What the Brokers say
Interesting news and views from across the Resource Analyst universe.
Excelsior Gold Ltd
(ASX:EXG)
EXG is a gold exploration and development company with tenements along the Bardoc Tectonic Zone to the north-west of the four million ounce Paddington gold mine.
Exploration and reinterpretation of historical data resulted in global resource growth of plus 105 per cent to 952.6koz at 1.7 grams per tonne gold over the past two years.
At the Zoroastrian deposit resources have expanded plus-120 per cent to 286.3koz at 2.8g/t gold in eight months.
Drilling re-commencing at Zoroastrian in early October, targeting strike and depth extensions, as well as these parallel loads ignored by previous operators.
Potential for Excelsior Gold to triple the Zoroastrian resource over the next 6 to 12 months.
Extensional drilling at Zoroastrian has increased potential to develop a standalone plant on the site of the old Bardoc mill.
Delivery of an expanded Zoroastrian resource will, in our view, enable Excelsior Gold to develop a 1 to 1.5 million tonnes per annum capacity plant, producing in excess of 85koz gold per annum.
Excelsior Gold is due to complete a PFS in JQ13.
The cash position of the company, as at September 2012 was $5.8m (expected expenditure for DQ12 is $2.9m).
The company is funded to progress exploration and development studies for the next 6 months; however acceleration of Zoroastrian exploration, which we would view as positive, may require further capital.
Recommendation: BUY and place a 12 month price target of 24 cents per share on a $ per resource ounce basis.
Price target contingent on delivery of a Zoroastrian resource of 700koz gold at a grade of 2.5 to 3g/t.
A preliminary DCF valuation based on completion of a BFS targeting a 1.5Mtpa operation producing plus-85koz per annum to provide a valuation guide of 40 cents per share.
Greenland Minerals and Energy Ltd
(ASX:GGG)
Rare earth and uranium giant moves towards mining
Following recent metallurgical breakthroughs and a gradual pro-uranium political shift in Greenland, Greenland Minerals and Energy’s Kvanefjeld Rare Earth Elements (REE) – uranium project (in-ground resources approx. $450 billion) is likely to be operating within the next five years.
Key points:
Kvanefjeld: the world’s second-largest deposit of rare earths (RE-oxide 10.33 million tonnes) and fifth of uranium (575 million pounds), with significant zinc (2.25 million tonnes) and calcite.
Metallurgical breakthroughs mean simple, low cost processing by flotation and atmospheric leach.
PFS updated Aug 2012: processing 7.2 million tonnes per annum for 36 years, producing 51.9 thousand tonnes per annum rare earth oxide (REO) as carbonate and 2.6 million pounds per annum uranium, OPEX $3.07 per kilogram REO with uranium credits at $70 per pound.
CAPEX is US$1.3 billion with likely further reductions due to metallurgical improvements. Project is scalable, so potential to start smaller and expand.
Greenland Minerals and Energy moving to 100 per cent ownership from 61 per cent, Joint Venture legal problems resolved.
Moratorium on mining uranium in Greenland; however, Greenland Minerals and Energy has approval to investigate uranium potential up to DFS. Mining Licence possible in 1H14.
Kvanefjeld is one of the few Tier 1 mineral projects held by a small cap that has a real chance of being built in the next five years.
With post-tax NPV (15 per cent) of $2.4 billion, its economic potential is indisputable.
The main challenges for Greenland Minerals and Energy will be obtaining a mining licence, funding, and generating confidence among investors in the REE and uranium markets.
Price target over 12 months is a speculative $2.32/sh, contingent on a near-term shift in Greenland’s anti-uranium stance.
If the uranium moratorium stands, Kvanefjeld will be hard to develop.
A binary outcome if ever we’ve seen one.
Recommendation: Buy (Speculative) 12 month target $2.32/sh
Dourado Resources Limited
(ASX:DUO)
Exploration recommences at Yerrida Basin-Goodin Dome
After a quiet 2012 over which the market experienced an aggressive sell down of risk assets, we are more confident of renewed market interest in ASX-listed junior explorers such as Dourado Resources as it recommences exploration at its Mooloogool-Diamond Well tenements covering around 2,400 square kilometres in the Yerrida Basin Goodin Dome region of Western Australia.
The tenements are situated south of Sandfire Resources’ (ASX:SFR) DeGrussa project (14.6 million tonnes at 4.6 per cent copper, 1.6 grams per tonne gold) and cover prospective lithologies and cross cutting regional structures that are potential hosts for copper / gold mineralisation.
14 copper / gold geochemical anomalies identified to date appearing to overlap on to neighbouring tenements held by Enterprise Metals (ASX:ENT), Great Western Exploration (ASX:GTE) and Thundelarra Resources (ASX:THX).
A soil geochemical program is planned over 10 tenements together with 11 Aircore holes in the south-east of the Mooloogool-Diamond Well tenements.
A HELITEM survey is also planned for the southern tenements.
Impressive results from neighbouring properties including Ventnor Resources (ASX:VRX) with high-grade copper results from Thaduna-Green Dragon and Enterprise Metals who recently reported high-grade gold intercepts from the Vulcan gold prospect including 4 metres at 3.9g/t gold from 84m
downhole.
2012 RC program extended gold mineralisation further north, east and south at Sabbath gold project (145,000t at 2.21g/t gold).
Results from second phase of RC drilling are awaited.
Recent soil geochemical sampling at Garden Gully (Mistletoe tenement) identified gold mineralisation in the south of the tenement (close to Doray Minerals (ASX:DRM) Andy Well project, 717,000t at 11.4g/t gold for 262,000 ounces)– a follow up RAB program is planned.
A further 10 targets have been identified in the southern tenements.
Price Catalyst
Exploration success at the Yerrida Basin-Goodin Dome tenements still represents the best opportunity for Dourado to stimulate market interest.
The recent discovery of elevated gold mineralisation by Enterprise Metals has further underlined the regions’ prospectivity.
The imminent publication of a maiden JORC copper resource at Ventnor’s Thaduna/Green Dragon in the order of 150 million tonnes at greater than 2 per cent copper should also boost market sentiment.
Recommendation: accumulate under 6 cents.