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Millennium Minerals undervalued on updated metrics for Nullagine Gold project

With a ore reserve upgrade and updated costs at Nullagine Gold project, the results are impressive, boosting internal rate of retunr to 45%. As a potential 100,000 oz pa producer, there appears upside on MOY's current miserly valuation of $25m.
Millennium Minerals undervalued on updated metrics for Nullagine Gold project

The metrics for Millennium Minerals' (ASX: MOY) Nullagine Gold Project have been significantly boosted by incorporating the recently announced ore reserve upgrade and subsequent ore mining schedule into the financial model.

Auralia Mining Consulting was commissioned to conduct the Ore Reserve study at the Nullagine Gold project. 

The Nullagine Gold Project is a 1.25 million ounce gold resource contained within 6 deposits located on granted mining leases.

The largest deposit is Golden Eagle located 10 km south of the township of Nullagine and contains 63% of the total Mineral Resource gold inventory.

The changes from the ore reserve study have  boosted stage 1 mining ore reserve tonnage by 30% to 10.45 million tonnes at 1.7 grams per tonne gold (Au) containing 568,000 ounces of gold.

Under the revised model, forecast recovered ounces increased by 25% to 505,000 ounces.  Initial mine life was unchanged at 7 years at a milling throughput rate of 1.5 million tonnes per annum producing a nominal annual gold production output of 72,000 ounces.

Forecast operating cash flow (EBITDA) is forecast at $311 million, producing a project Internal Rate of Return (IRR) of 45% and a Net Present Value (NPV) of $112M.

Gross operating margin would be 44%, with average cash (C1) costs of A$739 an ounce.

Labour costs were updated based on October 2010 mining industry remuneration surveys. Other design parameters for the study, such as pit slope angles, discount rates and milling throughput limits, were taken from the previously completed 2009 Feasibility Study.

A gold price of A$1,275 per ounce was used for pit optimisation purposes.

The company is finalising a higher throughput SAG mill design ahead of placing the mill order this month. The plant layout adopted will provide for future expansion given the high potential for additional mineral resource in and around the existing deposits.

Millennium is looking to build on current resources during the construction phase as part of its objective of targeting 100,000 ounces of annual gold production and a minimum mine life of ten years.

Hence Millennium will continue to drill in and around the existing deposits to target additional ore reserve potential, identified from exploration work in 2010.

BNP Paribas has recently been formally mandated as exclusive arranger and underwriter for the provision of the Construction, Cost Overrun, Performance Bond and Risk Management Facilities for the purposes of funding the construction and development of the Nullagine Gold Project.

Based on a number of valuation criteria, Millennium is significantly undervalued at current prices.

 

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