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In the news: Metal Tiger & Cardinal Resources

Published: 05:29 22 May 2018 EDT

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COMPANIES
Metal Tiger*†

LON:MTR | 2.5p | US$39m | Buy | TP : 3.6p

Takeaways from 121 Conference — High Potential Exploration Underway on T3 Dome, with More at the T20 Dome to Commence in August

We caught up with Metal Tiger management and its JV partner MOD Resources (MOD : AU) at the 121 Conference last week. Metal Tiger owns 30% of the Kalahari Copper JV in Botswana (MOD Resources holds the remaining 70%). The timetable for the completion of the DFS on the main T3 Copper Project remains on track for the end of this year, as does the completion of a scoping study into the development of an underground operation at the main T3 deposit. However, more interesting to us was the fact that exploration is now underway on the JV’s highly-prospective regional exploration portfolio.

Infill and extensional drilling has been ongoing at the main T3 deposit to support an update of the resource ahead of the planned completion of the open pit and underground studies at the end of the year. The first drilling outside T3 began in January 2018 at T-Rex, a large EM anomaly that lies below the main T3 deposit. This programme is set to continue until August.

In mid-May the company announced that drilling had also commenced to test other EM anomalies on the T3 Dome Complex; an initial 60-hole programme is planned to be completed by four rigs. In mid-April the company submitted the Environmental Management Plan for approval by the authorities for drilling of the T20 Dome, which covers an area of almost 700km2 to the south-west of the T3 Dome Complex. The company hopes to receive approvals in July this year, with drilling to be ongoing from then.

COMMENT: Drilling of T-Rex and the regional T3 Dome targets is underway, with more planned to commence at T20 in the near term. We view these programmes as having the potential to add significantly to the project’s value and await the results with interest.
 

A large number of copper occurrences have been discovered in the Kalahari Copper Belt near the geological contact between a package of shales/siltstones and the underlying sandstones. Although we anticipate the discovery of additional, possibly widespread, copper mineralisation in this environment, we believe the real prize would be the discovery of deposits that have been the beneficiary of the structural preparation that resulted in the development of wider-than-usual, high-grade mineralisation at deposits such as the JV’s T3 deposit and Cupric Canyon’s Zone 5 deposits. With a large number of well-defined targets to be tested this year, we are optimistic about the programme’s potential to deliver another discovery.

We reiterate our Buy rating and target price (TP) of 3.6p. The company’s current market cap is equivalent to approximately US$39m and our TP is based on a risked SotP value of US$49m. This comprises US$13m of cash and investments, an adjustment of US$15m for corporate overheads, US$10m for the company’s other interests and a risked value of US$41m for its 30% interest in the Kalahari Copper JV.

 

CARDINAL RESOURCES†††

CDV : AU : | A$0.50 | US$143m | Buy | TP : A$0.93

Takeaways from 121 Conference — Timetable Changes along with new Scope of Studies

Cardinal Resources’ presentation at the 121 Conference in London last week included a change to its timeline. Instead of planning to complete a pre-feasibility study on its Namdini Project in northern Ghana by the end of June 2018, the company now plans to produce an updated PEA by that time. The definitive feasibility study is not on the timeline, but management confirmed that this remains on track for 1Q19.

COMMENT: Although this could be viewed as a slippage in the timetable, we consider it a prudent move that could add value to the project. It came as a result of a decision to evaluate a larger development option than those considered in the PEA that was published in February 2018. That PEA assessed 4.5Mtpa, 7.5Mtpa and 9.5Mtpa development scenarios, which were supported over mine lives of 27, 19 and 14 years respectively. The long lives suggested that there was further potential to optimise the project’s scale of development. Also, as we noted in our initiation report in March, the larger the project, the better the returns. At a gold price of US$1,300/oz, the 4.5Mtpa case returned a post-tax IRR of 31% and the 9.5Mtpa case 44%.
 

The open-pittable mineable inventory in the PEA was 113Mt grading 1.12 g/t for 4.1Moz contained. This was based on the resource of September 2017 and 58% of the mineable inventory was in the Indicated category. The resource has subsequently been reviewed and we expect that all of the in-pit material will be upgraded to the Indicated category. An increase in the scale of the project could lead to a reduction in the operating and capital costs owing to economies of scale. This, in turn, could lead to a reduction in the cut-off grade, which could allow a re-optimised pit to include some of the mineralised extensions beneath the current pit to be included in the mineable inventory. Time will tell. We await the results of the updated PEA with optimism.

 

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