China-focused Inter-Citic receives bullish rating from Northgate Capital Partners

Inter-Citic Minerals (TSE:ICI) received encouraging remarks from equity research firm Northgate Capital Partners on Monday, after the Canada-based gold explorer boosted inferred resources at its Dachang project late last week.

On Thursday, the company increased inferred resources at its China gold property by more than 400,000 ounces of gold, due to the inclusion of new areas.

The updated report, prepared by Micon International, estimated inferred resources of 21.26 million tonnes grading 2.83 grams per tonne, or 1.93 million ounces of contained gold - an increase of around 409,000 ounces over the previous report last July.

In 2010, Toronto-based explorer Inter-Citic conducted a 25,070 metre drill program and a 9,800 metre trenching program focused on expanding the resources outside of the existing Dachang Main Zone (DMZ) and Placer Valley areas. The new "exploration area" resources are entirely in the inferred category.

In the research report, Northgate noted: "Increased resources at these new regional zones are a preliminary indication of the 279 square kilometre property’s mineral potential. We believe the Acadia Zone, 861 Zone, and XP Zone could each host 1.0-1.5Moz at similar grades to DMZ."

Northgate further said that a resource increase of this magnitude could substantially change the economics of the project relative to the equity research firm's current valuation, which is based on a preliminary economic assessment from 2009, incorporating only 46% of total resources.

New inferred resources are in addition to the estimated measured and indicated resource of 1.88 million ounces of contained gold, or 17.2 million tonnes at a grade of 3.41 grams per tonne (g/t) gold, at a cutoff grade of 0.6 g/t.

Based on future indications, Northgate assigned the Canada-based company a "sector outperform" rating, with a price target of $3.25, more than double its current share price.

Northgate expects to re-visit its valuation upon the release of the project's feasibility study, expected in the middle of this year, it said. Near term catalysts for the company's share price also include exploration results, advancement of Dachang, a new joint venture partner, or a potential takeover.
"We believe that Inter-Citic presents an excellent opportunity to invest in a potentially high‐return, low‐cost gold project in China — the world’s largest gold producing country.

"The share price currently reflects a discount to our development project Net Present Value estimate, which incorporates only half of all resources in the mine plan.

"Additionally, the shares currently do not reflect the value for inferred resources being upgraded with infill drilling and the blue‐sky exploration potential," the research firm concluded.
Zijin Mining Group (2899:SEHK), China’s largest gold producer, acquired a 19.15% equity interest in Inter-Citic Minerals in April of last year, but has no direct interest in the Dachang project.