exploration and development
Yukon Territory, Alaska and Mexico - Copper & Gold
Message: Analysts coverage and price targets (June '07)
www.khandakerpartners.com
June/20/2007 Ross River Minerals Inc.(TSX-V: RRM)North America: CanadaA Junior Resource CompanyRoss River Minerals Inc. (TSX-V: RRM) is a Vancouver (Canada)-based junior resource company, which seeks to maximize shareholder value through its copper-gold-silver projects. El Pulpo, the company’s flagship project is locatedin Sinaloa State, Mexico, and is the focus of its operations. Ross River has 100% rights on all concessions that constitute the property, subject to a 1% -2% net smelter royalty. The company’s other project – Tay LP – is located inthe Yukon Territory, Canada. Although it is not being developed by Ross River currently, Tay LP is located in an attractive mining area. Both Ross River’s projects are in the exploration stage and the company is currently workingtoward estimating their resource potential. However, exploration has and continues to reveal encouraging mineralization. The extremely buoyant outlook for metal prices also adds to the attractiveness of the stock. These factors lead to a more upbeat outlook for the company. • El Pulpo spans an area of approximately 20,321 hectares with features that indicate it could become an elephant-sized mining venture in Mexico. So far, the company has explored only one-third of the property. It has identified six copper porphyry and three gold-silver vein targets with high mineralization potential. As exploration and development of this large project would entail huge investments, Ross River is planning to enter into a joint venture with a mining major. This will not only enable the company to expedite the development of the property (by bringing in necessary funds and expertise) but also greatly enhance its share prices that currently appear undervalued.
• Of all the prospects identified until now at El Pulpo, Ross River is highly enthusiastic about the Jutamos copper-gold porphyry target and the La Papaya gold-silver vein system. Sampling results from Jutamos have revealed up to 5.6% copper, 3.6 gram per ton (g/t) gold and 141 g/t silver, while those from La Papaya returned values of up to 144.4 g/tgold, 4,737.3 g/t silver and 1.67% copper. La Papaya, the largest known vein system on the property, stretches for 8,000 meters and consists of six major vein clusters. In addition, good sampling results from other targets indicate the huge potential that El Pulpo holds. • El Pulpo is located in the vicinity of some very large-scale mining projects. The San Dimas gold-silver mine, operated by GoldCorp Inc. (TSX: G), has proven and probable (2P) reserves of 4.32 million tons grading 5.73 g/t gold and 388.2 g/t silver. Additionally, the La Caridad open-pit mine owned by Southern Copper Corporation (NYSE: PCU) in Sonora, Mexico produced 75.6 ktpd (thousand tons per day) copper and molybdenum in 2006. The presence of important mining projects in the surrounding area greatly enhances the chances of finding commercial quantities of metals in El Pulpo. It also reduces the risks associated with undertaking further development activities on the project. • The bullish outlook for metal prices adds to our optimism. Gold prices have been gaining strength over the past few years and are expected to remain buoyant. Rising physical demand from India and the Middle East, a weakening dollar, inflationary concerns and geopolitical tensions are likely to keep prices high. Copper, too, is in huge demand, particularly from emerging economies and is expected to trade at a high level at least in the near to mid-term until new capacities come online.
Investment SummaryWe are initiating coverage on Ross River Minerals Inc. (TSX-V: RRM) and expect the company’s market capitalization to reach C$69.205 million over a 12–18 month horizon, with a corresponding target price of C$1.612 per share. Ross River Minerals Inc. (TSX-V: RRM) is a Canada-based junior resource company, focused on the exploration of coppergold-silver metals in Mexico and Canada. The El Pulpo project, located in Sinaloa, Mexico, is the company’s flagship project and its current area of focus. The El Pulpo project, located 115 km to the northeast of Mazatlan, is spread over an extensive area of 20,321 hectares. The company has so far explored one-third of the property and has identified six copper porphyry targets and three gold-silver vein targets. The six copper porphyry targets represent a typical pattern of copper accumulations surrounding a molybdenum-rich deposit over an approximate area of 40 sq km. Of all the prospects, the company is particularly excited about the newly discovered Jutamos copper-gold porphyry target and the La Papaya gold-silver vein system. Sampling tests from Jutamos returned up to 5.6% copper, 3.6 g/t gold, and 141 g/t silver. The La Papaya gold-silver vein system consists of six major vein clusters and returned values of up to 144.4 g/t gold and 4,737.3 g/t silver in more than 700 samples taken in 2004.
The factors mentioned above indicate the enormous mineralization potential of El Pulpo. To exploit the resource would mean huge investments in exploration and development. Ross River estimates the capex on the project to exceed C$50 million, which is very large by all means for a junior company the size of Ross River. The company is, therefore, seeking partnership with a mining major to infuse the required funds and gain the necessary expertise to expedite development. Joint venture with a major company would also have significant positive impact on Ross River’s shares, which currently seem to be undervalued.El Pulpo is located on the Sinaloa Batholith and is within the Sierra Madre Occidental gold-silver belt. Sierra Madre is a highly prospective mineralized corridor in Mexico and hosts a number of mining projects. The occurrence of mining activity near the project greatly enhances the prospects of finding commercial quantities of metals and reduces risks. One of the best known mines situated close to El Pulpo is GoldCorp Inc.’s (TSX: G) San Dimas gold-silver mine, some 125 km northeast of Mazatlan. San Dimas has proven and probable (2P) reserves of 4.32 million tons grading 5.73 g/t gold and 388.2 g/t silver. Additionally, the La Caridad open-pit mine owned by Southern Copper Corporation (NYSE: PCU) in Sonora, Mexico produced 75.6 ktpd (thousand tons per day) copper and molybdenum in 2006. Southern Copper Corp also has an exploration project named Buenavista in Sonora which contains a potential mineral deposit of 36 million tons containing 29 g/t silver, 0.69% copper and 3.3% zinc per ton. Considering the high grade mineralization of these nearby projects as well as encouraging sampling results from El Pulpo, the probability of Ross River making significant metal discoveries is high. The bullish outlook for metal prices adds to our optimism. Gold prices have been firming up since 2002, reaching a 25-year high of US$ 725.75/ounce (oz) in May 2006. As independent precious metals research consultancy, GFMS, reports in its Gold Survey 2007, the uptrend in gold prices is likely to continue, going forward. This can be attributed to the rising physical demand from India and the Middle East, a weakening dollar, growing concerns over inflation and geopolitical tensions over the US’s action against Iran. Furthermore, over the last 10 years silver and copper prices have been gaining strength. Copper prices are expected to remain robust in the near to mid-term on account of strong demand from emerging economies such as China and India. Prices rose to a high of US$3.38 a pound (lb) in 2006 and are expected to remain high at least until new production and smelting capacities come online. Ross River’s other project, the Tay LP, is also an attractive investment prospect. It is located within the highly prospective Tintina Gold Belt, which hosts many other mining projects. The property is spread over an area of 8,600 ectares and is easily accessible. Some of the samples from the drilling work undertaken in 2004 returned good gold grades such as 3.96 g/t, 5.13 g/t, 12.50 g/t, and the highest 16 g/t. Ross River is in the process of partnering with a mining major to undertake further exploration and development on the project. If, and when, a major enters the project, it would result in significant benefits for the shareholders of the company.
We believe Ross River will be able to generate significant value for its shareholders by leveraging its prospective properties with diversified mineralization potential. The hike in metal prices further strengthens our bullish view, making Ross River an attractive investment opportunity.
June 20, 2007
Initiation of Coverage
Equity Research
Analyst: Rishi Narang
Trupti Sawant
(212) 513-1203
research@khandaker.com
www.khandakerpartners.com
Price (C$)
06/20/2007 $0.155
Price Target * $1.612
52 week high $0.170
52 week low $0.090
Shares Outstanding (millions)
Basic Shares 42,919
Options & Warrants 11,656
Fully Diluted 54,575
Capitalization (C$ millions)
Current Market Cap 6.650
Target Market Cap* 69.205
Revenue (C$ millions)
2009E –
2010E –
2011E –
2012E –
2013E –
* Our target price and target market cap are aiming at a 12-18 months investment period. For details, please see financial forecasts and analysis.
New Message
Please
login
to post a reply