What the Brokers Say
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Auroch Minerals (ASX: AOU)
Auroch Minerals has now bedded down the acquisition of the 3 million ounce Manica gold project and is steadily advancing towards its first production target of early 2015.
A recently completed scoping study indicates attractive economics centred around initially mining the non-refractory and transition zones of the deposit to produce approx. 40,000 ounces of gold per annum.
The Manica gold project is an advanced gold exploration play with an established JORC Resource of approx. 50 million tonnes at 1.83 grams per tonne gold for approx. 3 million ounces of gold at three deposits with mineralisation reported to be open at depth and along strike.
Approx. 85 per cent of the resource is hosted within sulphide ore zones (refractory) while the remaining approx. 15 per cent of the resource is hosted within free milling, transitional or oxide ore zones (non-refractory).
The 42 square kilometre granted mining licence is valid for 25 years and is well serviced by existing infrastructure such as telecommunications, local airport, roads, rail, power and water.
Auroch Minerals recently completed a Scoping Study assessing the technical economic viability of initially mining and processing the non-refractory and transitional component of the resource (approx. 5 million tonnes at 2.23g/t for 380,000 ounces of gold).
The Scoping Study indicates robust economics based on a 720,000 tonnes per annum plant processing ore at an average head grade of 2.23g/t gold for approx. 40,000 ounces per annum.
Cash operating costs have been estimated at approx. US$643 per ounce (excluding CAPEX and before tax, depreciation and royalties) against a current gold price approx. US$1,220.
The company is now set to embark on a Definitive Feasibility Study and is targeting first production as early as Q1 2015.
Red Mountain Mining (ASX: RMX)
Established resources with immediate high grade upside.
While the appetite for speculative investment has waned over the past 12 months, Red Mountain Mining (RMX) possesses many of the key ingredients for a highly-leveraged investment.
The company’s Batangas gold project is located in a prospective region of the Philippines and will be the developmental focus for RMX going forward.
The project has a current JORC resource of 5.8 million tonnes at 2.2 grams per tonne gold for 408,000 ounces of gold and with a number of high grade, near-surface targets identified, the potential to grow the resources base is high.
With the market currently attributing little value towards the company’s asset portfolio we see potential upside for risk tolerant investors.
Batangas – a number of high grade targets.
Considering the modest drilling budget, we see it as prudent that RMX drill its highest grade targets in an effort to garner new shareholder enthusiasm about the story.
The Lobo project (194,000 tonnes at 7.2g/t for 45,000 ounces of gold) offers a number of extensional and parallel drilling targets that look highly prospective.
We expect the next phase of drilling to target the Pica and Japanese Tunnel prospects that collectively possess an Exploration Target of 45 to 120,000 ounces of gold equivalent.
Archangel could be the base load.
With a current resource of 5.5 million tonnes at 2g/t for 363,000 ounces of gold the Archangel project is a larger scale development opportunity.
In the near term, RMX is aiming to complete a scoping study demonstrating the Bantangas project as a viable development proposition.
Conceptually we envisage Archangel serving as the base load ore supply topped up with higher grades from Lobo.
Philippines a solid jurisdiction to operate.
The Philippines has a well-established history of mining and is governed under a US based democracy.
The country was recently upgraded to investment grade by Standard and Poors from BBB- to BB+ which will make future financing of development projects more competitive.
Pending outcomes of the Executive Order 79 will likely increase royalty rates but should also improve the regulation and sustainability of mining in the country.
Funded – for now.
The recent rights issue has seen RMX’s cash balance increase to approx. $1 million, which is enough to fund a modest drilling campaign and potentially a scoping study.
We believe securing additional funding is the biggest challenge facing the company in the near term.
Alternative routes to further equity placement include selling down at the project level or a JV, either of which may be favourable outcomes for RMX.
Cheap on an EV/Resource metric.
With a 408,000 ounce JORC resource RMX is trading on an EV/Resource of $3.70 per ounce compared to a peer average of $25 per ounce.
Catalysts.
1) Successful upcoming drilling campaign.
2) Resource upgrades at Lobo.
3) Scoping study outcomes.
4) Clarity on future funding.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.