What the Analysts Say

WHAT THE ANALYSTS SAY: Interesting news and views from across the Resource Analyst universe.

Website: www.breakawayresearch.com

Company: Metallica Minerals Limited (ASX: MLM)

The recently completed initial resource estimation for Metallica’s 60 per cent held (reducing to 50 per cent in a JV with Ozore) Urquhart Point bauxite project supports the company’s plan to develop an initial 1.5 to 2 million tonnes per annum low capital and operating cost DSB operation (i.e. no screening or upgrading required).

7.5 million tonnes inferred resource grading at 51 per cent total aluminium and 16.3 per cent silicon dioxide (SiO2).

This includes a marketable 4 million tonnes higher grade domain (just in Area A) grading at 53.3 per cent total aluminium and 13 per cent SiO2, with 40.6 per cent available aluminium and 4.9 per cent reactive SiO2.

The resource will form the basis of an internal Scoping Study or Conceptual Development Study to be completed in June.

This resource comprises two areas – the northern Area A and southern Area B, with Area A generally being of higher quality.

The bauxite stratigraphy is also subdivided between a higher quality lower domain defined by less than 15 per cent SiO2and +48 per cent total aluminium, and a higher silica upper domain, with lower domain resources.

The quality results from Area A, which has a more continuous lower domain, indicate a marketable product, with low temperature, 150o C analyses returning an average available alumina (AAI) grade of 40.6 per cent and 4.9 per cent reactive silica (RxSi), from the lower domain resource of 4 million tonnes grading at 53.3 per cent total Al2O3 and 13.0 per cent SiO2.

These results indicate the majority of the silica is in quartz, and not clays.

No AAI or RxSi assays have been carried out as yet on Area B (or for that matter on the upper domain in both areas), however we still see the potential for readily marketable material to be produced from Area B, which has 777,000 tonnes grading at 52.7 per cent aluminium and 13.2 per cent SiO2 in the lower domain, which are similar grades to those at Area A.

In addition in the later years of the proposed operation there is potential for upgrading the remaining resource by dry screening the bauxite to exclude a major portion of the fines (less than 1.5mm) to make the bauxite marketable, albeit with slightly higher operating cost and likely discount compared to the dsb sale price.

The resource size will support only a modest operation (potentially 4 to 6 years if operated in conjunction with Hey Point), however we do consider this feasible, given the potentially low operating and capital costs, and thus with the capacity to return healthy margins – we consider our previously reported operating margin estimates of $10 to $20 per tonne as very feasible.

There are potential synergies with the nearby 2.5 million tonnes Hey Point resource, owned by a private company, Victorian Ferries, a major shareholder of Metallica.

The location of the mineralisation, immediately south of the Embley River at Weipa will result in a short (less than 12km) trucking distance to barge loading facility adjacent to the main Embley River shipping channel at Urquhart Point (or alternatively Hey Point), and an approximately 2km barge to self-loading Handimax vessels moored in the Jackson Channel at the mouth of the river on the gulf coast.

Mining costs will also be low, by virtue of the shallow (less than 7m) and free dig nature of the lateritic mineralisation.

Again, by virtue of location, capital costs are expected to be very low with expected early payback, and there may also be synergies with the Urquhart Point HMS Project which the JV is currently developing.

Website: www.breakawayresearch.com

Company: Forte Consolidated (ASX: FRC)

Forte has recently commenced drilling on its high-quality Sledgehammer and Szarbs prospects, which have been delineated through a methodical and thorough exploration program completed largely during the 2014 field season.

Both prospects, which are compelling targets, exhibit coincident geological, geochemical and geophysical anomalism; in the case of Sledgehammer akin to low to medium sulphidation epithermal mineralisation, and in the case of Szarbs both Mount Carlton style high sulphidation epithermal mineralisation and diatreme hosted mineralisation similar to the Mount Leyshon deposit, which is of a similar age to the Johnnycake geology.

The Johnnycake project is located within the highly gold/silver prospective Lizzie Creek Volcanics, the lowermost unit within the Permian Bowen Basin of north and central Queensland.

Since acquiring the tenement in 2013, Forte Consolidated has gone back to first principles in their exploration work, and defined two key targets – Sledgehammer and Szarbs.

Work completed since our August 2014 note includes IP surveying, with the results of this supporting the prospectivity of the targets, again, like previous work returning signatures typical of the target epithermal and diatreme hosted mineralisation styles.

Initial drilling on these high quality targets has commenced, being fully permitted and cleared by all stakeholders, and fully funded by virtue of the very well supported recent rights issue.

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.

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