YTC Resources valued at almost double current price by broker

YTC Resources (ASX: YTC) has attracted a Buy recommendation by a broker following the release of a maiden resource for the Nymagee deposit.

The broker placed a valuation of A$0.76 on YTC, almost double the company’s last price prior to the report of A$0.385, citing the potential for further growth at Nymagee.
A 12 month price target of $0.87 was given.

The following is an excerpt from the report.

Nymagee Maiden Resource Lays Platform for Growth
YTC Resources Limited (“YTC”, “Company”) released a maiden resource for its Nymagee deposit of 8.1Mt containing 96Kt of copper, 27Kt of lead and 53Kt of zinc for an estimated 125Kt of copper equivalent (in-situ metal).

The copper deposit is part of the Nymagee Project, located 100km southeast of Cobar, NSW, which is now 95% owned by YTC.

Interim resource with further growth expected
The Nymagee deposit consists of a shallow (above ~210m depth) and deeper (below ~210m depth) copper resource, along with a lead-zinc-silver lens. The deposit offers good potential for both open pit and underground mining opportunities, with ~93% of the global resource in the Indicated resource category, which will enable the calculation of reserves.

The shallow copper mineralisation makes up the bulk of the current resource and consists of 5.1Mt grading 1% Cu, 0.1% Pb and 0.2% Zn; exceeding expectations in terms of tonnes and grade. The deeper copper mineralisation delivered maiden tonnes of 2.6Mt grading 1.7% Cu, 0.3% Pb and 0.5% Zn, which is a lower copper grade than expected, however, significant zones of additional copper mineralisation including the high-grade Club House lode are yet to be included in the estimate. It is expected that these zones will be added in the future following more detailed drilling.

Mineralisation at Nymagee remains open at depth. The lead-zinc-silver lens consists of 0.36Mt grading 4.4% Pb, 7.8% Zn and 41g/t Ag.

Nymagee to be integrated into the Hera development
YTC has commenced feasibility studies (scoping level) on integrating the Nymagee deposit as a Stage 2 expansion to the development of the Hera gold-base metal deposit (Stage 1). Work to date includes initial metallurgical studies indicating that the Nymagee ore is capable of producing high-quality copper concentrates at good recoveries (>95% Cu recovery). However, test work for Pb, Zn and Ag is still required. We expect similar metal recoveries to Hera, that being ~91% recovery for Pb, ~90% recovery for Zn and ~47% recovery for Ag, all at high payabilities. YTC plans to recommence exploration and extensional drilling at Nymagee in January 2012.

Model adjustments; Maintain Buy
We have an updated valuation for YTC of 76cps, which is a slight adjustment from our preliminary 80cps valuation. Our valuation includes a development scenario for Hera and Nymagee. Hera is envisaged to be mined via underground methods, whereas Nymagee is modelled as an open pit and underground mining operation.

Given the increased tonnes from the maiden Nymagee resource (addition of open pit ore, along with deeper underground ore potential) we forecast that the plant will be expanded, and we have now modelled a 700ktpa operation for Nymagee for combined throughput capacity of just over 1mpta for Hera-Nymagee. We have increased our pre-production capital estimate for Stage 2 to ~A$80m, for all up capex for Hera-Nymagee in the region of ~$170m (which includes a contingency). It should be noted that this is our estimate of combined capital costs and they will be updated as feasibility studies into the Nymagee development progress. We have a 12-month price target for YTC of 87cps, and we maintain our Buy recommendation.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/24067/ytc-resources-valued-at-almost-double-current-price-by-broker-24067.html