What the Brokers Say
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Syndicated Metals LTD (ASX: SMD)
The current management of SMD joined in March 2012, but detailed new work plans were delayed until a settlement was achieved in August 2013 enabling the company to focus on development of the Barbara deposit.
Copper Chem Ltd (CCL) is farming into a 50 per cent share of Barbara by funding drilling that should lead to an extension of the current mining inventory of 1.2 million tonnes that has been established for an open pit at Barbara.
Barbara, near Cloncurry
Barbara is in North‐West Queensland, 60km from Mt Isa and 110km from Cloncurry, on the north side of the Barkly Highway, in a suite of tenements running up to 80km north.
Barbara has JORC Indicated and Inferred resources totalling 5.3 million tonnes, at 1.4 per cent copper, 0.1g/t gold, 2.5g/t silver plus some cobalt, for 76,000 tonnes contained copper.
SMD has further Resources totalling 600,000 tonnes for 8,000 tonnes contained copper nearby.
Agreement to develop the Barbara deposit
On 3 June 2013, SMD announced that it had executed an MOU with Exco Resources to develop the Barbara project.
On 16 September, the MOU had become a firm agreement with Copper Chem Ltd (a related entity of Exco Resources; and a subsidiary of WH Soul Pattinson (ASX: SOL).
This agreement involved:
CCL subscribing $522,000 in a share placement and buying out a significant shareholder to move to an 18.9 per cent stake in SMD;
CCL sole funding until a decision to mine at the Barbara development; and
CCL buying out a JV partner in some of the ELs in the Barbara project, so that the project becomes a 50:50 SMD‐CCL JV.
Likely Barbara Project
A pit containing 1.2 million tonnes of ore has been defined.
The current drill program, which has already reported 42m at 1.57 per cent copper and other, significant intersections of similar tenor with high-grade portions, is to determine ore closer to surface and the presence of mineralisation in an area of pit currently not drilled.
We expect that the development may increase to 1.8 million tonnes of ore at similar high grades.
We expect that this can be developed for less than $20 million (100 per cent basis) for a cash cost of about $1.65 per pound, with first ore in approximately 12 months, with a payback of about 12 months.
Goldminex Resources (ASX: GMX)
Goldminex Resources has significant acreage encompassing 2,756 square kilometres, positioned over two project areas within the Owen Stanley Ranges of Papua New Guinea (PNG).
The company’s flagship ‘Liamu’ project hosts 12 high-priority prospects within an extensive intrusive complex which has significant potential to host multiple large porphyry copper-gold deposits.
Geological and geochemical exploration to date has outlined an area in excess of 15sqkm shedding anomalous gold and copper in drainage samples. Exploration within this project area is still at a relatively early stage, however the ‘world class’ scale of the exploration targets should not be underestimated.
Within the tenements, GMX has also identified four nickel prospects, broadly defined by rock chips samples assaying up to 49 per cent nickel. Further work is required to better understand the source of these high grade nickel results.
Goldminex also has a 100 per cent interest in tenements (one EL and two ELA’s) surrounding the historical Gira goldfield, which was originally discovered in 1897.
Sparse exploration was carried out in the 1970’s/80’s with approx. 67,000 ounces of alluvial gold production recorded. The prospect, however, remains vastly underexplored. Goldminex is yet to carry out exploration within this prospective ground.
In 2011, Goldminex entered into a farm in agreement with Vale S.A., whereby Vale could earn a 51 per cent interest through funding exploration expenditure of US$20 million across six tenements (including the Liamu project).
Since entering into the farm-in agreement, Vale has spent a total of US$16.6 million, principally at the Liamu project, with the aim of identifying a large, economically viable porphyry copper-gold deposit.
Exploration activities included target generation, geophysical surveys, geological mapping, geochemical sampling and diamond drilling (8 deep holes for 4,299m).
In September 2013, Vale gave notice to withdraw from the Farm In Agreement leaving Goldminex with a 100 per cent interest in all of its tenements.
While it is clearly disappointing to see Vale withdrawing from the Farm In Agreement, the exit should be put into context.
As part of company-wide cost saving measures, Vale has substantially reduced its global exploration budget (and staffing levels).
As a result, a review of all exploration projects was undertaken with the reduced funds now allocated to more advanced ‘priority projects’.
Given the relatively early stage of exploration within the Owen Stanley Range, Vale’s exit is understandable.
The value attributed to the Owen Stanley Range tenements has been substantially enhanced with Vale’s involvement. All data gathered during the Vale’s funded US$16.6 million exploration program (geophysics, age data, geochemical and assay data) will remain the property of Goldminex.
There are also several gold targets which were identified during the Vale funded exploration program and which were not addressed. These targets could be quickly developed to drill testing stage.
Goldminex has a negative enterprise value suggesting the market is attributing no value to the company’s assets.
Breakaway believes this valuation is unwarranted given the prospectivity of the Owen Stanley tenements.
In excess of $30 million has already been spent advancing multiple prospects within the portfolio, all of which have ‘large scale potential’.
A new Joint Venture (JV) partner is now being sought to help share costs associated with advancing exploration at the Owen Stanley Range projects. In the meantime, Goldminex will likely run a lean operation, led by a capable management team.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.