Optiva Securities analyst Jason Robertson examined Kryso Resources (LON:KYS) after the company published a bankable feasibility study (BFS) for the Pakrut gold project yesterday.
The analyst emphasised the company’s scope to optimise the Tajikistan project further, given the size of the JORC resource and the mining plan considered for the BFS.
The BFS currently anticipates total production of 857,000 ounces of gold and 123,000 ounces of silver over a 14-year mine life, beginning in the second half of 2012. Pakrut’s average gold production is expected to be around 82,000 ounces per annum for the first four years.
Pakrut has a JORC Measured and Indicated resource of 1.61 million ounces (Moz) of gold, along with 1.24Moz in the JORC Inferred category.
“It must be remembered the BFS is a base case analysis which assumes only 857,000 ounces of gold will be mined ... there is tremendous scope for the parameters to be optimised in the near term to improve project economics,” Robertson said.
“Furthermore investors should not forget that with the BFS now published, one further box has been ticked by strategic investor-in-waiting China Nonferrous Metals in its proposed deal.”
Kryso has recently secured a £10.99m investment from China Nonferrous Metals International Mining (CNMIM) in a conditional placing of 73.27 million shares at 15 pence each to fund Pakrut.
The new investor intends to procure debt financing for no less than 70% of Pakrut’s development costs.
“We believe the BFS publication lifts the potential of this deal being finalised from 60% to 95%.”
“Once the deal is signed off with China Nonferrous Metals, technical and mine financing risks at Pakrut will be vastly reduced leading we believe to a significant market rerating.”
“To this end and with the gold price continuing to power ahead to the $1,400 mark we recommend Kryso as a BUY with a 12‐month target price of 28p.”