What the Brokers Say

WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.

Barclay Wells

Website: www.barclaywells.com

Potash West (ASX: PWN)

Potash West’s 100 per cent-held Dandaragan Trough asset contains both rock phosphate and potash within glauconite.

Despite the long term goal of the company to progress its potash projects (as evidenced by the company name), the company’s immediate focus is to become a producer of Single Super Phosphate (SSP) from this greensand deposit to then eventually fund the potash production.

The SSP project requires relatively low amounts of capital expenditure, is conveniently located near all necessary infrastructure and entails very little technical risk, as the mining and processing involved are relatively simple.

With an anticipated 20-plus year mine life, the project is attractively leveraged to forecast rises over the medium to long term in price and demand, globally, for SSP.

We have calculated a fully risked NPV range of between $31million and $43 Million for the phosphate project alone.

This compares to the current market capitalisation of around $4.5 million.

Whilst the potash may have significant value, the ability to fund the significant infrastructure is heavily dependent on cash flow from the SSP project.

In addition, we view the potash side of the asset to be essentially a technology play around development of the (company-developed) K-Max process.

This proprietary process would allow the company to viably extract potash from the glauconite at efficiencies far greater than current conventional methods.

We consider this blue-sky (for purpose of research note) and have attributed no present value to it in our valuation of PWN.

Like virtually all junior exploration companies, PWN entails significant risk.

However, we view the current market capitalisation as significantly undervaluing PWN’s potential.

 

 

Breakaway Research

Website: www.breakawayresearch.com

Horseshoe Metals Limited (ASX: HOR)

Horseshoe Metals is in the process of raising up to $2.05 million to progress its Horseshoe Lights and Kumarina projects in the highly prospective Bryah and Bangemall Basins of Western Australia.

The company has already identified significant copper resources on its projects, and the work has also identified a number of additional encouraging targets that require further work, particularly drilling.

As such the company has planned a drill program that will commence once funds are raised.

We see significant potential for exploration success, and for the company to build a critical mass of plus-200,000 tonnes of contained copper at Horseshoe Lights and to significantly add to the Kumarina copper resources.

Horseshoe Metals has made considerable progress on the Horseshoe Lights and Kumarina projects since listing on the ASX in 2010.

Copper resources have been delineated on both projects, and work has delineated a number of targets worthy of follow up.

The Horseshoe Lights project is centred over the historic Horseshoe Lights mine, which produced 300,000 ounces of gold and 54,000 tonnes of copper up until closure in 1994.

Horseshoe Lights is located in a similar stratigraphic position in the Bryah Basin to the recently discovered DeGrussa deposit of Sandfire Resources (ASX: SFR), and we consider there to be excellent potential for the discovery of additional zones of mineralisation on the company’s leases, in addition to the current resource of 12.8 million tonnes at one per cent copper.

At Kumarina a number of additional drilling targets have been identified, that have the potential to significantly augment the current shallow Rinaldi resource of 835,000 tonnes at 1.3 per cent copper.

Horseshoe Metals has defined significant copper resources at its Horseshoe and Kumarina prospects in the productive Peak Hill Mineral Field of WA, which also hosts the high-grade DeGrussa copper-gold mine (13Mt at 4.5 per cent copper and 1.8 grams per tonne gold) and other significant copper and gold deposits and prospects.

DeGrussa is located 75km east of Horseshoe Lights and 100km south of Kumarina.

Work on both projects has identified prospective targets that now require additional work.

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

The views, opinions or recommendations of this article do not in any way reflect the views, opinions, recommendations, of The Resources Roadhouse.

The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.