Stifel Nicolas issued the folowing BUY RATING for CJO and a...

Stifel Nicolas issued the folowing BUY RATING for CJO and a target of 30 cents.

Namiquipa Drilling Continues; CDG Feasibility Still Expected In March

Cerro released drilling results from Namiquipa. The results are generally in line with previous drilling and our
expectations. We note that gold mineralisation was newly discovered by Hole 55, drilled in the north-eastern portion
of the vein system.

Company Overview

Primary Asset: Cerro Del Gallo project, Mexico
Start-up Capex: $120mn heap leach, 2014E startup
Primary Metal: Gold
Reserves and Resources: 1.7mmoz Au at 0.67g/t
LOM Avg. Gold Production (primary): 82koz Au
LOM Avg. Total Cash Costs (co-product): $640/oz Au
LOM Avg. Silver Production (secondary): 0.9mmoz Ag
Status: Development, updated FS due 1Q12
Cerro Resources NAV8%: C$529mn (or $0.36/share)
Insider Ownership & Trading Activity : 13%, Neutral
Cerro resources released another 11 holes from Namiquipa
(Mexico, Ag/Zn/Pb). Three holes into the key Americas vein returned an average of 2.9m grading 3oz/t Ag (NSR of $117/t). The remainder returned mixed results from the Princesa/Megan vein with about nine of 26 intersections showing high grade with the rest still in mineralisation,
albeit at lower grades.

Interestingly, gold mineralisation, hitherto not
recorded, was intersected in Hole 55, drilled in the north-eastern portion of the vein system

The Namiquipa deposit has multiple veins already established and we expect an initial resource to be delineated by 2012 year-end, with feasibility work commencing thereafter. Additional assays are expected
to be released regularly through 2012.

Cerro Del Gallo gold/silver project feasibility study remains on schedule for end of March. We note that this is the main project for the company,

Mt. Phillip iron ore asset remains non-core and likely for sale. We value Mt. Phillip at $30mn or just $2.60/tonne of contained iron. Recent transactions for projects at varying stages of development have averaged $2.90/t.

Changes Previous Current

Rating — Buy
Target Price — C$0.30
Price (03/05/12): C$0.13
52-Week Range: C$0.37 –
C$0.09
Market Cap.(mm): 104.4
Shr.O/S-Diluted (mm): 794.6
Enterprise Val. (mm): $88.9
Avg Daily Vol (3 Mo): 18,533
NAVPS: C$0.36
Cash (mm): A$11.3
Working Capital (mm): A$14.9
Price/NAV: 0.4x
S&P/TSX Composite Index: 12,517.21
Dividend(C$ / %) C$0.00
Cash balances are as of December 31, 2011
P/NAV is at target setting gold price of
$1,600/oz
Prices are intraday.

March 5, 2012
Cerro Resources NL
CJO – TSX

Buy
Gold & Precious Metals


Valuation: While the Cerro Del Gallo provides a solid valuation base, Nami continues to offer "Blue Sky" exploration upside, particularly as silver price move
higher. Our sum-of-the-parts net asset value for the flagship Cerro Del Gallo
(8%-NAV) and Namiquipa (10%-NAV) assets in Mexico is C$529mn, or $0.36/share (based on approximately 1.5bn fully diluted, fully financed (including
future financings shares).

Cerro Resources currently trades at 0.34x P/NAV at
spot gold prices, versus peer average of 0.58x. We maintain our Buy rating and $0.30/share 12-month target price.

Drilling Results Summary

We have calculated Net Smelter Return (NSR) values for each hole using inputs from our model including our longterm price assumptions ($38/oz silver, $1.15/lb
Zn and $1.15/lb Pb), as well as payability factors consistent with our conservative Namiquipa model assumption (77% Ag, 45% Pb, and 48% Zn).

We have
highlighted in green the NSR values that exceed $114/t, which are likely economic
to mine but note that many of the lower grade intercepts are associated with cheaper to mine wider widths.


Target Price Methodology/Risks
Our 12-month target price of C$0.30 is based on a P/NAV multiple of 0.8x. Risks to
our target price include changes in the price of gold and silver, funding risks,
technical risks, and political risks.

Cerro Resources NL (CJO) March 5, 2012
Cerro Resources
Net Asset Valuation (C$)
Shares (FD, FF, ITM) (mn) 1,481.7
Market Capitalization ($mn) $185
($mn) Per Share Per Share Per Share Per Share Per Share Per Share
Assets
Cerro del Gallo (100.0%), Mexico $329.7 $0.22 $0.52 $0.37 $0.30 $0.22 $0.18
Namiquipa (100.0%), Mexico $67.6 $0.05 $0.13 $0.09 $0.07 $0.06 $0.05


Investments $32.0

Total Assets $429.4

Balance Sheet

Basic Working Capital $14.4

Long-term Debt $0.0

Net Asset Value $528.7

Share Price $0.13

We upgrade to a BUY RATING and a share price target of $0.30.







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