What the Brokers Say
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Website: www.psl.com.au
Cradle Resources (ASX: CXX)
The recently released independent scoping study on Cradle Resources’ (ASX: CXX) Panda Hill niobium project (50 per cent owned with right to acquire balance) demonstrated a robust project at current prices.
There were several highlights which included lower capital/sustaining costs and higher grades (when compared to our estimates).
In addition, the study briefly examined a staged case whereby upfront capital costs were estimated to be c30 per cent lower compared to the base case.
On balance the base case was slightly lower than our estimates on a Net Present Value (NPV) basis due to higher operating costs and lower recoveries which have scope for improvement.
Robust Niobium Project:
Overall, the scoping study demonstrated a robust Ferroniobium project.
Encouragingly, upfront capital costs were c19 per cent lower (US$185 million) than Cradle’s initial estimates and sustaining capital was lower.
Whilst upfront capital was significantly lower this was offset by higher operating costs which were up c26 per cent from our previous estimates.
Recoveries were also slightly lower at 62 per cent LOM (PSL est. 65 per cent).
Based on the study we estimate a project NPV (at12 per cent) at US$332 million and IRR of 56 per cent.
At decision to mine our project NPV (at 12 per cent) increases to US$466 million.
PFS to Further Optimise:
Cradle plans to commence a Pre-feasibility Study (PFS) in Q2/2014 which is anticipated to be completed in Q4/2014.
The study will examine further project optimisations. The key areas highlighted for improvement include:
1) recoveries and reagent use;
2) reduced contract mining rates; and
3) power costs.
These have the potential to further reduce operating costs.
Staged Case Considered with 30 per cent Lower Capital Costs:
As part of the scoping study, a staged approach was briefly examined. Under this scenario the study estimated that capital costs would be c30 per cent lower at US$125 million.
The plant would initially process one million tonnes per annum (Mtpa) then be expanded to 2.3Mtpa after the first three years.
This lower capital option will be further examined in the PFS. The advantage is the reduced dilution with equity and/or lower debt requirements, as this expansion is funded through operating cashflows.
Further Funding:
At the end of the December Quarter, Cradle had $754,000 in cash. We anticipate that Cradle will need to raise additional capital to drive the project towards a decision to mine.
Catalysts:
1) Q3/2014: Metallurgical test work results;
2) Q3/2014: Updated resource estimate (category);
3) Q3/2014: Baseline studies for ESIA;
4) Q4/2014: PFS; and
5) Q4/2014: Commence DFS
Website: www.breakawayresearch.com
Emmerson Resources (ASX: ERM)
Emmerson is successfully applying a modern exploration strategy to its dominant tenement position in a world class mineral field.
The company has established a large JORC Resource at four deposits, with significant further exploration potential.
Emmerson also owns a fully permitted 300,000 tonnes per annum C.I.P. processing plant, providing a fast-track pathway to gold production.
With an Enterprise Value of just $9.4 million, Emmerson appears significantly undervalued.
Emmerson Resources (ASX: ERM) has a large, 100 per cent-owned tenement package covering the majority of the world class ‘Tennant Creek Mineral Field’, located in the Northern Territory.
The company has already identified significant copper-gold resources at four deposits, totalling 6.79 million tonnes at 3.6 grams per tonne gold equivalent (AuEq ) for approx. 900,000 ounces AuEq.
This JORC Resource is likely to be revised upwards in the near term with approx. one million tonnes of ‘ore grade mineralisation’ identified for near term assessment.
Of particular interest is the high-grade Chariot gold deposit (170,000 tonnes at 17.4g/t gold for 99,000 ounces gold) which is likely to be the first deposit mined and processed through the 100 per cent-owned 300,000 tonnes per annum Warrego C.I.P. processing plant, which is currently under ‘care and maintenance’.
A 1,200m RC drill program is scheduled to commence at the end of the wet season, targeting relatively shallow mineralisation (100m-200m) at Chariot East and Chariot West.
Historic ‘ore grade’ intersections in this area make it low risk-high reward program with potential to add meaningful ounces within an expanded open cut mine plan at Chariot.
Emmerson is a well-run company operating in a world renowned mineral province.
The company appears to have ‘cracked the code’ for discovery of blind deposits, and has increased its JORC Resource estimate by 70 per cent (gold) and 140 per cent (copper) in just the last quarter.
The Scoping Study currently underway is likely to provide impetus to begin feasibility work, targeting production in late 2015/early 2016.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.