Colossus Poised to Revive the "Next Gold Rush" at Serra Pelada

OVAIS HABIB, Stonecap Securities (02/11/2009)
We are initiating coverage on Colossus Minerals Inc. with a SPECULATIVE BUY recommendation and a 12-month target price of $2.75 per share.
  1. High grade exploration potential at Serra Pelada (75% interest) with excellent infrastructure, access to labor, and PGE mineralization

  2. Exploration potential great enough to attract takeover

  3. Pending catalysts for the stock include ongoing drilling success at, and delineation of an initial NI 43-101 resource estimate for, Serra Pelada; and completion of a scoping study by late 2009 that could lead to a feasibility study in 2010

  4. Well-financed for aggressive exploration and evaluation program in 2009
Our 12-month target price of $2.75 per share is based on the average of the valuation methodologies. Our positive outlook for Colossus at this preliminary stage (resource delineation stage) is warranted, based on management's ability to fast-track the delineation of resources at Serra Pelada through modeling and re-assaying (2,000 m) the historical drilling database (40,000 m of drilling conducted by Vale Inco from 1980-1998). In addition, the company's ongoing Phase II drill program (~5,000 m) is expected to further expand and reconfirm the exploration work conducted by Vale Inco. We arrive at our 12-month target price by applying three valuation techniques to our expectation that the company's ongoing exploration/re-assaying programs have the potential to delineate ~3.0 million ounces in gold resources, in the next 12 months. Our three valuation techniques indicate a range of potential values of $1.57 to $3.80 per fully diluted share, averaging $2.74 per fully diluted share.

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