• Expanded resource estimate
• Confirmation of high grades
• Large discount to NAV
The share price of Polo Resources rose sharply after a positive update from the Nimini-Komahun gold project in Sierra Leone. Buy into Polo now, and you're effectively getting most of its investments for free because the company's net cash pile of around £48m at the end of March is almost as much as the current market value of £57m.
An independent estimate by SGS Canada increased the indicated gold resource at the site from 110,000 to 521,000 ounces. Plus, there's another 263,000 inferred ounces of gold, bringing the total potential resource to 784,000 ounces. Future extraction costs are likely to be held in check as the average grade at 4.59 grams per tonne is at the high-end for gold projects in the region. Following more drilling, a pre-feasibility study is expected in the first quarter of next year.
Analysts at Investec make the point that Polo currently values the Nimini-Komahun resource at $30.5m (£19.2m), or $38.90 an ounce. If Polo's 90 per cent share of the resource is calculated using the sector peer average of $84.50 an ounce, then the stake would be valued at $66.3m, adding 0.88p/share to the company's net asset value (NAV) which would take Investec's estimate to 4.81p a share.
