It would appear that an overseas broker has started covering MSR. Text of their report below:
The full report is on the Bloomberg system under MSR - All News / Research
Report start -
With the price of gold off the record levels at but still trading at USD 1,730 per ounce or 20% higher YTD, we have been investigating companies in our region, which can be defined as the Former Soviet Union (FSU), that are either producing or are very close to producing gold from mining activities. Key areas we have focused on are location, resource outlined to date and average operating cost per
ounce. We are pleased to present clients of Foyil Securities with background on Australian quoted Manas Resources (MSR AU) who are on the verge of producing gold from their 100% owned projects in the Kyrgyz Republic with a production cost that will make them one of the lowest cost gold miners in the world right at the time when gold is still viewed as a viable and safe investment in the time of global economic turmoil.
► Mining approvals on the horizon. On 21st June MSR reported via an ASX release that they have submitted the TEO report (Technical and Economic Justification Study) to the Kyrgyz Ministry of Natural Resources for review. The Kyrgyz Republic has made a major effort to attract FDI from
international mining companies to develop the gold mining sector in the country. MSR has full support from the local community and has worked where ever possible with local engineering companies to progress the projects. Approval of the TEO will immediately allow MSR to apply for a
mining license. The Kyrgyz Republic boasts corporate tax of only 10% and gold production royalties and minor taxes that will be a maximum of 5.5% further adding to the financial strength of the project from a reporting perspective.
► 1.13m ounces of gold resources which are compliant with the JORC code. MSR currently has underway a 20,000 m drilling program across all active exploration sites of which 12,500 m has been completed and 5,000 m reported. The two main target areas to date, Shambesai and Obdilla,
give MSR 1.13m ounces of in-ground gold resources based on activities since 2008. MSR continues to drill prospective sites within its 4,400 km2 landholding and in Q2 drilled the first hole at a new site called Pum that lies just 3 km from the main Shambesai zone. Drilling outside the existing resource boundaries at other prospects has produced an encouraging result, which will require
further drilling and analysis but could become a third mine site within the landholding. With an initial
first-stage mine plan producing annual output of 35,000 ounces of gold for 5.5 years, the current resources offer the opportunity for significant expansion both in terms of gold output and mine life. The next resource update for Shambesai � in which a significant expansion is expected � is due by the end of September.
► Strong balance sheet. On 10th December 2010 MSR announced a capital raising of AUD 11.5m. This offer was heavily oversubscribed and MSR issued 57.5mn shares at an AUD 0.20 share price. This was notable for being above the prevailing market price of AUD 0.19 at the time. At 30 June
2011 the company had cash reserves of AUD 8.8 million with 177 million shares, 60 million listed options and 15 million unlisted options on issue. Cash burn for the current quarter is estimated at AUD 2.65m as the exploration program concludes, which will leave MSR with AUD 6.18m in cash on the balance sheet as the quarter ends, plus a further AUD 12m subject to the exercise of the 60m quoted options at AUD 0.2 exercise price , which expire September 30, 2011.
► Production to start in 2012. MSR plans to start production at the end of 2012. The production site will be located in the Shambesai valley. CapEx necessary to launch production is estimated at AUD 16.3m, which will be spent on the construction of a Vat and Heap Leach Plant the construction of which will commence upon the company�s receiving government approval. Money necessary for
building the plant will be received either by converting 60m options provided the stock price reached AUD 0.2 per share in September, through issue of further equity or will be borrowed.
► The purpose of this report is to inform Foyil Securities� clients of the opportunity in the region. A
Scoping Study released on 16 November 2010 showed a pre-tax cash flow of USD 118M at a USD 1,000 gold price for mining mainly the 180,000 ounce high-grade oxide portion of Shambesai only. Significant upside exists in the remaining resource at Shambesai and the 485,000 ounce Obdilla resource only 7km away. At this point, our Buy rating of the stock is based on the expected announcement of resource upgrade in September, which will raise the company�s reserves from the current 1.13m ounces and the release of a Feasibility Study later in the year which will place a value on the cash flows to the Company as it enters production. With a current gold price of USD 1,830
per ounce and past economic figures run at USD 1,000, there is significant potential for a substantial increase in value both on the first-stage oxide operation, future underground and sulphide operations, and on the increase of current in-ground resources.
Manas Resources Limited is an Australian-based gold explorer in the Kyrgyz Republic with substantial
resources, high grade drill targets and a large highly-prospective land holding in the world class Tien Shan
gold belt. Manas Resources was a wholly owned subsidiary of Perseus Mining (PRU AU) who are focused on gold mining in Africa. PRU is now a AUD 1.4bn company and given their focus on other geographical areas, Manas Resources was spun out into a separate company and floated on the Australian stock exchange (ASX) in 2008. PRU remains the largest shareholder of MSR owning some 24% of the issued
shares. Since 2008 MSR has been focused solely on exploring and drilling it�s 4,400 km2 landholding in the
South of the country and has become the largest and most active gold explorer in the Kyrgyz Republic. The exploration activities have so far resulted in a resource of 1,130,000 ounces of gold which MSR plan to put into production in 2012 with an initial extraction cost of USD 180 per ounce and output of around 35,000 ounces per year over the first 3 years. The operating cost places MSR in the lowest quartile of any gold producers worldwide and is one of the key drivers in Foyil Securities releasing this research note.
Additional investment points
► Substantial exploration program underway. Manas Resources has now completed a substantial exploration program at the Shambesai gold projection the Kyrgyz Republic - with 7,500 meters of results still pending - which are expected by September 2011. The program included 5,000 meters of infill drilling, 5,000 meters of extensional drilling and 2,500 meters of sterilization and
geotechnical drilling. The main focus of drilling at Shambesai have been on areas which Manas has designated as critical to expanding the shallow oxide resource for mining, while expanding the western pit boundary and increasing the economics of the pit optimization for the Feasibility Study. A resource update is forecast to be received in the September quarter. Shambesai is highly
prospective due to previously announced hits such as 33.7 meters at 10.74 grams per tonne (g/t) gold from 114 meters, including 7.8 meters at 28.64 g/t gold. The impact from this and other high grade hits improved the project's economics by substantially increasing the underground potential.
In other Manas news - drilling has now kicked off at the Ulugtau and Obdilla prospects, with Tashbulak to commence soon. Another major plus for Manas is that the Feasibility Study for Shambesai is progressing ahead of schedule, and will be completed in the December 2011 quarter.
► Experienced management team. MSR�s management has over 80 years of combined experience in the minerals industry in geological consulting and gold mining with strong links to Perseus Mining Ltd, which is a key shareholder in MSR, giving the company the necessary skills to succeed.