According to Clarus Securities:

Unparalled Growth for Cheap

Banro is an emerging gold producer poised to deliver production growth of ~190% to 260koz by 2014. Beyond 2014, we expect a further doubling of production by 2018 (Exhibit 1). With the recently announced financing facility, Namoya is now fully funded which we expect to drive a re-rating of the stock. We highlight that management has delineated 17.2MMoz at a discovery cost of US$10/M&I oz and there are 33 mine targets some within sites of historical mining that could provide substantial resource growth. NOT RATED.

1. Twangiza Project Ramping Up

While the Twangiza mine has experienced start-up challenges since attaining commercial production in September 2012, we believe these issues are largely behind the company with the mine expected to see annual production of 96koz over the next twelve months. Management intends to complete two phases of
expansion which will increase plant capacity from the current 1.3Mtpa to 2.0MMtpa at a total capital cost of US$13MM by 2014. This will take production into the 120koz range at anticipated cash costs in the US$550-600/oz range. Using these parameters, we estimate an NPV of $586MM or $2.59/share for Twangiza (Exhibit 2) above the current market cap of ~US$470MM.

2. Solid Production Growth on the Horizon – Namoya Next Online

Namoya is tracking well towards delivering production growth of ~190% by 2014 with 60% of the initial capex already spent. Based on the January 24, 2012 economic assessment, the project is expected to generate annual production of 100koz at total cash costs of US$500/oz and an initial capex of US$175MM. Using these parameters the PEA estimated an NPV of $366MM or $1.70/share which the market is clearly not paying for. However, we note that management intends to mine and process higher grades (see grade tonnage curve in Exhibit 4) which along with updated per tonne costs takes our NPV estimate to US$479MM
or $2.12/share (Exhibit 3).

3. Production Growth Fully funded

Banro recently announced a financing package of up to US$90MM that makes Namoya fully funded (Exhibit 4). The financing will be in the form of 1.6MM gold linked preferred shares of Banro at US$25 each for gross proceeds of US$40MM (subject to increase to $60MM at Banro’s option) and credit facilities of US$30MM from Rawbank and Ecobank in the DRC each for US$15MM at rates of 9% and 8.5% interest respectively.

Significantly Undervalued Player

Banro trades at an AMC/oz of $34/oz, well below the producer average of US$111/oz (Exhibit 12). Part of this discount is likely due to having its operations in the DRC. However, we believe the political climate in the DRC is improving particularly in light of a peace accord recently signed with the rebel group that seized northern DRC in November. Further with the Namoya project now fully funded and significant production growth on the horizon, we expect to see a re-rating on the horizon. For its two projects Twangiza and Namoya (which should be in production by end of 2013), we impute a combined value of $4.71/share, double the current stock price of $2.33/share.

Further Growth from Lugushwa and Kamituga

We are encouraged by the resource growth potential at the Lugushwa and Kamituga projects, both sites of historical mining activity. Lugushwa is reported to have seen historical production of at least 457koz of alluvial gold while historical records suggest that Kamituga has seen historical production of approximately 1.5MMoz. We expect that Lugushwa could duplicate the Namoya heap leach plan/design and achieve production in the 2016-2017 timeframe, at a run-rate of 80-100koz. Kamituga could then come online shortly thereafter also at a run-rate of 75-100koz. Lugushwa currently hosts a resource of 5.6MMoz of which 1.13MMoz is in oxides whereas Kamituga hosts a 0.92MMoz resource. Management intends to develop these two projects from internal cash flows.