The cash flow generated from Coolgardie will be used towards the development of the larger Mt Bundy Gold Project in the Northern Territory, that has the potential to be a large scale bulk tonnage operation which is targeting >150,000oz pa production over a minimum 6 year mine life.
The information in this article should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Analyst Comment: This was an opportunistic acquisition for Primary, as it allows the company to enter the ranks of gold production by 2017 and take advantage of the record high Australia gold price. Critically the cash flow generated from Coolgardie (+$40m - TSI estimate) will be used towards the development of Mt Bundy, therefore significantly reducing future dilution. Mt Bundy remains the long term valuation driver for the company as it is one of the few remaining gold development assets in Australia that has the potential to produce more than 150koz pa.
We have estimated that Coolgardie will initially be mined as an open pit operation with production between 45koz - 60koz pa at an AISC of $1,183/oz (TSI estimate). With a low initial capital cost requirement ($7m - TSI estimate) due to historical mine development as well as three toll treatment facilities with 8km of the project, we see this as a relatively low risk opportunity for the company to become a gold producer.
We look forward to drilling commencing at both projects as well as further information regarding timing on the commencement of gold production at Coolgardie in the coming months.
Valuation: This acquisition has resulted in our valuation increasing to $0.42 / share (previous $0.30 / share). The increase was driven by the additional value from Coolgardie, as well reducing future dilution, due to cash flow generated from Coolgardie prior to the development of Mt Bundy.
To view the video, please visit:
This information is general information only. Any advice is general advice only. Neither your personal objectives, financial situation or needs have not been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice. Adam Kiley (AR No. 458224) is an authorised representative of Intelligent Financial Markets Pty Ltd (AFSL No. 426359).
About Primary Gold Ltd
Primary Gold Limited (ASX:PGO) is an Australian-listed emerging gold producer and explorer with multiple near-term production and advanced exploration assets located in the Northern Territory and Western Australia.
Primary Gold's flagship asset is the Mount Bundy Gold Project in the NT, which includes the Rustlers Roost open pit project, Toms Gully high grade underground mine and 250ktpa processing facility, the Quest 29 deposit and a large lease holding of approximately 1,500km2 of underexplored tenure across the Pine Creek region. All deposits are located within a 10km radius, providing the opportunity for development of a large scale long life centralised processing facility.
About The Sophisticated Investor
The Sophisticated Investor is a new equity investment tool which seeks to assist investors in becoming more informed in their investment decision making. We show and tell investors about a company in a series of short, informative videos. We possess specialist equity analyst skills and are complemented by video professionals. We conduct site visits and interview management, in a way most investors simply aren’t able to access. We promote long term value creation for investors by employing detailed financial analysis and intrinsic value calculations.
The Sophisticated Investor
Primary Gold Ltd