Discovery Metals (ASX: DML) combines a portfolio of mineral assets in Africa and joint ventures in Australia. Discovery Metals is focused on developing the Boseto Copper Project in north west Botswana and to create shareholder wealth through discovery and development of economic mineral deposits.
The Company’s major asset and current focus is its Boseto Copper Project in north west Botswana. The company also controls the Dikoloti Nickel Project in north east Botswana. There are two smaller Australian projects which are joint ventured with the JV partners potentially earning into 51 percent equity.
Botswana copper-silver district holds major promise for Discovery Metals
Investors are said to be upbeat about Australian junior mining company, Discovery Metals (ASX/BSE: DML) (AIM: DME). The company has operations in Southern Africa's diamond rich country, Botswana. Investors believe that its ongoing exploration in Botswana looks promising, and is working on what could be a major copper-silver district.
Discovery Metals primary asset is Botswana's Boseto Copper Project with a total resource of 60.4 Mt grading at 1.4% copper and 19.5g/t silver. This is in the same area which is also being explored by Canada's Hana Mining which has the similarly-sized Ghanzi copper-silver project close by.
Discovery also has a nickel project, south east of Boseto called Dikoloti with a current resource of 4.1Mt inferred at 0.7% nickel, 0.5% Cu and 1.2 g/t PGE.
Australia based RBS Morgans said in a statement that Discovery Metals is a "strong fundamental story, going unrecognised in a buoyant copper price environment".
Moving from Australia to the UK, London based Westhouse Securities said in a mining research report that, "Discovery has plenty of exploration upside with only 5% of the 1,300km of its Kalahari Copper belt licence having been explored".
Discovery Metals is yet to complete the bankable feasibility study (BFS) for its Boseto copper project in March 2010.
Discovery is well funded to complete the BFS by March 2010. Westhouse noted that the company has raised A$13.1m through a placement, which was completed in October 2009.
This was followed by A$2.7m through a share purchase plan with approximately 20% of the company's shareholders taking the offer, said Westhouse. There is also a potential A$9 million available from the exercise of options which are priced at A$0.30 due to expire in May 2010. This provides ample cash for Discovery Metals to complete the BFS.
Production is expected in 2011 at 2Mt per year for 25,600 t copper and 690,000 oz silver per year with a probability of high grade initial production to increase revenues in early years.
There is also a possibility of Discovery Metals pursuing underground mining, which will increase production and the mine's life beyond the currently planned 10 years. Westhouse said that, "Due to the large high grade zones and the continuity of the ore body, Discovery believes that it will be possible to switch to underground mining below the currently planned open pits".
Discovery Metals is also, according to Westhouse, highly geared to the copper price and that a 25% increase in this gives 76% increase in EPS.
Last but not least, Discovery Metals has only explored 5% of the 1,300km of copper mineralisation known within its 14 tenement areas.
However investors have to watch out for certain issues that could aggravate Discovery's rosy future. For one the company has not yet started production. All figures and results are a projection of what might be expected in the future.
As an example, capital expenditures and operating costs on the proposed company's financials are not filly estimated until the BFS is complete. In addition grid power is not yet guaranteed which could increase operating costs, said Westhouse Securities.
In addition to the Boseto project, Discovery is also pursuing the Dikoloti Nickel project near Selebi Phikwe in Botswana. The project comprises four prospecting licences covering 612 km2. Westhouse said that the project surrounds the three nickel deposits of BCL ltd and is within 45km of BCL's concentrating and smelter plant, which is the largest nickel processing facility in Africa".
Dikoloti has an inferred resource of 4.1Mt at 0.7% Ni, 0.5% Cu and 1.5 g/t PGE's at a cut off of 0.5% Ni. In its research report, Westhouse said that in November 2006, Snowden consultants re-evaluated the project economics which showed that the project was economic at nickel prices above US$ 10,000/t which is well below the current nickel price of over $18,000/tonne.
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