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Hill End Gold: Undervalued; Adding Shallow Gold Resources - Singaporean Interest Adds Intrigue

Hill End Gold (ASX:HEG) is undervalued on a current EV/Gold resource ounce basis against its peers. This becomes more acute when factoring in an aggressive drill program - likely to add near surface commercial gold resources ounces at its New South Wales projects.

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Why Hill End Gold is undervalued is usefully defined. In this case: a total JORC Resource of 557,000 ounces while significant is not a 1 million ounce resource. This is likely to change as there is a 1 million ounce "near term" target, with drilling underway.

Change of focus: In the past, the focus may have vexed some investors. However, there is a clear goal to develop near surface satellite open pittable gold deposits.

Given low projected CAPEX and OPEX would provide healthy returns to shareholders.

Given the cash position is robust at $3.8m this is less of a constraint moving forward.

Hill End Gold's 29.1% shareholder, Singapore's Infiniti acquired its stake at a price of $0.025 per share.

While Infiniti is a supportive shareholder, we would expect the company to be looking for Hill End Gold to increase resource ounces at Hargraves in the near term as well as move toward bulk mining by 2014 and a lift in the valuation of the company.

We would expect Hill End Gold to attempt to define a Reserve at Hargraves by the end of the 2012 which would lead into a Pre-Feasibility Mining Plan.

The Company is shifting development focus to the delineation of open pittable resources at Big Nugget Hill and Big Nugget Hill North. Proactive Investors estimates exploration potential of 0.5M ounces of gold.

Conceptual mining studies are already underway at Big Nugget Hill where a planned production rate of 1 MTPA from open pit mining at, at a grade of ~2 g/t for a CAPEX of ~$43M is under evaluation, and will be updated as a formal mining study that is scheduled for completion at the end of calendar 2012.

Gold values are amenable to extraction by simple gravity separation that reduces the Run of Mine to ~1.4% of its original volume; and that small volume can be leached to produce gold doré for final refining at very low CAPEX and OPEX.

Proactive Investors believes that the aggressive drill and development programme underway over multiple targets at Big Nugget Hill and the Meroo have potential to quickly build total gold resources on all tenements to 1.0M ounces.

This should build momentum. Should this slip, we could see the Singapore connection taking more interest. Notably, Hill End Gold director Quah Su-Yin is also CEO of Singapore's Infiniti and Asiasons - which is the largest shareholder in S$1.1B, valued Singapore listed LionGold Corporation. Acquisitive LionGold has made takeover offers for a number of ASX listed gold developers.

With a shift in focus, an acquisitive shareholder group with a 30% stake and cash of $3.8m we have derived a valuation and price target of $0.03 - $0.05 per share for Hill End Gold over the next 12 months.

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Disclaimer / Disclosure

This report was produced by Proactive Investors Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (Licence no. 221938). Proactive Investors will receive payment for the compilation and distribution of three research reports. Proactive Investors Pty Ltd has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be
relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Proactive Investors Pty Ltd does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by Proactive Investors carry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested. Neither Proactive Investors nor any of its associates guarantees the repayment of capital.

WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor's objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.

Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

DISCLOSURE: Proactive Investors Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, Proactive Investors Pty Ltd may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates, employees, representatives or Authorised Representatives of Proactive Investors Pty Ltd and RM Capital Pty Ltd may hold shares in Hill End Gold Limited.