Polymetals Mining: QuickView

Polymetals Mining (PLY), an ASX-listed gold and base metals producer, continues to profit under difficult economic conditions based on a model of successful asset identification, development and operation leading to consequential low-cost gold production. With gold production at the White Dam gold mine near Drew Hill, South Australia, set to finish in 2013, the company’s plans now shift to commissioning the Mt Boppy gold mine near Cobar, NSW, and moving to a scoping study on the Turner River project in Western Australia (WA).

Mt Boppy - set to go
PLY is focusing its endeavours on the old Mt Boppy gold mine, part of the 100%-owned 204km2 of consolidated Canbelego tenements in the Cobar region of NSW. Consistent with PLY’s approach, a reduced start-up time is expected and cost advantage with a 150ktpa processing plant and site camp already stationed at Mt Boppy. The feasibility study completed in January 2013 estimates a pre-tax NPV of A$27m10 and an IRR of 100% with 81koz Au to be mined (80% recovery rate), and using a gold price of A$1,600/oz. PLY’s target total cash cost for the Mt Boppy project is A$1,091/oz. PLY is also testing near-mine targets with step-out drilling occurring at the Pipeline Ridge, Boppy South and Birthday prospects.

White Dam and Turner River
PLY’s decision to increase its JV interest from 25% to 50% (Exco Resources: 50%) at the White Dam gold mine and Drew Hill tenements in South Australia has allowed it to take advantage of high-margin gold from the dump leach since conventional mining concluded at White Dam in H212. The JV holds 728km2 of exploration tenements, including three historic gold/copper mines that PLY is evaluating, as well as drilling 20 near-surface copper gold targets. Meanwhile, PLY’s recent exploration programme at the Turner River project near Port Hedland in WA has provided excellent results. The current resource estimates c 300koz of Au and PLY management indicates it will proceed immediately with a scoping study.

Valuation: Technical expertise and cash costs drive low EV/oz
PLY’s current market capitalisation of A$17m implies an average EV/oz Au value of US$11.03/oz. This compares very favourably with Edison’s average EV/oz Au value across ASX-listed gold companies of US$86.09/oz. We believe the market has not fully appreciated PLY as a producer with low C1 cash costs and technical experience, allowing it to produce low volumes at high margins.

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