Continental Gold Limited (CNL): Initial Look at Buriticá PEA; target lowered $0.80 to $4.50 (CNL-CN, SP, C$4.50/sh target, down from $5.30, Mike Hocking)
The PEA has outlined an initial throughput of 2,000 tpd increasing to 3,500 tpd, a fairly large underground gold mine utilizing long-hole stoping methods. Given the narrow width of the veins, Mike had assumed a much more limited 750 tpd, increasing to 2,000 tpd over a 3 year period, largely requiring cut and fill methods. It appears CNL used a subset of their resource at a higher COG before dilution to calculate the resourced used in the PEA (and Mike expects that a significant portion of these tonnes are classified as inferred); thus, the company assumed higher dilution than Mike’s estimates (58% vs. 30%) but diluted processing grade was in-line. Even after the release of the PEA on Monday, Mike’s primary concern remains dilution and throughput. The PEA has outlined a very large mine on mineralization hosted largely in narrow veins.