FROM THE BROKING DESK
A quick reminder that we’re marketing KEFI Minerals† (AIM:KEFI) in London this week. KEFI is an emerging gold developer looking to commence construction of its flagship 115,000oz pa Tulu Kapi Project in Ethiopia by early 2017. This project has strong government support. Jim Taylor has just put out an initiation piece on the company: KEFI Minerals — Emerging Gold in Ethiopia, 12 September 2016. We’re taking round Harry Anagnostaras-Adams (Chairman) and Wayne Nicoletto (COO). Let us know if you’d like a meeting.
ASX:PEN | A$0.60 | US$77m | Buy | TP : A$0.95
Lance Project Update
Peninsula Energy has announced that production ramp-up at the Lance Project in Wyoming is continuing on schedule. Of the seven planned header houses required for Stage 1 steady-state production, four are operational and the remaining three are planned to enter production in October, November and December, subject to timely approval of production plans by the authorities.
The company did not give updated production forecasts, although, in late July it maintained its CY16 guidance at 200,000-300,000lb U3O8, and reiterated its expectation of reaching Phase 1 nameplate capacity of 600,000-700,000lb in 1H17.
COMMENT: The update gives comfort that the production ramp-up at Lance is progressing in line with guidance. We maintain our BUY rating and our A$0.95 target price, which we derived using a sum-of-the-parts NAV assuming a long-term uranium price of US$55/lb.
Potential three-stage ramp-up to 2.3Mlb pa U3O8 at Lance — Stage 2 is planned to begin increasing production capacity towards 1.2Mlb pa from 2018 for a capital commitment of US$35m. Stage 2 will also bring the back-end of the processing plant (elution, precipitation, drying and packaging) in-house, helping to reduce operating costs. Subject to capital constraints, Stage 3 could commence as early as 2020, which would increase production capacity to 2.3Mlb pa for US$78m capex. Total JORC resources at these three project areas total 53.7Mlb, which the company states supports a mine life of at least 20 years.
Declining LoM all-in costs to US$29/lb by 2020 — The company guides that all-in costs for Stages 1, 2 & 3 will be US$41/lb, US$31-32/lb and US$29/lb respectively, while the current long-term uranium benchmark price stands at US$44/lb U3O8.
In April the company announced that it had secured a US$15m convertible loan facility from major shareholders RCF and Pala — This matures in April 2017 and bears interest at 8%. The facility is convertible at the lower of A$0.80/share or the price of any equity issued prior to the repayment. The funds are planned to be used for Stage 1 working capital requirements, Stage 2 engineering design, drilling and feasibility studies at the Karoo Project in South Africa and for general working capital purposes.
Awaiting update regarding US$25m streaming funding for Stage 2 expansion — In April the company announced that it had signed a term sheet for a US$25m Revenue Streaming Facility (RSF), for which due diligence was ongoing. The company planned to use the funds for engineering and construction of the Stage 2 Central Processing Plant (CPP) and the development of a further seven header houses and wellfield units. The company also intends to complete the NYSE MKT listing process during 2H16.
WHITE ROCK MINERALS
ASX:WRM | A¢1.9 | US$6.0m
VMS Targets Identified within Expanded Red Mountain Tenement
White Rock Minerals has announced that an assessment completed by a recognised global VMS expert has found highly prospective results in the Dry Creek West, ReRun, West Tundra Flats, Smog and Glacier target areas at its Red Mountain Project in Alaska. These findings are supported by electromagnetic surveys completed on the area.
White Rock is well positioned to advance exploration on the 143km2 Red Mountain Project. Together, the two studies have provided a pipeline of targets for follow-up field assessment focusing on the highest conductivity anomalies. Surface geochemical sampling and ground geophysics will be used to define drill targets for the coming field season.
CEO and MD Matt Gill said: “The two studies underpin our belief that the Red Mountain Project could be home to a new camp of high-grade zinc-silver-gold VMS deposits. Of the 30 conductors associated with geochemical anomalism, White Rock will aim to prioritise five of the best conductors for a campaign of follow-up field work that will culminate in drilling to test the best of these targets in addition to confirming the existing deposits at Dry Creek and West Tundra Flats.”
Red Mountain is a high-quality, advanced exploration project centred on an established VMS district. It is located in central Alaska, 100km south of Fairbanks, in the Bonnifield Mining District. The tenement package comprises 224 mining claims, including the Dry Creek and West Tundra Flats VMS deposits.
The Red Mountain Project includes the Dry Creek and West Tundra Flats deposits, with historical resources of 5.7Mt at 5% Zn, 2% Pb and 120 g/t Ag — Historical estimates are sourced from prior owner Grayd Resource Corp, based on drilling completed between 1996 and 1998. Drilling highlights to date include grades of 26% Zn and 12% Pb over 5.5m at Dry Creek, and 7% Zn and 4% Pb over 3m at West Tundra Flats. Preliminary metallurgical test-work has indicated recoveries of over 90% Zn, >80% Au and >70% Pb & Ag. Statistical analysis of VMS clustering patterns indicates that, further to Dry Creek and West Tundra Flats, the Red Mountain camp has the potential to host a sizeable 10-15Mt deposit with similar Zn, Ag and Pb grades.
Updated scoping study for Mt Carrington Au-Ag project gives an NPV10 of US$44m with an IRR of over 100% — The company also owns 100% of the Mount Carrington gold/silver project in New South Wales, for which the results of an updated scoping study were announced at the end of March 2016. Capex for the seven-year LoM project is low at A$24m, with a capital payback of <1 year. A total of 111,000oz of gold and 6.7Moz of silver were planned to be produced over a mine life of seven years. Project C1 cash costs were estimated to be A$754/oz (>US$543/oz). At a gold price of A$1,600/oz and a silver price of A$22/oz the project had a pre-tax NPV10 of A$61m and an IRR of 103%. The company believes that a feasibility study and EIS can be completed for the project within a 12-month timeframe.