Kinbauri Gold Corp > Message
Morning NotesApril 22, 2008Kinbauri Gold Corp (KNB-TSXV, $0.85, TARGET $2.25, BUY) Tara Hassan – 416.603.4343Frontier Pacific Mining bid supports higher valuation for KNB th@mpartners.caMARKET INFOClosing Price, April 21, 2008 $0.8512 Month Target Price $2.25Total Return Potential 165%52 Week Range $0.36 to $1.11Market Cap-FD (000's) $58,662Enterprise Value-FD (000's) $58,662Avg Volume (previous 3 months) 310,990FINANCIAL INFO (FYE May 31) FY2008EShares o/s (000's) 43,538Fully Diluted Shares(000's) 69,014VALUATION 2008ENAV/Share $1.83Resources (M+I) (000 oz) 989Total Resources(M,I,I) (000 oz) 2 ,063EV/Resource (M+I) 59EV/Resource (Total) 28Source: M Partners, Company Information• Yesterday Eldorado Gold (ELD-TSX) announced that it intends tomake an offer for all of the outstanding shares of Frontier PacificMining (FRP-TSXV)• FRP holds a number of assets in Europe and South America,however, it is our view that its gold asset in Northern Greece is whatmakes it attractive to ELD• The Perama Hill deposit in N. Greece contains 1.36Moz of IndicatedResources and 27Koz of Inferred Resources and will undergo afeasibility study shortly• Early indications from FRP suggest the deposit could be mined as alow strip open pit mine with good processing recoveries and couldincorporate a silver revenue stream• It is our view that this proposed takeover represents a veryinteresting data point for Kinbauri Gold (KNB-TSXV), who is currentlydeveloping a similar sized asset in Northern Spain• In general the projects have a large number of similarities (asshown in the table below), with the exception of different miningmethods (underground vs. open pit)• Despite this, KNB is trading at a significant discount to the proposedoffer for FRP (valued at 3.5X KNB’s EV/oz value), signaling that there issubstantial upside for a quality asset like the one KNB is developing• Based on the implied market cap for FRP ($156.7M based on $0.90share price) and the short term investments currently on its book($18M) the EV/total oz valuation for FRP is $100/oz• Applying this valuation to KNB results in a share price of $2.99,251% higher than its current value
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