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Blackham Resources' worth more than double current valuation, broker

Last updated: 17:00 02 Dec 2015 EST, First published: 16:00 02 Dec 2015 EST

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Blackham Resources (ASX:BLK) has received a Buy recommendation and Target Price of $0.50 from BW Equities.

The target is around double the last traded price. The following is an extract from the report.


Matilda Gold Project, on track for mid-2016 production


Investment Summary

Blackham Resources has completed a Pre-Feasibility Study on the Matilda Gold Project and is another step closer to recommencing production at the Wiluna Processing Facility.

Over the next three months Blackham will incorporate the recent drilling into an upgraded Reserve and Resource, complete the DFS and commit to the Wiluna Processing Facility refurbishment.

Underpinned by a large tenement position and a growing gold resource Blackham will emerge in mid 2016 as a producer of over 100,000 ozs of gold per year with the potential to grow both mine life and production.


Investment Highlights

- BW unrisked project valuation based on mine life of 6 years 9 months V BLK 4 years 9 months is A$226 million. After corporate costs, interest and tax our unrisked valuation is $156 million. Payback on refurbishment capital is 14 months.

- Recent drilling is not yet in mine plan. Ongoing drilling will expand Resources and Reserves increasing mine life towards ten years with the real possibility of increasing gold output in the medium term from a potentially large resource in the Williamson area.

- On track for gold production in mid 2016 to re-establish >100,000ozpa gold production.

- Tenements of 780km2 surrounding the Wiluna Processing Facility with a total gold resource of 4.7million oz.


Investment Recommendation

BUY Rating on an increased price target of $0.50.

Our price target reflects an 85% premium to the recently traded price and is based on a risked NPV derived from our DCF model of the Matilda Gold Project assuming a seven year mine life.

Risks associated with the Matilda Gold Project are rapidly reducing as PFS and DFS work together with ongoing drilling progresses.

Redevelopment is fully funded and the target price is based on the completion of the DFS and Blackham Board approval to formally commence engineering work for recommencement of production.

This is expected before March 2016.

The Pre Feasibility Study demonstrates that re-commencement of gold production with a low capital cost refurbishment of the Wiluna Processing Facility can be achieved by Mid-2016.

Resource drilling is ongoing.

Recently announced results not in the PFS can increase the mine life by at least two years and allow a rescheduling of higher grade ore to even out planned production to over 100,000 per year.

BW expects that by the time production re-starts next year the mine life will be at close to ten years and growing.

 

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