Kryso Resources (KYS.L) Investec Securities Price: 29.9 | Target: 42.0 | Rec: Buy While KYS today announced its interim results, more relevant was the update on the Pakrut development, with construction of the underground infrastructure now underway.

This is the first step of an 18-month development program, which should see gold production from the 2Q14.

Maintain Buy with our unchanged 42p target price based on a combination of NPV and peer group multiples. * KYS’s interim results were largely immaterial, given that the company has only just commenced its construction phase.

The reported loss of $0.9m was in line with our forecast loss of $1.0m and largely reflected administration charges.

1H12A development works of $5.2m (1H11A $1.4m) were fully capitalised.

* The key highlight over the period was securing the $93.5m finance loan facility (see Significant leap forward in financing Pakrut project, 25 May 2012).

While all development work to date has been financed by cash reserves (cash of $7.3m at end of period), drawdown of the finance facility is now expected to commence. * Subsequent to the 1H12 period, KYS’s major shareholder, CNMIM, exercised 22m of its 73m warrants, at 21p per share, taking its shareholding to 30.7% and realising £4.7m for KYS.

This provides a component of the requirement that 30% of any loan drawdown is met by cash/equity.

* The revised feasibility study has been completed and is awaiting final sign-off from KYS’s consultants, SRK.

This should provide an update on the operating parameters, including operating costs and capital costs.

Meanwhile, underground mine infrastructure construction is now underway (scheduled March 2014 completion).

KYS recently announced the awarding of the $40m underground contract to China No.15 Metallurgical Construction Group. To access the full note please click here Analyst: Hunter Hillcoat To receive further information or change your Research Preferences please email: South Africa or United Kingdom IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers ("the disclaimer") that may be accessed and read by clicking on the following hyperlink:http://www.investec.co.uk/about-investec/what-we-do/investment-banking/investec-securities/company-research/morning-meeting-comments.html or copying the address into your Internet browsers address bar.

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