RCR Gold Company Review - March Quarter 2010

Resource Capital Research
YTC.AU
YTC Resources Limited
A$ 0.21
YTC is on track to start gold and base metal production in early 2011 from
the Hera Project (NSW). A resource upgrade and DFS are expected in April
2010. A near-term value driver could be exploration drilling between Hera
and the historic Nymagee Copper Mine.
30 March 2010
Gold, Base Metals, Silver
Australia (NSW)
Pre-Feasibility Study
Exchanges: ASX:YTC
Capital Profile
Production and Financial Forecasts
Share price (A$)
0.21
52 week range (A$/share)
0.10
Number of shares (m)
164
Year End: June
to
Dec-09a
Mar-10F
2009a
2010F
2011F
0.35
Exploration and evaluation (A$m)
1.22
2.50
1.14
5.32
4.00
Options and warrants (m)
5
Corporate (A$m)
0.55
0.55
1.38
2.08
2.20
Convertible notes (m)
0
Exploration/(Expl.+ Corporate) (%)
69
82
45
72
65
0.5
1.1
0.3
Fully diluted (m)
169
Funding duration at current burn (years)
Market capitalisation (undiluted) (A$m)
33.7
Shares on issue (pr end) (m shares)
164.2
164.2
43.8
164.2
189.2
Drilling - RAB (m)
5,000
5,000
4,000
20,000
20,000
Drilling - Other/Diamond (m)
Land holding ('000 ha)
5,000
185
5,000
185
10,000
180
20,000
185
20,000
185
0.0
Debt (A$m) - Mar 10F
23.9
Enterprise value (A$m)
Major shareholders: Yunnan Tin Group (15%),
Wonderful Investments, HK (9.8%), China Yunnan Tin metals Group, HK (5.9%)
Tenement costs ($k per year)
Capital raisings (A$m)
7
Avg monthly volume (m)
-
-
-
-
-
3.1
0.0
2.8
25.3
10.0
0.0
Cash (A$m) - Mar 10F
9.7
Funding from JV partners (A$m)
0
0
0
0
Price/Cash (x)
3.5
Cash (A$m)
11.5
9.7
1.3
7.8
1.8
Price/Book (x)
1.2
Cash backing (Ac/share)
7.0
5.9
2.9
4.7
1.0
Listed company options:
No
Net asset backing (Ac/share)
17.0
17.7
12.4
17.4
19.3
Quarters stated on calendar year basis.
Investment Points
Company Comment
Focused on gold and base metal exploration in NSW,
including recently acquired flagship, the Hera Gold and
Base Metal Project near Cobar.
Hera Project and Nymagee JV: purchased 3Q09. Hera is
an advanced stage, undeveloped gold and Cu-Pb-Zn
deposit, with an AuEq resource ~500koz Au.
Hera's Main Lens could provide 7 years underground
production of 39kozpa Au, with natural hedge from base
metal co-product (e.g. Zn 6700tpa). Opex A$360/oz AuEq
High gold and base metal recoveries from coarse grind,
gravity and bulk float.
Near-term value drivers could include a Hera resource
upgrade and DFS in 2Q10, and ongoing exploration drilling
of gravity anomalies between Hebe and Nymagee.
NSW exploration portfolio includes early to advanced stage
prospects for gold (Baldry, Kadungle) and tin.
YTC – YTC Resources Limited
Share Price ($/Share)
0.35
0.30
0.25
0.20
Overview: YTC listed on the ASX May ’07. It is focused on the exploration and development of gold and
base metal projects, especially tin, in the New England and Lachlan Fold Belts of New South Wales.
Hera Project and Nymagee JV (Au, Ag, Pb, Zn, Cu): Located 100km SE of Cobar, central NSW, Hera is an
advanced but undeveloped gold, silver and base metal (Cu-Pb-Zn) deposit. It is Cobar-style deposit
consisting of 1-12m wide sub-vertical lenses. Mineralisation extends from surface to +500m depth, and
measures 800m (strike) by 300m (width). Hera was found by Pasminco (2001) and subsequently developed
by Triako and CBH Resources, which each established JORC resources (with different Au and base metal
cut-offs). YTC bought Hera plus 80% interest in the Nymagee JV from CBH (A$12m plus 5% royalty Jun ’09).
Mining Evaluation: To date, YTC has evaluated the Main Lens (600m strike), which could be mined via
conventional bench stoping (+150m depth). Some parts of the lens are high grade, e.g 16.7m @ 70g/t Au,
8.5% Pb, 11.1% Zn and 38g/t Ag (CNYDD017). YTC has defined a Mining Inventory for Main Lens of 1.14mt
@ 6.7g/t Au, 14.9g/t Ag, 0.2% Cu, 2.27% Pb and 3.72% Zn. This could be mined over 7 years, with annual
production 39koz Au as both bullion and in concentrate, along with concentrates containing Ag (77kozpa), Zn
(6700tpa), Pb (3800tpa) and Cu (330tpa). Gold could be produced from a gravity circuit and as a concentrate
either at Hera or, for example, at CBH’s Endeavor plant (150km by road). YTC estimates opex A$360/oz
AuEq. Initial capex could be A$23.4m including A$5m for the DFS and exploration, A$11.8m underground
development and A$3.5m for a gravity circuit. Mine life extensions could be provided by the 1530 Lens
(drilled 22.8m @ 7.1g/t Au from 361.4m depth) and Far West Lens (drilled 7.8m @ 15.2g/t Au and including
12.5% Zn). YTC plans to mine Hera in early 2011. A Definitive Feasibility Study (by GRES) and resource
update are expected Apr ’10. DFS metallurgy shows that a coarse grind, gravity and bulk float can recover
up to 83% of Au and 86-96% of base metals. The DFS should include a mine plan defined at US$170/t.
Hera exploration: The deposit is open at depth, and along strike. Resource infill and expansion drilling
commenced Oct ’09. Important findings include an open north-plunging extension to the Main Lens
(HRD020: 8m @ 5.5g/t Au, 18g/t Ag, 0.47% Cu, 2.3% Pb, 1.4% Zn) and an interpreted connection between
the Far West and Hays/Werners lenses to form a continuous Western Lens with 300m strike. A new copper
lens was also intersected west of Main Lens (incl 7m @ 3.15% Cu). The 1km-distant Hebe Prospect has
drilling 7m @ 3.26g/t Au and +2% Pb and Zn, while the underground Nymagee Copper Mine (Nymagee JV)
produced 0.42mt @ 5.8% Cu in 1880-1917. A gravity survey of the 6km Hebe-Nymagee corridor revealed
untested anomalies that have become exploration targets, e.g. Zeus (1.5km SSW Hera). Drilling is ongoing.
Valuation: At a long-term gold price of US$850/oz and based on the Hera Evaluation Study and the Triako
resource (Main and 1530 lenses), the company’s NAV (5% discount rate) is A$102m, or A$0.61/share (fully
diluted), including cash (Mar 10F A$10m). Based on the 1.14mt Mining Inventory, near-term target remains
A$0.50/share. This valuation takes no account of the company’s large NSW exploration portfolio.
Investment Comment: YTC’s infill drilling at Hera, and recently discovered lens extensions and
connections, should boost the resource and help with a +US170/t mine design. An obvious near-term price
catalyst should be the DFS and resource upgrade in April 2010. The results of exploration drilling, on gravity
anomalies such as Zeus, and around the Nymagee Copper Mine, could provide good news. Project finance
for Hera (equity and/or debt) will be needed in mid 2010, as dictated by capital costs in the DFS.
Reserves and Resources/Mineralised Material
0.15
Code for reporting mineral resources - Australian:
Tin
Classification
0.10
(JORC)
Project
Equity
Ore
Au
Cut Off
Au
Au
Mt
g/t
g/t
t
koz
koz
0.0
0.0
0.0
Reserves
0.05
Au Eqty
Resources
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Jul-09
Jun-09
Apr-09
0.00
Source: Bloomberg
Hera (CBH, 2007) ^
Indicated + inferred 100%
3.3
2.67
7.5% ZnEq
8.8
283
283
Hera (Triako, 2004) ^^
Indicated + inferred 100%
1.8
6.70
2.5g/t AuEq
12.0
385
385
0.0
0.0
0.0
Mineralised Material (est., non compliant with JORC)
^Other metals: Cu 0.18%; Pb 2.72%; Zn 3.35%; Ag 15.13g/t.
^^Other metals: Cu 0.2%; Pb 2.5%; Zn 2.8%; Ag 14g/t
Doradilla Project tin resource is 7.8mt @ 0.28% for 49.2mlbs Sn
Contacts
Mr Rimas Kairaitis
Chief Executive Officer
Tel: +61 (0)2 6361 4700
Orange, NSW, Australia
www.ytcresources.com
Analyst: Dr Trent Allen
[email protected]
March Quarter 2010
Directors
Wenxiang Gao (Chair)
A Wehby (Vice Chair)
R Kairaitis (CEO)
G Zhang (Non Exec)
S Woodham (Non Exec)
R Chambers (Non Exec)
R Hill (Non Exec)
C Ng (Non Exec)
Key Projects
Project
Hera
Nymagee
Tallebung
Kadungle
Doradilla
Baldry
Giant's Den
Ownership/
Option
100%
80%
100%
100%
70%
100%
100%
Target
JV
Type
Partner
Metal
Au-base
Cobar
na
Au-base Ausmindex/MMG
Cobar
Sn (W)
Lode, porph.
none
Porphyry
none
Au, Cu
Sn, Ni
GCP,SRL
Skarn
none
Au, Ag
Epitherm.
Lode, alluv.
Sn (Au)
none
Disclaimer and disclosure attached. Copyright© 2010 by Resource Capital Research Pty Ltd. All rights reserved.
Process
Route
Gravity/float
na
na
na
na
na
na
Project
Status
Pre-feasibility
Mid Expl.
Mid Expl.
Mid Expl
Adv Expl.
Early Expl.
Mid Expl.
Location
Aus (NSW)
Aus (NSW)
Aus (NSW)
Aus (NSW)
Aus (NSW)
Aus (NSW)
Aus (NSW)
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Resource Capital Research
Preliminary process flow sheet, Hera Project (NSW): Stage 1 metallurgy has shown high recoveries of gold
(up to 83%) by coarse grind and gravity, and base metals by subsequent bulk float. Downstream options
include leaching, and finer grind and float. A DFS and resource upgrade are expected in April 2010.
Gravity survey, Hebe to Nymagee: conducted at 100m x 100m spacing, the survey revealed at least six
untested or poorly tested anomalies that are now drilling targets. The current focus is Zeus, which has
already been shown to be mineralised. The Nymagee Copper Mine is also highly prospective.
March Quarter 2010
Disclaimer and disclosure attached. Copyright© 2010 by Resource Capital Research Pty Ltd. All rights reserved.
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Resource Capital Research
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March Quarter 2010
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