Kryso Resources – a tip of the year reviewed

AIM-listed Kryso Resources (LSE:KYS) is a tip of the year from myself at 32p. The shares currently trade slightly above this level at 32.75p despite continued unfavourable sector sentiment and an update last month that delays meant that its development project “is not now expected to be completed by March 2014 as previously scheduled”. So do I stand by one of my tips of the year?

The February update from the company detailed that “construction operations at Pakrut, which are in their early stages, are ongoing but delays have been experienced. The company retains full confidence in the project construction and potential and will advise a new target date for the completion of construction and commencement of gold production at Pakrut in due course”.

The shares did trade at above 34p prior to the announcement and fell to close at 30.625p on it. The delay though should be a matter of just a few months – which, considering an estimated 14 year (and it could be longer) mine-life, makes barely a jot of difference to a discounted cash flow valuation of the enterprise.

Using a $1,500 gold price, I recently calculated a heavily discounted value for the shares in excess of 60p on the Nifty Fifty offering. There is obvious risk in investment in Tajikistan and in the move from explorer-developer to producer (construction delays being an example). However, with the mine set to be a low cost producer, I continue to view the economics here as robust and retain a positive stance.

For a detailed reminder of why I rated this a tip of the year in a detailed analysis click here

Tom Winnifrith writes for 10 US and UK websites. You can follow all of his thoughts on twitter @tomwinnifrith. You can get links to all of Tom’s articles on his own blog www.tomwinnifrith.com

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