GGG Resources’ Bullabulling gold project has significant exploration upside - Collins Stewart

Collins Stewart called GGG Resources’ (LON:GGG) key Bullabulling gold project in Australia a very interesting asset with a significant exploration upside.
Following today’s appointment as GGG’s new corporate broker, Collins Stewart gave a summary of the company’s projects.
The broker gives GGG’s flagship asset a valuation that eclipses its current market cap.

Collins Stewart said that GGG’s 50% owned Bullabulling has a net present value (NPV) of US$178 million, with US$89 million, or £57 million, attributable to GGG, compared to its market cap of £31 million. GGG's joint venture partner is Auzex Resources (ASX:AZX)

Within 3 months of acquisition, the JORC compliant resource increased from 432,000 oz to just under 2 million ounces (Moz) of gold at 1.5 grammes per tonne (g/t).
According to Collins Stewart, the exploration upside is significant with the overall mineralized structure over 14 kilometres in length, while the infrastructure is “excellent” with the deposit being located just 5 kilometres (km) from the town of Coolgardie, meaning availability of cheap power.
This as well as substantial ‘sweet spots’ of mineralisation close to the surface, with grades of over 2 g/t and simple ore metallurgy typical for shallow deposits in gold fields in the area with 90% recoveries makes Bullabulling an “interesting project,” according to Collins Stewart.
The feasibility study at Bullabulling is commencing with a view to move the project into production in Q1 2013, which the broker said was “realistic and achievable”, citing the example of the Edna May gold project, which has been successfully commissioned this year by Catalpa Resources (ASX:CAH).
The broker used similar projects in Western Australia were used as a benchmark, stating that the “technically simple nature” of Bullabulling inspired greater confidence in valuation than its peers.
The key input assumptions were capital costs of US$157 million, a 15 year life of mine, an annual steady state production of 130,000 ounces (oz), cash costs of just under US$600/oz and a long term gold price of US$1,100/oz, which is significantly below the current US$1,340/oz.
“At $41/resource ounce, GGG Resources is one of the outstanding value propositions in the sector.
"As Bullabulling gets closer to production, we expect the gap between the project NPV and the company valuation to narrow significantly," concluded Collins Stewart.
GGG today said that Westhouse Securities will continue as its nominated adviser.