LONDON, ENGLAND / ACCESSWIRE / February 26, 2015 / Today, mining analyst Stephan Bogner published a 15 paged Initiating Coverage on CMC Metals Ltd. The research report includes an interview with the CEO, Jack Bal, and a commentary from Bob Moriarty.

The full research report can be viewed with the following links:

English: http://www.rockstone-research.de/research/RockstoneCMC1english.pdf

German:http://www.rockstone-research.de/research/RockstoneCMC1deutsch.pdf

Highlights

CMC owns 50% of the historic Radcliff Mine in southwestern California. The remaining gold resource is not large but extremely high-grade and thus highly lucrative (even at a current low gold price):

- A total of around 300.000 ounces (oz) gold are hosted in the Radcliff Deposit - at an average mineralization of 3 g/t gold (relatively high-grade for an open-pit).

In order to start large-scale open pit mining, capital expenditures (CAPEX) in the order of $30-40 million must be financed to start developing the mine and infrastructure. For such a large investment, a time-consuming and costly feasibility study would be required. To avoid such, CMC is executing the following mission to start mining immediately:

- Around 84,000 oz gold are located in high-grade sections of the Radcliff Deposit (so-called gold pods/ lenses/exhalites) averaging around 22 g/t gold.

- One of those gold pods (Gold Pod #1) contains around 24,000 oz gold (at an average grade of 35 g/t gold). CMC plans to mine out this gold pod first (underground). It will take around 1.5 years to mine the 22,000 tons of rock containing the 24,000 oz gold (valued $29 million @ $1,200/oz).

- Since months, CMC and its joint venture partner (Pruett-Ballarat Inc.; a private company specialized in mining engineering) are constructing a 30 m long adit to Gold Pod #1, which should be completed in March 2015. Mining will initially encounter an extremely high-grade portion of Gold Pod #1, which is enriched with 124 g/t and 218 g/t gold.

- The other gold pods are located only 100-150 m from Gold Pod #1 and a total of 4-5 years are required to mine out the 84,000 oz gold with underground methods.

- CMC plans to produce around 20,000 oz gold per year thus generating revenues of around $24 million per year (total of $101 million at a gold price of $1,200/oz).

- The production costs for the first 84,000 oz gold are estimated between $700-$800/oz. Milling (crushing and grinding) costs typically make up 20-30% of total production costs.

The Icing on the Cake

- CMC owns 100% of the Bishop Mill, a 2h truck drive on highway from Radcliff. This mill is planned to process the high-grade material from Radcliff and produce a first concentrate, which will be shipped to a processing facility in order to be sold.

- The Bishop Mill has been upgraded by CMC during the last 5 years and is fully permitted now. At the moment, CMC is running it with some test batches. The tailings pond has been laid and lined, and is about to get fully permitted. The final approval is expected to be granted within 90 days - which is somewhat irrelevant because the first zone to be encountered with the adit showed as much as 124 g/t and 218 g/t gold in 2 drill holes. Hence, all of the extremely high-grade material (+15 g/t gold) will be transported on trucks to CMC's Bishop Mill, where it will get crushed and grinded. CMC does not need to concentrate the material by putting it through the flotation circuit hence creating waste to put into the tailings pond. The high-grade can be shipped directly to a processor facility in order to produce saleable gold doré bars. Metallurgy showed favorable recoveries in excess of 90%.

Conclusion

On Tuesday, and within 2 days only, CMC completed an oversubscribed private placement for proceeds of $523,500 thus being fully financed to start mining and producing saleable gold doré bars. I am confident that high-grade mining at Radcliff will start in early March. The mined material will then be transported to the Bishop Mill on a daily basis (transportation costs of around $30/t). As the process of crushing and grinding is already permitted, the Bishop Mill will be operational immediately. CMC will be mining the high-grade (+1 oz/t gold) zones first, thus I am positive that around 20,000 oz gold can be produced in 2015 if the mill runs at 2,000 tons/month beginning in March. Hence, CMC is expected to generate revenues exceeding $1 million per month including a highly lucrative profit margin typical for high-grade gold mining. Considering all this, CMC's current market capitalization ($5 million) appears vastly undervalued.

Analyst Bogner forecasts the not-too-distant future as follows:

"My current top pick in the junior gold space is CMC Metals Ltd., a Vancouver based exploration and development company in its final stages of putting the historic Radcliff Mine and Bishop Mill in southeastern California back into operation. CMC appears to be only weeks away from selling its first gold bar and advancing to a highly profitable gold producer as it intends to start mining extremely high-grade material in the magnitude of 1 ounce (31.1 g) of gold per ton. With a current market capitalization of $4 million, the transition phase from an unknown junior explorer to a cash-flow generating small-scale miner is anticipated to yield most of the share price upside. This phase is expected to occur mainly in the first half of 2015 thanks to an increased news-flow putting this company back into the focus of investors looking for highly profitable, near-term production stories of high-grade gold deposits with fully financed capital expenditures (CAPEX) and low operating expenditures (OPEX) in favorable mining jurisdictions."

Technical Analysis

Hand in hand with the gold price correction since 2011, the TSX.V share price of CMC has been correcting downwards within the (red) triangle formation. In late 2014, the price succeeded in rising above the resistive (red) triangle leg (bullish) and has been stabilizing at the $0.05 level since then. As soon as the news-flow starts to increase - thanks to the start of mining and milling at the Radcliff Mine and Bishop Mill - the price is anticipated to appreciate significantly to its 2011-high at around $0.50 CAD until 2016. See chart here: http://scharts.co/1DKdSTp

The full research report can be viewed with the following links:

English: http://www.rockstone-research.de/research/RockstoneCMC1english.pdf

German: http://www.rockstone-research.de/research/RockstoneCMC1deutsch.pdf

Disclaimer:

The author, Stephan Bogner, holds shares of CMC Metals Ltd. and thus would profit from a price increase. Neither the author nor Rockstone Research Ltd. was paid or instructed by CMC Metals Ltd. to write or publish this content. Please read the full disclaimer within the above mentioned research report and on www.rockstone-research.com as a conflict of interest exists also with Zimtu Capital Corp. and none of this content is to be construed as "financial analysis" or "investment advice."


SOURCE: Rockstone Research Ltd.