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RESEARCH: Big River Gold, Big River, Big Opportunity

FYI | Feb 12 2020

Pitt Street Research has initiated coverage of Big River Gold, developer of the Borborema Gold Project in north eastern Brazil

By Pitt Street Research

Strong economics obtained from DFS

Big River Gold ((BRV)) is developing the Borborema Gold Project in north eastern Brazil. In December 2019, a Definitive Feasibility Study (DFS) at Borborema has been completed demonstrating compelling economics of the project, allowing Big River to advance financing discussions with various lenders in the immediate future.

Subject to financing, Big River intends to commence mine construction in 2020 and envisages a ~71K oz pa operation with an >10-yr mine life. The first 4.5 yrs will see an average 85K oz pa production at an AISC of US$759/oz.

A potential doubling of the project coming?

Big River had previously proposed, in its February 2018 optimisation of a 2013 Feasibility Study, an open-pit project processing 2 Mtpa. And yet, the most recent DFS provided reduced capital and operating costs with even stronger project economics.

However, we see potential for a larger operation once the economics of the new flowsheet have been properly costed. There are sufficient resources to justify a review into expanding production rates up to 4Mtpa, which is the limit approved by the current environmental and construction permitting.

Valuation range of $0.094–$0.150 per share

Based on data only provided in the DFS, we have valued Big River on a DCF basis with a range of 9.4 cps base case to 15.0 cps optimistic case. No value is assigned to the exploration upside, likely Stages 2-3 of mining and additional resources and reserves or by-product credits.

We see Big River being re-rated by the market based on five main factors: the higher and strengthening gold price; the return to favour of Brazil with international investors; cost improvement identified in the DFS; advanced state of permitting and lack of a tailings dam requirement; and favourable location within Brazil.

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