What the Analysts Say

WHAT THE ANALYSTS SAY: The boys at Breakaway Research run the ruler across Silver City Minerals’ copper potential and Image Resources’ minerals sands project.

Analyst: Breakaway Research

Website: www.breakawayresearch.com

Company: Silver City Minerals Limited

Silver City Minerals (ASX: SCI) has a reputation as a solid explorer in the Broken Hill region with an extensive tenement package.

While initially concentrating on the discovery of Broken Hill-type orebodies, it has now identified an IOCG target which is significantly younger than the typical Broken Hill-style mineralisation and which has only been partially explored by previous companies.

The identification of this advanced copper target is a major achievement for the Company as it is likely to represent a ‘game changer’ in terms of future news flow.

The company is led by geologist Chris Torrey who is supported by a geologically focused Board.

During the past few years it has systematically investigated its large tenement position and has identified a new exciting copper project in a province which has been largely dominated by Broken Hill lead-zinc-style mineralisation.

The company is now accelerating exploration on the copper project, which includes the Copper Blow mineralisation.

This target is a deviation from the traditional Broken Hill-style target but as an iron oxide‐copper‐gold (IOCG) target it is a member of a class containing world-class orebodies such as Olympic Dam, Ernest Henry and Selwyn.

In line with these orebodies, it is likely to contain gold, silver and cobalt credits which has already been demonstrated from surface sampling by the company.

This target is exciting with copper mineralisation evident along this four kilometre trend and historical drilling having demonstrated economic intersections including:

11.8 metres at 6.7 per cent copper, 1.92 grams per tonne gold and 14g/t silver;
15m at 2.7 per cent copper, 0.53g/t gold and 3.7g/t silver; and
19.2m at 1.8 per cent copper, including 3m at 4.6 per cent copper.

Follow‐up selective surface sampling by Silver City Minerals has reaffirmed the copper grades in the historical drilling but also gold grades up to 1.85g/t and cobalt grades up to 749ppm.

A drilling campaign by the company is now urgently being finalised and is scheduled to commence on the 28th August.

The project is particularly exciting given that the copper price has been moving higher and is now around US$3 per pound.

A recent placement and oversubscribed SPP leaves the company fully-funded and combined with the technical capabilities of Management and the Board, the company is well placed to execute a successful program.

Analyst: Breakaway Research

Website: www.breakawayresearch.com

Company: Image Resources NL (ASX: IMA)

Image Resources has completed a positive feasibility study on its Boonanarring/Atlas mineral sands project north of Perth, WA.

The location is close to infrastructure and the extensive detail in the study leaves minimal risk in terms of the Company not meeting its production and financial targets.

Image Resources was ASX-listed on 4 July 2002 and in recent years has attained an enviable track record of successful mineral sands exploration in the Perth Basin, immediately north of Perth.

The company is now transforming to producer status with first mineral sands production scheduled for March 2018.

The final hurdle is financing the relatively modest capex of $56.7 million, which will be a combination of debt and equity – we have assumed 50:50.

The Board has approved managing director Patrick Mutz to secure this financing and he has engaged PCF Capital Group to assist with the debt portion.

A recent placement raising $3 million at 9 cents per share has enabled the company to order long lead items.

In terms of raising the equity portion, this will be conducted in September and we believe there will be keen interest in participation by the local funds.

We would also expect the company may offer its shareholders participation in a rights issue.

Therefore from an investor perspective, with the financial robustness of the project, the financing could be completed relatively quickly and investors waiting for the financing may miss out.

Hence, we recommend investing now as the price is supported by the valuation metrics and it may also allow participation in a future rights issue if the company decides to proceed down this fund raising path.

The development of the Boonanarring project is a major step forward as the company transitions to a producer and generates earnings and cash flows.

This allows the company to then pursue a strong growth path given it has a portfolio of projects that can be accelerated.

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.