Intermin Resources Limited’s (ASX:IRC) gold strategy has seen New York-based Arrowhead Business and Investment Decisions upgrade its valuation.
Arrowhead has placed a fair market value of 45.4 cents to 48.2 cents per share on the ASX-listed explorer focused on the Kalgoorlie Region of Western Australia, home to some of Australia’s largest and richest gold mines.
The fair value has been established by Arrowhead using its blended valuation method.
Arrowhead had initiated coverage on Intermin on October 3, 2017 and last updated its report on February 16, 2018 with a fair market value of 35.4 cents to 38.1 cents per share.
READ: Intermin Resources’ reconciliation of Teal gold production exceeds estimates
Intermin recently completed mining at the Teal open pit gold mine, located 11 kilometres northwest of Kalgoorlie.
The Stage 1 and Stage 2 mines at Teal produced a total of 229,000 tonnes of ore mined at 3.2 g/t for gold production of 21,936 ounces in the June 2018 quarter.
Gold production was 19% above feasibility levels and above revised project guidance.
Intermin estimates costs from Stage 1 and Stage 2 of the mine at all-in costs of A$1,000- A$1,100 per ounce.
Stage 1 and Stage 2 of the Teal project were highly profitable with total estimated free cash flow of $9 – $10 million.
Intermin’s next mining project is the development of Goongarrie Lady, located at the northern end of the Bardoc Tectonic Zone.
READ: Intermin Resources delivers positive feasibly study for Goongarrie Lady gold project
The company completed a feasibility study in June 2018, and plan to mine a maiden JORC 2012 ore reserve of 135,000 tonnes ore grading 2.94 g/t gold for 12,700 ounces of gold over a period of seven months.
The recently concluded reverse circulation drill program involving 167 holes for 8,447 metres confirmed the grade and the geological interpretation to further support the feasibility study and mine approvals.
The project is expected to be highly profitable with an estimated cash generation of $5-$6 million. Intermin expects to make an investment decision in early 2019.
READ: Intermin Resources’ initial Anthill gold resource provides strong growth base
Anthill is one of the most valuable new additions to Intermin’s mining pipeline with an initial resource estimate of 78,000 ounces of gold.
The company has planned a large-scale 14,000 metre follow-up reverse circulation program in 2018 to test the extension, parallel lodes and primary targets, with a scoping study to follow shortly thereafter.
Intermin’s Resource Base
Demand for gold
Gold demand is driven by the need for preservation of value.
The bullion’s modest price recovery compared to other commodities has resulted in a reduction in spending on exploration to less than US$4 billion from almost US$10 billion in 2012.
This has left many companies in the industry forecasting a shortage in supply by the end of the decade leading to a price increase.
Analysis
The company generated a revenue of $3.5 million from gold sales in the quarter ended June 30, 2018 and $11.5 million in the previous quarter ended March 31, 2018.
Intermin’s cash and tradeable securities stood at $9.5 million as at June 30, 2018. The company is debt-free and intends to self-fund its exploration.
The management team is highly experienced in mining development and the exploration of gold projects.
Arrowhead believes Intermin is well placed for the successful development of its projects.
Arrowhead Business and Investment Decisions received fees in 2017 and expects to receive fees in 2018 from Intermin Resources for researching and drafting reports and for a series of other services including distribution and networking services.