THE BOURSE WHISPERER: The team at Breakaway Research provided a couple of resource company notes this week. Here we take a quick look at the highlights.
ZYL Limited (ASX:ZYL)
ZYL’s objective is to become a leading producer of anthracite for both South African and export markets.
It has prioritised development of its Mbila project in KwaZulu-Natal province for the delivery of high-grade anthracite, primarily to South African industrial consumers.
Over the medium-term, the company also plans to develop its Kangwane project, consisting of the Kangwane South and Central areas, in Mpumalanga province, which will produce anthracite for export markets.
Mbila is ZYL’s most advanced project and is on track to commence producing anthracite in Q3 2013. An interim Feasibility Study outlined a project with high operating margins between A$82.2 per tonne and A$59.2 per tonne.
The project is located close to critical infrastructure, minimising up-front capital costs to A$84.5 million.
A shortlist of preferred debt providers has been selected.
Current reserves of 33.4 million tonnes support a long life operation, as well as providing potential for expansion.
ZYL Limited is an ASX-listed metallurgical coal exploration and development company with two advanced anthracite projects in South Africa.
All of ZYL’s projects host large anthracite resources and are in close proximity to key infrastructure, including ports and rail.
ZYL is well placed to take advantage of a growing shortfall in South African and international anthracitic coal markets.
Recommendation: Speculative Buy
Blackham Resources (ASX:BLK)
Blackham Resources recently acquired the Matilda gold project located in the Wiluna region of Western Australia.
The project’s assets include previously operating mines, some infrastructure and a JORC resource of 12.5 million tonnes at 1.9 grams per tonne gold for 757,000 ounces of gold, made up from four nearby deposits.
Blackham has a near term exploration target of plus one million ounces of gold with significant exploration potential at depth and along strike of the existing deposits.
A recent 4,000m RC drill campaign confirmed the prospectivity of the targets by intersecting wide zones of ‘ore grade’ mineralisation.
Further opportunity exists to identify additional deposits hosted along 40km of strike over the Wiluna Mine Sequence and 10km strike along the Coles Find Mine Sequence.
The Wiluna plant, owned and operated by Apex Minerals, is located in close proximity to the Matilda project and has both oxide and sulphide treatment circuits.
Potential exists to toll treat oxide ore through the plant providing Apex with additional revenue and operational efficiencies (as the plant is underutilised) while Blackham has the opportunity for early cash flow to fund additional exploration and development costs.
Blackham is also evaluating the potential of coal export and a Coal to Liquids facility to process lignite from the 1.4 billion tonne Scaddan and Zanthus deposits located near the port of Esperance.
The project is well serviced by infrastructure and may warrant a standalone mining operation for the export market should an appropriate lignite market be identified.
The Matilda gold project already hosts a sizable resource however significant exploration potential still exists along strike and at depth of the known deposits and resource upgrades are likely.
Blackham has potential to develop sufficient resources to justify its own operation or for early cash flow via the toll treatment of ore through the nearby and underutilised Wiluna gold plant, providing additional funding for exploration and development.
Recommendation: Speculative BUY