##{"id":59057,"date":"2011-10-27T10:44:17","date_gmt":"2011-10-26T23:44:17","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/10\/27\/ampella-attracting-interest\/"},"modified":"2011-10-27T10:44:17","modified_gmt":"2011-10-26T23:44:17","slug":"ampella-attracting-interest","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/10\/27\/ampella-attracting-interest\/","title":{"rendered":"Ampella Attracting Interest"},"content":{"rendered":"

\n\t– RBS<\/span> Australia initiates on Ampella<\/span> with a Buy rating
\n\t– Stock offers both significant exploration potential and project development upside
\n\t– Ampella<\/span> now rated a Buy by three brokers in the FNArena<\/span> database<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tAmpella<\/span> Mining ((AMX<\/span>)) is a gold play with a 2.2 million ounce resource at the Konkera<\/span> project at Batie<\/span> West in Burkina Faso. Batie<\/span> West is a 110km<\/span> long prospective shear, which has been largely untested by recent exploration methods.<\/p>\n

\n\tIn initiating coverage on Ampella<\/span> with a Buy rating, RBS<\/span> Australia sees significant upside potential as exploration work continues. As RBS<\/span> notes, Ampella<\/span> plans $31 million worth of exploration in 2012.<\/p>\n

\n\tDrilling will test a number of highly prospective targets on regional properties. Some drilling had been done on five of the properties prior to the region's wet season and RBS<\/span> suggests results could provide an additional value catalyst if drilling on these properties proves to have been successful.<\/p>\n

\n\tAt the existing Konkera<\/span> West project, pre-feasibility studies are underway to determine the viability of mining the resource. A significant amount of drilling on the project was recently completed, the aim being to upgrade the resource category and extend zones at depth at both Konkera<\/span> Main and Konkera<\/span> North.<\/p>\n

\n\tRBS<\/span> expects this will lead to further resource upgrades in the current quarter. What should follow is rapid development of the project into full feasibility in 2012, RBS<\/span> noting Ampella<\/span> has a target for the project of 3.5 million tonnes<\/span> per year, which would translate into gold production of around 200,000 ounces annually.<\/p>\n

\n\tCash costs for the project should be competitive at around US$600 per ounce and RBS<\/span> expects first production from Konkera<\/span> early in 2014. A ramp up to full production is expected by 2015.<\/p>\n

\n\tAs RBS<\/span> points out, Ampella's<\/span> current cash position of $35 million is not enough to cover the cost of both the aggressive exploration program and feasibility studies. This suggests further capital will be required, likely early in FY13<\/span>.<\/p>\n

\n\tAside from the positive of good potential to grow production and resources, RBS<\/span> sees some corporate appeal in Ampella<\/span> that adds to the attraction of the stock. This reflects a significant level of M&A activity occurring among domestic and offshore gold miners at present.<\/p>\n

\n\tAs Ampella<\/span> offers both resource upside potential and near-term development upside RBS<\/span> sees the company as attractive to a mid-tier mining company as a bolt-on type acquisition. On the flipside<\/span>, there is potential for Ampella<\/span> to be an acquirer of a number of local projects.<\/p>\n

\n\tRBS<\/span> picking up coverage on Ampella<\/span> brings to three the number of brokers in the FNArena<\/span> database covering the company. Credit Suisse similarly initiated coverage on Ampella<\/span> with an Outperform rating in September, while BA Merrill Lynch also rates the stock as a Buy.<\/p>\n

\n\tRBS<\/span> Australia has set a target on Ampella<\/span> of of $2.84, which is around the mid range of targets given Credit Suisse has a target of $3.00 and BA-ML of $2.60.<\/p>\n

\n\tShares in Ampella<\/span> today are unchanged as at 10.30am<\/span>, with a last sale price of $1.765. This compares to a trading range over the past year of $1.505 to $3.42. The current share price implies upside of around 59% to the consensus price target according to the FNArena<\/span> database of $2.81.
\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"