What the Analysts Say

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

Website: www.beerandco.com.au

Company: Energia Minerals (PLS.EMX)

In June 2014, EMX announced it had purchased Mining Leases at Gorno, to facilitate its development.

Gorno has an Exploration Target of 6 million tonnes to 10 million tonnes at 7 per cent to 10 per cent zinc plus lead.

EMX is delivering
EMX has awarded a contract to rehabilitate the decline into Gorno. By September 2015, EMX will have under‐ground drill platforms to facilitate drilling to deliver a JORC resource.

EMX will then complete a feasibility study. Beer & Co expects this will be done by March and we expect first ore by December 2016.

Gorno Zinc project
Our valuation of Gorno is currently $107 million, based on:

Capital costs of €55 million, including feasibility studies to (re‐)develop a 500,000 tonne per annum mine and mill;

Operating costs of €19/t mining, €19/t milling, €4/t site admin, €6.5/t (of ore) for product transport plus €6/t sustaining capital (mostly mine development);

A mining inventory of 6.5 million tonnes grading 6.25 per cent zinc, 1.25 per cent lead and 4.5 grams per tonne silver, and then 1.5 million tonnes at 5.5 per cent zinc and one per cent lead; and

Our commodity prices are about the current levels for AUD‐USD and EUR-USD, with lead 95c/lb and zinc $1.05/lb, for most of the mine life.

We also assume that EMX brings the project into production after selling a 40 per cent stake in the project at a discount to NPV, at a time when zinc is expected to be in severe deficit.

Conclusions
EMX has near term exposure to zinc, which is projected to be in severe shortage by the end of 2015.

Beer & Co estimate that the value of EMX’s Gorno zinc project is about four times the current market cap of the company.

EMX has longer term exposure to uranium, with small expenditures until prices have recovered.

Despite the long lead time, with first product still 5 years away, Beer & Co estimate that EMX’s Carley Bore project has a positive NPV at spot uranium prices and a value of $75 million at current contract prices.

Website: www.paradigmsecurities.com.au

Company: Blackham Resources Limited (ASX: BLK)

Blackham Resources’ 1.3 million tonnes per annum Matilda gold project to produce 100,000 to 110,000 ounces per annum is coming closer to fruition with progress made on the mill rehabilitation process and the finalising of ore sources from the current 4.7 million ounce resource.

Exploration appraisals are also providing potentially significant new resources.

Higher A$ gold prices and the fall in the cost of mining contractor equipment and fuel costs should give this project even more attractive margins.

Blackham Resources has developed its Wiluna goldfield plant and resources into a significant intermediate size gold mining project.

The mill site and the mine development in open cut and underground sites have a replacement cost of well over $100 million in even today’s depressed market so the company’s achievements to date have been substantial.

BLK is well placed after the recent equity and seeks a potential debt funding package that would allow confirmation of mining reserves, development of open cut and u/ground mines and refurbishment of the mill and onsite plant.

Mine development will not only include the Matilda project open cuts but also high-grade free milling ores from nearby low capital cost open pits and underground at the Wiluna site to boost initial output through higher grades and lower unit gold production costs.

Gold production is expected by mid-2016 at a rate of at least 80,000 ounces per annum with higher numbers possible as grades and tonnes from these newly identified gold-in-quartz ores, such as the additional 120,000 ounces at 7.4g/t identified at the Golden Age reef at Wiluna, sweeten the mill feed.

BLK has also identified new ore potential of as much as 25 million tonnes at >3g/t (1.5moz) from 8 drill-ready targets and others that add as much as a further 3 million ounces to the current 4.7 million ounces.

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.

The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.