What the Brokers Say

WHAT THE BROKERS SAY: Interesting news and views from across the Resources and Oil & Gas Analyst universe.

website: www.breakawayresearch.com

Carpentaria Exploration (ASX: CAP)

Carpentaria Exploration is primarily a western New South Wales iron ore developer, with 60 per cent ownership of the Hawsons iron ore project, located near Broken Hill.

The project, for which positive economics are indicated, is well served by infrastructure, including power, rail, port and a skilled workforce in Broken Hill.

Carpentaria also has a second string to its bow, actively exploring a package of tenements in New South Wales prospective for intrusion related gold and porphyry related gold/copper deposits.

Carpentaria Exploration (ASX: CAP), along with 40 per cent JV partner Pure Metals, continues to assess development of the Hawsons iron ore project.

The company has recently completed a positive project review, and now is looking to progress through the feasibility phase, for which funding is required.

A key to the project is that it is well served by infrastructure, with potential available capacity for production of up to 8 to 10 million tonnes per annum, thus minimising capex and lead times.

In this, Carpentaria is unique when compared to its peers. There are also potential infrastructure synergies with other projects and companies in the region.

With Pure Metals currently managing the Hawsons project, Carpentaria has the resources to actively explore its package of 100 per cent held intrusion related gold and porphyry related copper/gold projects in central and northern NSW.

These prospective projects are largely located over areas of known mineralisation, however with little modern exploration.

The company has a Board and management team with a proven track record in industry and government that has pro-actively managed projects.

We see short term price appreciation on the back of obtaining a partner to fund the Hawsons DFS and any exploration success on the gold projects, with medium to longer term appreciation to be driven by ongoing advancement of all projects.

Website: www.argonaut.com

Citation Resources (ASX: CTR)

Citation has announced that its Atzam#5 well, onshore Guatemala, has been successfully cased above the first of multiple objectives.

The well is an appraisal of a field that was successfully tested by the Atzam#4 well in 2013.

Atzam#4 is currently producing 170 barrels of oil per day with no water cut and steady pressure (indicating greater deliverability is possible).

The well is choked back until the Operator has a better handle on the impact of a higher production rate on the Estimated Ultimate Recovery (EUR).

The Atzam field may contain as much as 20 million barrels of recoverable oil with additional upside possible from near field exploration (CTR 60 per cent).

Operations have been slower than expected; however, we are now at the pointy end of the process and, given the success at Atzam#4 and oil shows seen already in Atzam#5, we consider the chance of success as high.

Guatemala Re-Cap:

Citation has a 60 per cent interest in the Atzam Oil Field, onshore in Guatemala, through its ownership in the local operating company, Latin American
Resources.

The first well in the recent program, Atzam #4, flowed at >600bopd from a secondary target and has been flowing at a choked back rate of 170bopd.

The current 2P Reserve related to only the Atzam#4 well has been independently estimated at 2.3mmbbl with upside potential for the field as high as 20mmbbl.

Additional potential on the permit is also considered likely with Atzam look-a-likes as well as other play types in which oil production has been proven.

Guatemalan fiscal terms are considered attractive with operating margins of approx. 50 per cent.

Atzam#5 – Layer Upon Layer:

One of the key positives about the Atzam field geology is that there are multiple prospective horizons starting at the C13 level (just below where casing has recently been set).

During the drilling of Atzam#4, many interesting shows were seen but not tested as a standard drilling plan calls for drilling to Total Depth and then testing from the deepest horizon up.

Atzam#4 had issues with the deepest horizons (C18/19 – the primary targets) but fell back to the C17 and achieved a highly successful outcome, albeit that the interesting shallow zones were not tested.

A different approach is being used at Atzam#5 with production testing equipment so that testing can occur on the way down if anything interesting is seen.

The primary targets remain in the deeper horizons; however, we are likely to get significant newsflow on oil shows as well as production testing from other horizons over the next few weeks.

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.