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Bass Metals attributed buy recommendation with aggressive share price target

Output is expected to increase to 20,000 tonnes per annum while costs are lowered.
Picture of graphite
The Graphmada graphite project should be back in production in 2018, delivering a profit in 2019.

Bass Metals Limited (ASX:BSM) has received support from analysts at Baillieu Holst with the broker placing a buy recommendation on the stock and a price target of 7 cents.

This represents a significant premium to Monday's closing price of 2.2 cents.

The broker’s positive take on Bass is influenced by the imminent return to production of its Graphmada graphite mine in Madagascar.

A transformational year

Stage I recommissioning is well advanced following the commissioning of drying and packaging operations.

It should be back in full production in early 2018 and Baillieu Holst expects that the company will produce a high-quality concentrate that will attract an increase in pricing.

This should lead the way to lifting output to 20,000 tonnes per annum while also lowering operating costs.

Broker highlights customer relationships

Baillieu Holst noted that Bass has a sound track record of dealing with customers, and an improvement in reliability and quality should be well received.

Warren Edney, research analyst, said: “The market capitalisation might be small, but BSM would be one of the top picks among the graphite plays.

"We believe it will re-rate over the next 12 months as the sales track record is rebuilt and exploration and development options become measurable.”

Fundamentals appear attractive

Bass's market capitalisation is relatively small at about $50 million, but perhaps this makes the company more appealing given there are few microcap miners in production.

Baillieu Holst is forecasting a net profit of $6 million in fiscal 2019, representing earnings per share of 0.2 cents.

This is forecast to more than double in 2020 with earnings implying a forward PE multiple of about 4.

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