Near term gold producer Havilah Resources (ASX:HAV) is the subject of a research report from State One Stockbroking. The current share price is $0.33.
The broker has a Speculative Buy rating on the company.
Transitioning to a producer by mid-2016
While Portia is small (355kt at 4.7g/t Au for 67koz), it offers HAV an attractive low-cost, and relatively low-risk, entry point into production. We calculate gold production (from simple gravity recovery) starting in July/August 2016, furnishing some A$28 million in free-cash for the group over a six-month period.
At the same time, management is also moving its flagship Kalkaroo Cu-Au Project (620kt Cu and 2Moz Au Resource) through permitting and feasibility milestones, with a view to securing financing and increasing its appeal to prospective project partners.
Certainly, 2016 is shaping up to be a watershed year for South Australia’s newest gold miner.
Valuation: A$0.44ps with upside potential
Our NPV-derived target price of A$0.44ps (fully-diluted) is underpinned by an NPV valuation of A$28 million (A$0.13ps) for the Portia Gold Mine and A$47m (A$0.22ps) for the Kalkaroo Cu-Au Project. However, we see scope for this valuation to increase significantly.
There is potential to access additional gold below the current optimised open-pit floor at the Portia Gold Mine.
Mining of oxidised ore (3.7Mt) at the adjacent North Portia could extend the simple, low-cost gravity recovery operations at Portia beyond late-2016.
Most importantly, progressively de-risking the Kalkaroo Project in 2016 by completing feasibility studies to BFS status and/or securing financing, could see our 20% risk-weighted project value approach our un-risked project value of A$233m (A$1.10ps).
Our forecast long-term (post FY16E) Australian copper and gold prices are similar to the current spot prices of A$6,525/t and A$1,507/oz respectively. In a 10% higher (A$) commodity price environment, our target price increases by 35% to A$0.59ps.
Corporate activity / valuation per Resource ounce
Our A$94m SOTP valuation for HAV equates to A$14 per Au Eq.
However, the A$46/oz average price (A$63-A$30/oz range) paid in recent corporate transactions indicates the potential upside if HAV becomes an acquisition target - either at a corporate or asset level.
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