What the Brokers Say
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Forte Consolidated (ASX: FRC)
Forte Consolidated has completed the acquisition of a 100 per cent interest in the prospective Johnnycake project located near the recently commissioned Mt Carlton gold/silver/copper mine in north-east Queensland.
In late 2012, Forte Consolidated entered into an agreement to purchase a 100 per cent interest in EPM 18986, named the ‘Johnnycake Project’, for total consideration of $50,000 from Adept Solutions Limited, now called Emerchants Limited (ASX: EML).
Emerchants only disposed of the tenement due to a change in business activities from the resources to the financial services sector.
The tenement is located at the northern end of the Bowen Basin, approx. 170km south of Townsville and is in close proximity to Evolution Mining’s Mt Carlton Mine, which hosts a JORC Resource of 25.2 million tonnes at 1.7 grams per tonne gold (for approx. 1.35 million ounces of contained gold), plus significant silver (approx. 30.6 million ounces) and copper resources (approx. 63,000 tonnes of contained copper).
Historic aeromagnetic and radiometric surveys have been sourced and reprocessed, and have refined the definition of important faults and dykes (which are conduits for fluids, potentially leading to the formation of mineral deposits).
A desk top review of the available ‘Johnnycake’ data has generated four distinct targets; namely Hill 345, West Rocky Creek, Mt Wickham South and CAZ.
A limited initial field program, comprising soil and rockchip/float samples, has been completed at each of the targets with some promising, albeit preliminary, results.
The company’s chairman, John Terpu, has extensive knowledge of the area having acquired the original Mt Carlton tenements with modest outlay in his role as managing director of Conquest Mining Limited (the company which discovered the nearby Mt Carlton project).
With this experience, Forte plans to apply known exploration methodology to the Johnnycake area.
Forte also holds the Kangaroo Hills project in north Queensland, which represents a secondary priority at this time.
Initial drilling included 4m at 100g/t silver and 3.4 per cent zinc at the Clarke prospect and deeper drilling is required to adequately test the target.
Forte Consolidated is currently advancing exploration at the Johnnycake project.
Four high-priority precious metal prospects have already been identified; however exploration is still at an early stage.
With an EV of just $2.1 million and $2.2 million cash to fund exploration, Forte is highly leveraged to exploration success.
Sovereign Gold Co Ltd (SOC.ASX)
Overview: Sovereign Gold Company Ltd (“Sovereign Gold”, “the Company”) is an Australian gold explorer focused on New South Wales.
The company has made a discovery of national significance at its Mt Adrah project near Wagga, and remains free carried for exploration up to $21 million within the SUGEC JV, near Uralla.
It retains a 79.5 per cent interest in Precious Metal Resources (PMR.ASX).
Catalysts: After expanding its resource inventory by 200 per cent at a cost of $1 per ounce, Sovereign Gold has set an exploration target of 3.2 million ounces to 4.6 million ounces for the existing ‘Pipe-1’ deposit at Mt Adrah.
The company has identified neighbouring prospects which could support a mineralised camp exceeding 40 million ounces.
Further resource drilling at Pipe-1 and appraisal of neighbouring targets stand as major growth drivers.
Hurdles: The refractory nature of mineralisation at Mt Adrah may require significant project scale to overcome metallurgical and marketing risks.
Sovereign Gold’s exploration targets are conceptual in nature and there is no guarantee further mineral resources will be defined.
The company remains reliant on external capital to fund operations outside its SUGEC JV.
Investment View: As Sovereign Gold’s present market valuation merely reflects its free carried interest at Uralla and PMR shareholding, the potential significance of Mt Adrah has yet to be recognised.
Should the company successfully realise its current exploration target at ‘Pipe-1’, our base case valuation of 49 cents per share offers, a 145 per cent premium to recent trade.
Neighbouring prospects provide upside beyond our current appraisal.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.