What the Brokers say

THE BOURSE WHISPERER: While we were attending the RIU Sydney Resources Roundup The Roadhouse caught up with its old buddies from Breakaway Research which passed on a couple of its recent company research notes.

Matsa Resources (ASX: MAT) has a diverse portfolio of projects at various stages of assessment. The most advanced is the Norseman gold/magnetite project which hosts a JORC resource of 26.5 million tonnes at 1.7 grams per tonne gold for a total of 1.47Moz of gold.

Negotiations of a joint venture for the Norseman project are well advanced with the final terms expected to be agreed imminently. Once completed, further exploration programs, feasibility studies and ultimately development of the project (targeting 2 million tonnes per annum by 2015) are likely to follow.


Norseman Project Tenure. Source: Company

Matsa has a strong project pipeline of earlier stage projects. Approximately 5 kilometres north of the Norseman project, the company has identified large widths of magnetite iron ore at Dundas. A further drilling program is required to define a JORC inferred resource, although the company has established an exploration target of +300Mt. Production synergies may exist with the Norseman project.

Matsa is also awaiting further licence application approvals from the Thailand government over tenure prospective for iron ore, copper and gold.

Recommendation: Speculative Buy

Olympus Pacific Minerals (ASX, TSX: OYM) is an established gold producer with two operating gold mines located in Vietnam.

The company produced 42,868 ounces of gold in 2011, at a cash cost of US$715 per ounce, and is on track to increase production to 65,000oz in 2012 at reduced cash costs.


Olympus Pacific – Project Locations. Source: Company

With the Vietnam operations now running smoothly, the focus is shifting to the Bau goldfield in East Malaysia.

Bau is a ‘company maker’ and currently hosts a total gold resource in excess of 3 million ounces with significant further exploration potential. Recent drilling at Jugan (one of eight central Bau Trend sectors) has intersected additional large widths of ore grade mineralisation yet to be included in the current resource.

Highlights include 52 metres at 4.64 grams per tonne gold from 3 metres below surface.

A feasibility study is currently underway based on the initial development of the Jugan Hill and Young’s Hill (Bekajang) deposits with the remaining six sectors phased into production in due course. The company envisage a 3 million tonnes per annum plant, employing either an Albion or pressure oxidation circuit to treat the refractory component of the ore, to be commissioned in 2014.

Once in full production, Olympus Pacific have targeted 100,000 to 150,000 ounces of gold per annum from Bau, which when coupled with the Vietnam operations, would bring total gold production to more than 200,000ozpa.

Comparative analysis by Breakaway research indicates that Olympus is cheap relative to its peers based on its established resource base. This creates an opportunity for a strong re-rating as its growth plans are quantified and achieved.

Recommendation: Speculative Buy

Sheffield Resources (ASX: SFX) has a portfolio of mineral sands, iron ore and talc projects, all located within Western Australia, however the principle focus for the company is the development of the Eneabba and Dampier mineral sands projects.

The Eneabba project is the most advanced and was recently the subject of a scoping study completed by mineral sand industry experts TZMI.

Eneabba hosts a 161 million tonnes at 2.5 per cent VHM (Valuable Heavy Minerals) resource comprised from three closely spaced deposits.

Further opportunity exists to extend this resource with infill and extensional drilling on other nearby, already defined prospects. The outcome of the scoping study showed the project to be technically sound and economically attractive under various commodity price assumptions. Sheffield is now progressing with a pre-feasibility study with the goal of first production by 2015.

Stage two in the company growth profile envisages advancing the potentially high grade, large tonnage Dampier project in northern WA. Dampier has an exploration target of 450 to 840Mt at 5 to 10 per cent VHM, more than twice the size and grade of the Eneabba project, and is viewed as the ‘company maker’.

A 12,500 metre drilling program is about to commence with a maiden JORC resource expected in early in Q4 2012.

Mineral sand prices remain at elevated levels and are likely to advance on these levels in the medium term with supply and demand fundamentals underpinning the upward trend.

Sheffield is now advancing the Eneabba project through the feasibility stages with first production slated as early as 2015. Encouragingly, one of the deposits, West Mine North, already sits within a granted Mining Lease.

Recommendation: Speculative Buy


Reed Resources’ (ASX : RDR) Meekatharra gold project (100 per cent), located in the Murchison region of WA, is expected to start producing gold during Q4 2011.


Project location map. Source: Company

Given the successful completion of the BFS, Reed is aiming to start producing gold from its flagship Meekatharra gold project, by mining open pit sources, in the fourth quarter of 2012, subject to financing. The plan is to ramp up production to 95,000 ounces per annum by the end of 2014 and increase production to 160,000 to 180,000 per annum under Stage 2 (planned to commence in 2015).

Reed has defined a substantial reserve base of approximately 0.75 million ounces of gold, estimated by the respected geological consultants Snowden Mining.

The company has three primary open pit ore sources, Bluebird, Mickey Doolan and Prohibition, that will provide the ‘base load’ ore for the plant in the initial years of operation. Total reserves could support a production rate of 100,000oz per annum for over six years.

We like the fact that Reed could start producing gold before the end of the year at average (C1) cash costs of A$1,076 per ounce. Reed’s existing plant can be refurbished for a relatively low capital expenditure of A$35.5 million.

Recommendation: Speculative Buy