Millennium Minerals (ASX: MOY), the following is an extract from a Patersons research report.
Patersons rates Millennium a speculative BUY with a twelve month price target of $0.056, more than double the last traded price of $0.022.
Millennium Minerals is targeting first commercial production at its flagship Nullagine gold project in the East Pilbara District of Western Australia in the June quarter of 2012.
Millennium plans to produce 72,000 gold ounces annually over a seven year mine life, sourcing ore from several pits.
The largest is Golden Eagle, which accounts for around 63% of the company's 1.24 million ounce gold resource.
Mine construction is scheduled to commence in the September quarter of 2011, once project financing is secured.
Millennium has raised A$29 million via a rights issues and has secured A$45 million in debt facilities to fund the estimated A$77 million start-up capital.
Patersons expects the funding shortfall of A$20 million will be addressed in the September quarter of 2011.
Using a DCF model Patersons have calculated a NAV of $0.056 per share, and rate Millennium a speculative BUY.
Millennium hopes to confirm down dip and along strike extensions of mineralisation at several of the Nullagine deposits and will continue drilling through 2011 to expand the resource base.
The company has budgeted for an exploration spend of circa $10 million over the next twelve months, with a goal of adding an extra 200,000 ounces to the resource and raising the reserve to 700,000 ounces prior to the commencement of mining.
Long lead items ordered and construction commenced
Long lead time items have been ordered and initial construction of the Nullagine Gold project has commenced.
Project construction and the commission of the 1.5Mtpa plant are expected to be completed in the by June 2012.
Possible heap leach scenario
The results of a Scoping Study estimate an extra 175,000 ounces could be added to production over the current 7 year mine life with the addition of a heap leach.
A feasibility assessment will be performed in 2012.
1. Confirmation of financing structure (debt/equity).
2. Further exploration success.
3. Heap leach feasibility study.
1. Funding risk.
2. Project execution risk.
3. Market expectations.