - Q4 / 2014

• Certificate of Authorization ("C of A") - Q4 / 2014