ICI: Further Infill Drilling Results

CATHERINE GIGNAC, Northland Capital Partners (11/10/2009)
"Dachang gold project in northwestern China at the pre-feasibility stage. The updated resource and positive scoping study should lead to a feasibility study. Measured and indicated resources total 1.34 million oz grading 3.37 g/t gold plus 1.14 million oz at 3.00 g/t in inferred resources. The proposed open pit mine plan incorporates only 1.45 M oz or 57% of all resources, and excludes most of the inferred resource. Inter-Citic's 83% interest in the Dachang Project can be increased to 90%, with the Qinghai Geological Survey holding the remaining interest.

Recommended as Speculative Buy with a target of $1.00 per share. We believe this is an excellent opportunity to invest in a potentially high-return, low-cost gold project in China, the world's largest gold producing country. Due to the scarcity of large gold mines, the project could be attractive for a company already working in the region, a new entrant, or a Chinese company. Eldorado Gold (ELD-T) is anticipated to complete the acquisition of $2.0 billion Sino Gold (SGX-ASX) before year-end, which will increase its production and reserves in China.

NPV increases 63% with higher gold price. In light of the record strength in the gold market in U.S. dollars, the model was also run with a US$1,000/oz gold price. This returned a net present value (15% discount rate) of $1.78 per share for Inter-Citic's 90% interest. Therefore the 20% increase in the average gold price raises the net present value by 63% from the $1.09 per share based on a US$800/oz gold price. The initial capital cost is projected at US$83 million in the August 2009 Preliminary Economic Assessment (PEA). We have assumed 70%–30% debt-equity financing, with feasibility studies and construction expected to lead to a production start in 2013. The target price is based on the modest end of the NPV range. Based on the Sino Gold acquisition and the positive gold market, a corporate takeout of Inter-Citic could value the company at the $1.78 per share level."

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