GBM Resources’ (ASX: GBZ) progress at the Milo IOCG and Rare Earth Elements and Yttrium Project in north west Queensland has earned the company a Buy recommendation from Perth-based broker RM Research.
RM Research has placed a six month price target on GBM of A$0.35, an increase of more than 300% on the company’s current price.
The following is an exerpt from the report.
Maiden Resource due June Quarter at Milo...Phosphate Spin out...Mt Morgans exploration kicks into gear
This report addresses why investors should try to understand the inherent value and potential GBM Resources Limited (“GBM” or “the Company”) represents.
GBM’s 100% owned Milo Prospect near Cloncurry in far north Queensland is fast becoming a company making project as the Company moves towards completing a Scoping Study in mid CY 2013 and a Preliminary Feasibility Study (PFS) in mid 2013. As exploration progresses, it is clear that the project is more than a multi commodity IOCG (iron-oxide/copper/gold) deposit. Exploration has delineated sulphide mineralisation containing copper (Cu), gold (Au), molybdenum (Mo) and uranium (U) that has been overprinted and enveloped by widespread value adding rare earth elements (REE) and yttrium (Y).
Additional shareholder value will soon become apparent once GBM vends the phosphate rights held by its 100% owned Bungalien Phosphate Pty Ltd to joint venture partner Swift Resources Ltd (“Swift”) (GBM ASX announcement, 16 February 2012). GBM will receive A$3.3 million for 30% of its phosphate rights in the form of equity in Swift and will undertake an in-specie distribution of the shares to shareholders.
Based on an EV/Cu tonne of approximately A$450 for ASX listed copper explorers/developers, we anticipate that Cu-REE or IOCG-REE companies should trade at perhaps a 70-80% discount to reflect the lower recoveries (perhaps 30-40%), higher capital costs (+20-30%) and more limited market for concentrates (ie dominated by Chinese smelters). Based on this methodology would translate to a six month share price target of say A$0.35 per Share for GBZ whose Milo Project is essentially likely to comprise around 30-40% Cu and 60-70% REE by contained value. Speculative Buy.
- Milo IOCG/REE: A Scoping Study and maiden JORC complaint resource statement due by mid CY 2012 is an upcoming highlight. The initial conceptual exploration target of between 30-80 million tonnes of poly-metallic mineralization and REEs grading 0.8%-1.2% Cu-equivalent has been well and truly exceeded as the maiden Inferred JORC resource for the REE mineralization is already 103 million tonnes @ 760ppm for around 82,500 tonnes of REEYO
- The Milo Project resource has over 1 kilometre of continuous Cu & REE mineralization and is still open-ended to the north and south and at depth. Planned drilling will be a highlight over the next quarter.
- Swift will acquire 100% of the Bungalien Phosphate Project for the phosphate rights and intends to list on the ASX. GBM shareholders will receive free shares in Swift.
- GBM acquired a new tenement from Newcrest Mining (ASX: NCM) that surrounds Ivanhoe Australia’s (ASX: IVA) Trekelano Cu-Au mine which extends over 1.2 kilometres southwards to the Tick Hill gold mine. The potential will be determined once all previous data is assimilated, assessed and targets are generated.
- The Bungalien IOCG JV Project’s maiden drilling program at the Bronzewing Bore prospect intersected significant widths of anomalous IOCG style copper mineralization.
- At the Mt Morgan Project, a large porphyry Cu/Au system was discovered at the Sandy Creek Prospect. This will now be a priority drill target for 2012.