KGL 0.93% 53.5¢ kgl resources limited

my conservative valuation

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    http://www.kentorgold.com.au/PDF/2011jul20...orGoldJinka.ppt


    Note Slide 25 "Maiden Jorc Resource" and note where the current 8.8M tonnes resource at 1.3% Cu is limited to. That's right. 200m! Now note the best hole drilled so far is at 400m (bottom right of the slide). It doesn't take much imagination to quickly see the tonnage increase to circa 20M tonnes after further infill drilling. Jervois is shaping up as a significant discovery. Remember the mineralisation occurs over a distance of 12km (the J curve). In my opinion, even 20M tonnes at 2% Cu equivalent is going to be conservative. That's 400,000 tonnes of copper metal in situ. At an industry average in gound value of 8.5c/lb Cu or $190/tonne, that values Jervois alone, on my numbers, at $76M or 7c per KGL share.

    Burnakura and Gabanintha on my conservative numbers total 700,000 ounces * $50/oz = $35M or 3.3c per share. That excludes all lead, silver, zinc and copper. Those by-products will be significant and would bump up my in ground value of the gold to around $55M or 5c per share.

    I personally am confident Andash will proceed and the current NPV at today's spot prices is $360M. Let's discount that by 80% for political risk and my value for Andash now is a conservative $57M or 5.5c per share for KGL's 80% holding. Obviously that rises rapidly towards NPV (34c for Andash alone) once the green light is given and construction is well underway.

    Cash is currently around 5c per share and there is zero debt.

    Based on the above, I can easily justify the following valuation NOW and it allows zero exploration upside at Burnakura/Gabanintha.

    Andash 5.5c
    Jervois 7c
    Burnakura/Gabanintha 5c
    Cash 5c

    Total valuation: 22.5c.

    This is a no-brainer but the market will be reluctant until the Andash hurdle is overcome. The "penny" also hasn't dropped just yet on how good this Jinka acquisition was. Give it time and it will.

    The other huge positive is that all the Jinka assets are not subject to native title. This means a savings of approximately 3 years in getting to production.
 
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