YTC Resources: Hartleys places $0.90 price target, maintains "Buy"

YTC Resources (ASX: YTC) is the subject of a new research report by Hartley’s Research who have placed a $0.90 share price target, maintaining its "Buy" recommendation. Below is an extract of the report.


Company data

Share Price (last): 0.505
Valuation: 0.80
Price Target: $0.90
Issued Capital: 248.4 million
Market Cap: $125.4 million
- fully diluted: $129.0 million
Cash (est): $$26.0 million
EV: $99.4 million

Robust Hera DFS for Stage 1 Lays Foundation for Growth

YTC Resources has released the results of the Definitive Feasibility Study (DFS) for the Stage 1 development of the Hera  gold and base metal deposit, part of the Hera-Nymagee Project, located  ~100km southeast of Cobar, NSW.

The Company has adopted a two-stage  approach to developing the Hera-Nymagee Project, fast tracking gold  revenue from Hera (Stage 1) to establish the mining and processing  infrastructure with the view of self-funding the development and integration  of the larger Nymagee copper deposit (Stage 2).

Stage 1 of the DFS  demonstrates that the Hera mine delivers  robust project economics, based  on a 350Ktpa plant producing gold and silver bars (doré) and a bulk leadzinc concentrate at an annual average production of  ~50Koz on a gold  equivalent (Au Eq) basis, over a minimum 7.3 year mine life.

Hera pre-production capital requirement of A$73.5m

The Hera development has a pre-production capital requirement of  A$73.5m, which is in-line with expectations. The Company expects C1  operating costs of A$395/oz (after  lead-zinc credits), providing a solid  foundation for the Hera-Nymagee production centre and platform for growth.

Using a gold price assumption of A$1450/oz, YTC expects Stage 1 to  generate revenue of over A$510m for the life of mine, for a Net Operating  Profit (pre-tax) of ~A$95m. As part of the DFS, YTC has released a maiden
ore  reserve for Hera  of 423,471oz Au Eq at average grade of 7g/t Au Eq,  providing a mining inventory of over 390Koz Au Eq over the initial life of  mine.

Our updated Nymagee-Hera Project valuation (NPV12) is now ~A$133m (up  from ~A$129m) adding 2cps to our valuation, which compares to the current  market capitalisation for the Company of A$127m and Enterprise Value (EV)  of ~A$99m. The modular plant design is capable of expansion to treat the  Nymagee ore in Stage 2, which when integrated with the Hera circuit will  provide a copper-silver concentrate.

YTC has an existing approval to commence development of surface  infrastructure, box cut and decline to the first production levels. The  Company submitted an application for the complete Hera operation in  November 2010 and is finalising the Environmental Assessment (EA) prior  to public exhibition in October 2011. YTC remains hopeful for full approvals  by December 2011, with work to commence before the end of the year.

Nymagee copper expanding with maiden resource Q4 CY’11

YTC continues to intersect significant copper mineralisation from shallow  and deep drilling at Nymagee (YTC 90%). Stage 2 of the Hera-Nymagee  DFS is to integrate the Nymagee deposit, which is located 4.5km away from
the proposed mine and processing infrastructure.

YTC expects that a  maiden resource estimate for Nymagee will be released in mid Q4 CY2011,  with detailed open pit and underground mine studies to follow.

Metallurgical  test work is also planned with the processing plant upgraded to combine  Nymagee ore with Hera Stage 1 ore. We see an additional A$30m capital  requirement for Stage 2, which YTC believes can be self-funded from Stage 1.

YTC continues with the aggressive drill program at Nymagee with 3 rigs  currently on site, providing a strong flow of news. We have a 12-month price  target for YTC of 90cps, and we maintain our Buy recommendation. 

Originally published at: http://www.proactiveinvestors.com.au/companies/news/19857/ytc-resources-hartleys-places-090-price-target-maintains-buy-19857.html