Exeter Resource Corp. (TSE:XRC) was the subject of a new research report from Mine2Capital, which issued a "Sell" recommendation and a $1.75 target price.
Exeter Resource Corp. is a Canadian public company whose focus is to maximize shareholder value through the discovery, evaluation and development of gold projects in the Maricunga district in Chile.
The junior explorer's flagship asset is the 100 per cent-owned Caspiche Project which is a gold-copper porphyry system, an orebody common to many of the world's largest open pit gold-copper mines.
Caspiche is located in the prolific Maricunga mineral belt which is currently undergoing massive expansion and investment in mineral projects from some of the worlds' largest gold miners.
A January 2012 pre-feasibility study (NYSE:PFS) showed robust economics and strong leverage to gold prices. The PFS estimates pre-tax NPV of US$2.8 billion at a 5 per cent discount rate, with average cash operating costs of US$606 per gold equivalent ounce (before copper and silver credits) and US$18 per gold equivalent ounce (after copper and silver credits).
Total production over a 19-year mine-life was pegged at 12.98 million ounces of gold, 4 billion pounds of copper and 14.7 million ounces of silver.
In a research note, Mine2Capital's mining analyst Alka Singh outlined that Caspiche was strategically located in the prolific Maricunga Mineral Belt in Chile, the longest standing democracy in the Latin America region.
Andina Minerals' (
) Volcan gold deposit lies 35 kilometres north northeast of Caspiche.
Exeter also has a strong management with expertise in gold-copper exploration with geologists Yale Simpson and Bryce Roxburgh with over 30 years of mining experience.
In terms of risks, the Mine2Capital report highlighted that scarcity of water was an issue in the area. However, Exeter has entered into an option agreement with a private company to purchase water rights for 300 litres per second, located about 150 km to the north of the project.
Also, Barrick made a recent decision to shelve its Cerro Casale project in Chile, which lies 10 km south of Caspiche and hosts a similar-sized deposit and grades.
"We believe the US$4.8 billion estimated capex for Caspiche will also experience cost over-runs," Mine2Capital's Singh said.
Singh also wrote that Exeter has yet to provide a feasibility study, secure financing and construct the mine.
"New mines often face commissioning issues, which need to be addressed."
Exeter will also require additional funds for exploration and development of its flagship project and other exploration-stage assets. As of March 2012, Exeter C$68 million in cash, sufficient for its 2012 planned exploration and other operations.
"However, the company may have to raise additional funds of over US$300 million (for the heap leached oxide-only ore) or over US$5 billion for developing the Caspiche super-pit option," the Mine2Capital analyst said.
Although politically stable, Chile however is not completely geologically stable and lies in a seismically active zone.
As for near-term catalysts, investors can expect to see additional drill results from regional targets, a pre-feasibility study of the heap leach project next year with production at Caspiche in early 2016.