What the Brokers Say
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Base Resources Ltd. (ASX: BSE)
Base is on track to begin commissioning the US$298 million Kwale mineral sands project in Kenya on schedule in Sept 2013.
Some US$196 million has been spent and funds are available for completion.
Key Points:
Base reported very good progress on construction at Kwale which is 71 per cent complete and rated one of the best undeveloped mineral sands projects in the world.
Its projected revenue to cost ratio of approx. 3.0x is amongst the very best and we assume commodity prices close to current levels.
Some US$196 million of the projected US$298 million capex has been spent and Base has US$108 million cash on hand and US$46 million yet to draw on its US$170 million debt facility.
We project $16 million cash at the low point in June 2014.
Commissioning is the next key hurdle and risk, in our opinion.
This risk can be significant for mineral sands but Kwale is planned as a simple dozer push mine like J-A and not a large-scale wet dredge project.
Timing:
Kwale is on schedule for production to commence in Q3 2013 with initial shipping in the Dec Q 2013.
We include a three-month buffer in our forecasts that may not be required.
We make no changes to our timing or forecasts at this time.
The dam wall was closed ahead of the wet season as planned and this was important because the wet season has begun and adequate water is required to run the process plant.
Funding:
Base is fully funded for its US$298 million spend but a US$20 million extension of the debt facility was added – to be sure.
We include some working capital in our total capex spend of US$308 million.
Cash of A$108 million as at March 2013 was down from A$94 million at Dec and debt drawn was US$124 million (US$52 million at Dec) with US$170 million total available in the facility.
Thus, a further US$46 million remains to be drawn in June and US $61m was spent in the March Quarter.
Recommendation: Speculative risk – price target AUD0.60
Aus-American Mining Ltd (ASX: AIW)
New high grade zones discovered
Key Points
Aus-American has released the latest batch of assay returns from its maiden drilling program at the Blue Bell VMS copper project in Arizona.
The results continue to show wide, high grade polymetallic intersections that build on the mineralisation discovered in the first seven holes.
The latest results better the first release and importantly, have potentially discovered a new, previously unrecognised high grade lens, with grades that better the historical mining grades from the 1920s.
The best intersection from the project so far – 17m at 4.6 per cent copper equivalent – has been returned in this second batch of assays.
Results from a further nine holes are expected in May. This will complete the program.
Aus-American is also about to start a VTEM geophysical survey over their entire land holding.
A Canadian based VTEM specialist has been contracted for this work.
The VTEM data collection and interpretation will be made simultaneously and we therefore expect a very quick turnaround once the VTEM has been flown.
We believe the VTEM survey could quickly establish the potential of the landholding.
The survey will utilise the existing mineralisation as a calibration aid in identifying new areas of mineralisation not exploited by mining in the early part of the 20th century.
Aus-American has set an exploration target at between 15 million and 20 million tonnes at a copper grade of between 0.6 per cent and 0.8 per cent and gold and silver credits of between 0.2g/t to 0.4g/t, and 15 to 30g/t respectively.
This is based on the concept of lower grade open pittable resources.
The higher grade massive sulphide lenses are seen as an upside case on the model.
Intersections reported so far support this model with DJC calculating that the weighted average grade of all reportable intersections is now at 1.1 per cent copper, up from 0.8 per cent copper before the release of the latest results.
Aus-American has stated its intention to strengthen the board through a search to find an executive chairman.
Jim Malone, who has been acting-chair, will step down from the position on the company securing a suitable candidate.
We believe there will be several catalysts in 2013, which have the potential to drive share price appreciation.
Aus-American has a current diluted market capitalisation of just $6.7 million and $1.5 million in cash.
We maintain our Speculative Buy on the stock.