• CGG
  • Buy
  • Highrisk
  • Base metals
  • MARKET CAP
    $664m

Citadel Resource Group 14 Jul, 2010

Take up entitlement

CGG; Buy up 30 cents

On 21 June 2010, Citadel Resources announced an accelerated non-renounceable pro rata entitlement offer to its shareholders. The issue price is $0.29 per new share and eligible shareholders are entitled to subscribe for 3 New Shares for every 4 Shares held at the Record Date.

“Citadel has conducted an institutional and retail entitlement offer. The retail offer closes shortly and we are recommending Members take up their entitlements despite the lack of an appreciable discount to the current share price.”

The announcement of the retail offer above was immediately followed by the completion of an institutional offering which raised $250.8m with the institutional offer shares issued on the 30 June 2010.

This research report is advising Members to take up their entitlements – with the offer due to close on the 19 July 2010. While the current share price is at a similar level, we believe the quality of the Jabal Sayid Copper Gold Project means that overall; the company remains a Buy at the current price. The minor advantage for existing shareholders accepting the current entitlements issue is the fact that they will save brokerage.

Hence, Stock Resource recommends Members take up their entitlement issue. In addition, for Members without current exposure, Stock Resource recommends Citadel as a Buy up to 30 cents.

Retail Entitlement Offer
The following timetable highlights that investors holding shares on the 24 June 2010 were entitled to participate in the 3 new shares for 4 existing share offer at 29 cents per share.

CGGtimetable14Jul10

However, eligible retail shareholders must meet the following criteria:

New Shares in respect of the Retail Entitlement Offer are expected to be issued on 27 July will holding statements dispatched on 28 July 2010.

Jabal Sayid Copper Gold Project Update
Jabal Sayid is Citadel’s flagship asset and is one of the world’s premier copper‐gold mine development projects. Bariq Mining Limited (Bariq) is the holder of the exploitation (mining) licence which covers the Jabal Sayid project (Mining Licence). The Mining Licence has a 30 year term and does not require any payment of royalties to the Saudi Arabian Government.

On 21 June 2010, Citadel announced it had reached agreement to increase its equity interest in Bariq to 70%, the consideration for which will be Citadel funding its joint venture partner’s 30% share of equity contributions to project capital prior to draw down of debt funding. This acquisition is subject to the approval of Citadel shareholders at an Extraordinary General Meeting to be held on a date to be advised.

The company reports that the development of the project is continuing with key activities including:

Project Recap
Members will recall that the planned processing plant commissioning targeted to start in Q4 2011. This production is based on an initial 10 year mine life from Lodes 2 and 4 only and which produces an average 230,000dmt per annum of clean concentrate. This would comprise:

The project has received strong interest in off take from smelter groups with one off take agreement already signed with Transamine. The company has also commenced expansion studies on Lode 1 and is pursuing exploration targets identified within lease area.

The Chartist’s Perspective

Working out the final stages

cgg14Jul10

A broadly ranging head and shoulders continuation pattern commenced in late 2006, had its pivotal point at 10.5c in 2008, and entered its final stages at 46.5c in November 2009. At this point the price produced a double turning point at the upper barrier to the pattern, deflecting the price back to support within the pattern. This was achieved with the spike to 23.5c in June this year.

The subsequent rally is encountering resistance around 30c but has the ability to break higher to key resistance around 35-38c. As this area is approached the price may need to pause and consolidate before breaking higher through 40c to head towards the main upward sloping barrier to the phase which would be located in the 50-55c range.

When the phase is finalised the stock would gain the potential to test resistance at 58-62c and then head higher through $1.00.

At this stage a drop back beneath 26.5c would cause concern with the price facing the risk back into more critical support in the 20-23.5c range.

‘The Chartist’s Perspective’ has been independently derived by Regina Meani from charting and technical assessment, and has not taken into account fundamental analysis of the company.

Related Articles

Disclaimer

Breakaway Investment Group Pty Ltd, and its authorised representative Stock Resource, have made every effort to ensure the reliability of the views and recommendations expressed in this report. Our research is based upon information known to us or which was obtained from sources which we believed to be reliable and accurate at time of publication.

This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each recommendation for their own specific circumstances. Not all investments will be appropriate for all subscribers.

To the extent permitted by law, Breakaway Investment Group Pty Ltd and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Breakaway Investment Group Pty Ltd hereby limits its liability, to the extent permitted by law, to the re-supply of the said information or the cost of the said re-supply.

As at the date at the top of this page, Directors and/or associates of Breakaway Investment Group Pty Ltd currently hold positions in Adelaide Brighton (ABC), Beach Energy (BPT), Commonwealth Bank (CBA), Cooper Energy (COE), Cue Energy (CUE), Energy Metals (EME), Icon Resources (III), Integra Mining (IGR), Far Limited (FAR), KUTh Energy (KEN), Namoi Cotton (NAM), National Australia Bank (NAB), Northern Iron (NFE), Otto Energy (OEL), PanAust (PNA), Pluton (PLV), Regional Express (REX), Sipa Resources (SRI), Tiger Resources (TGS), Westpac (WBC) and Zicom Group Limited (ZGL). These may change without notice and should not be taken as recommendations.

Reference within the Stock Resource Report to the “Stock Resource Portfolio” is a reference to the hypothetical portfolio on the “Past Predictions” page, which includes details on the methodology used to derive the performance figures.