Proactive Investors - Run By Investors For Investors

Walkabout Resources worth three times current valuation according to Perth broker

Patersons has a target price of $0.25 on Walkabout Resources.
Walkabout Resources worth three times current valuation according to Perth broker
Walkabout is focused on graphite

Walkabout Resources Ltd (ASX:WKT) has received a Speculative Buy from Patersons.

The Perth broker has applied a target price of $0.25, three times higher than yesterdays close of $0.084. The following is an extract from the report.

Jumbo graphite development opportunity:

Walkabout Resources Limited (WKT) is an Australian graphite developer in Tanzania.

The Company recently completed a Definitive Feasibility Study (DFS) on the Lindi Jumbo Graphite Project (“Lindi”) (70% owned with an option to acquire 100%).

The DFS estimated production of 40ktpa of graphite in concentrate and was updated in August 2017.

The update includes a new capital estimate (US$30m), updated schedules, metallurgical test work and the potential impact of legislative changes in Tanzania to the Mining Act comprising of a 16% free carried interest by the Government.

WKT has announced that has met with the Tanzanian Government, we see this as a move in the right direction and potential way forward.

The Lindi Project has a JORC Ore Reserve of 5.0Mt at 16.13% total graphitic carbon (TGC, April 2017).

The Company has developed a proprietary processing technique which yields exceptionally high ratios of Large (+180μm), Jumbo (+300μm) and Super Jumbo (+500μm) flakes into concentrate.

WKT has further exploration ground prospective for graphite in Tanzania and, also explores for lithium in Namibia and coal in Botswana.

Importantly, WKT has in principle Chinese part funding and both Chinese and European off-take agreements for Lindi.

We endorse WKT’s business plan as the Company aims to develop the Lindi Project under a conservative approach by engaging the right partners to minimise project risk.

We initiate coverage of WKT with a Speculative Buy recommendation and a price target of $0.25/sh.

Considerable upside for expansion at Lindi:

The exploration ground at Lindi remains open in all directions.

Given the high grade of the project (16.13%).

We would consider a cut-off grade of 7.5% TGC as Resources grade for some other graphite companies.

Tanzanian situation remains risky, however showing signs of improvement:

The announcement by Barrick Gold (ABX-US), could be taken as an inflection point.

Its subsidiary Acacia Mining (ACA-LN), would pay $300m and split the ‘economic benefits’ from operations with Tanzania under a deal proposed to resolve the months-long dispute.

Valuation:

We have valued the Lindi project at $85m under conservative assumptions, we included 50% of our Lindi’s valuation, 12% discount rate to account for country risk and uncertainties and 50/50 debt to equity.

Further upside remains if project equity reaches 100% ($0.37/sh) and a 70/30 debt to equity would increase the valuation to $0.54/sh.

We also have included the potential 16% free carried equity by the Tanzanian Government.

View full WKT profile View Profile

Walkabout Resources Ltd Timeline

Related Articles

1539165351_Tertiary---exploration-in-Sweden.jpg
October 10 2018
Tertiary Minerals has a unique portfolio of fluorspar assets in Europe and the US
project area
September 04 2018
Significant scope for quick expansion both along strike and at depth with ongoing drilling throughout the remainder of 2018.
Alaska map
October 03 2018
The project includes the “smoking gun” deposit Zackly which contains an inferred resource of 41,200 tonnes of copper, 213,000 ounces of gold and 1.5 million ounces of silver, with mineralisation continuing 100 metres below the bounty.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use