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Gowest Gold receives initial "buy" rating from Fundamental Research

Fundamental Research Corp. has initiated coverage of Gowest Gold (CVE:GWA)(OTCPK:GWSAF) with a "buy" rating and $0.60 fair value share price.

In a research note, analyst Siddharth Rajeev said the company had "strong fundamentals" and Gowest's major strengths were its "strong management team", projects with expansion potential, a positive preliminary economic assessment (PEA) on the currently known resource estimates and a fair value estimate which is 253 percent above the current price.

Gowest is a gold exploration and development company focused on developing its 100 percent-owned Frankfield East gold deposit, in the prolific Timmins, Ontario gold camp.

An estimate for Frankfield issued in June 2011 pegged resources of 348,000 indicated ounces - 1.62 million tonnes at 6.68 grams per tonne gold - and 838,900 inferred ounces - 4.34 million tonnes at 6.01 grams per tonne gold.

The company has a total land package of approximately 66.5 square kilometres, which extends along the Pipestone Fault over an approximately 20 kiometre-long continuous block of claims.

It is thought that this fault is an offshoot from the Porcupine-Destor Fault to the south, which has been the source of over 70 million ounces of historic gold production.

The research firm said that drilling completed so far in 2011 has defined the Frankfield East deposit over a total strike length of 900 metres and to a vertical depth of approximately 1,000 metres.

It should be noted that the deposit remains open along strike and at depth, Fundamental Research's Rajeev said.
In his research note, Rajeev noted: "We believe significant potential exists to expand the resource estimate with results from the 2011 drill program."

The company might also be able to fast-track mine development by shipping ore to nearby processing facilities.
Earlier this month, Gowest announced positive results on a recently-completed PEA for Frankfield.

The assessment gave a 10-year mine life for Frankfield East, producing 1,500 tonnes per day at an average life-of-mine cash cost of $660 per ounce. The annual average gold production rate was pegged at 95,000 ounces per year, with an overall gold recovery rate of 95 percent.

Gowest said the PEA confirmed a pre-tax net cash flow of $265 million, giving an internal rate of return (NYSE:IRR) of 23 percent and a 3.3 year payback period.

Initial capital costs were seen at $167 million, with life-of-mine sustaining capital projected at $86 million.

Looking at governance, Fundamental Research's Rajeev said that Gowest's management and board own approximately 12 percent of outstanding shares - which he believes indicates their confidence in the firm's projects.