What the Brokers say – Issue 81
WHAT THE BROKERS SAY: Interesting news and views from across the Resource Analyst universe.
Consolidated Tin Mines (ASX: CSD)
The acquisition of the Kagara processing facilities by Consolidated Tin’s major shareholder is of major strategic importance, providing the company with a clear pathway to production.
A 50/50 JV agreement will soon be signed with first tin production scheduled for 2014.
Consolidated Tin Mines (ASX: CSD) has taken a major step forward in its ambition to become the next Australian tin producer.
Snow Peak International (SPI), CSD’s major shareholder, recently agreed terms to acquire the Kagara Central Region processing plant (and surrounding mining operations) for a total consideration of $40 million.
The acquisition now creates a clear path to production for Consolidated Tin’s nearby Mt Garnet tin project with the flagship Gillian deposit located just 9 kilometres (by sealed highway) from the Kagara plant.
Terms of a JV between Snow Peak and CSD are currently being formalised (subject to CSD shareholder approval) however, both parties envisage a 50/50 JV with CSD providing the Mt Garnet tin project and Snow Peak providing the processing plant.
Some modifications will be required to the plant which will be funded on a 50/50 basis.
In the short term, CSD will manage the plant and continue to process ore from copper and polymetallic mines (included in the acquisition) for a 10 per cent free carry in any profit made.
The earlier signing of a $3 million funding package with Snow Peak has been used to advance exploration at Mt Garnet and complete a pre-feasibility study (PFS).
The results of the PFS are expected shortly after an understandable delay (due to the acquisition) while the recently completed 10,000 metres drill campaign is likely to lead to the company soon announcing a resource upgrade (targeting a further 2 million tonnes Mt for a total of 8 million tonnes to 10 million tonnes of tin mineralisation, averaging 0.5 per cent tin).
Recommendation: Speculative BUY
Corazon Mining Limited (ASX: CZN)
Top Up Rise – high risk, massive potential
Corazon Mining Limited (ASX: CZN) recently secured an option to acquire 75 per cent of the Top Up Rise project (TUR project) located in the Gibson Desert of Western Australia.
The TUR project is a highly speculative ‘greenfield’ play that could have significant upside.
The next Olympic Dam…?
The project area covers an area of 1,380 square kilometres on the eastern margin of the Gibson Desert.
The target at the TUR project is a very large, very dense rock mass, first identified in gravity in surveys carried out by the GSWA.
Corazon believes that the anomaly has the potential to be a large Iron Oxide Copper Gold (IOCG) system.
Olympic Dam, one of the most significant mineral deposits in Australia is an IOCG deposit.
Due to the remote location and sand cover very little exploration has been carried out in the area.
In the late ‘90’s BHP explored an area to the south of TUR, following up a large gravity anomaly defined in a broad spaced regional survey that missed the anomaly at TUR.
BHP completed more geophysical surveys and defined a 3 kilometre by 6 kilometre gravity anomaly at a modelled depth of approx. 300 metres.
A combination of approval delays, logistical difficulties and a change in corporate exploration strategy meant the target was never drill tested.
Work completed by Toro Energy (ASX: TOE) on an Exploration Licence approx. 30km east of TUR discovered further encouraging indications of IOCG mineralisation.
Border Exploration, the vendor of the TUR project, completed an airborne magnetics survey over the TUR gravity anomaly and, after interpreting these results with the GSWA data, defined an 8km by 4km residual gravity high of greater than 7 milliGals above background; of similar size and more intense than the anomaly at Olympic Dam.
Corazon plans to follow-up with ground based geophysics and drill testing.
An access agreement was recently signed with the Traditional Owners and exploration work should commence in the coming months.
Option terms and capital raising
Corazon’s option on the TUR project was recently approved by shareholders.
Terms of the option are staged, with Corazon progressively earning up to 75 per cent of Border on the satisfaction of various milestones and payments.
Corazon recently announced a share placement and SPP to raise up to $3 million to fund exploration at TUR and the company’s Canadian projects.
Oil & gas style risk/reward
With a fully diluted market capitalisation of just $9.7 million and a post-raise Enterprise Value of $7 million Corazon is, in our view, an exceptionally cheap option on potentially massive upside.
We believe the downside is limited by this cheap entry and the company’s Canadian exploration assets, which we believe are attractive in their own right.
Consequently we rate Corazon as a:
Speculative Buy.
Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice.