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Bass Metals' shares spike on plant commissioning as it approaches near-term production

Management expects stage II will mark the expansion to production of 20,000 tonnes per annum.
Picture of graphite
The broker forecasts that the company will generate operating cash flow of $8.3 million in fiscal 2019

Bass Metals Limited (ASX:BSM) has recommissioned the refurbished processing plant at its Graphmada large flake graphite mine in Madagascar.

This follows wet commissioning of the plant, effectively completing the final phase of stage I.

The news appeared to be well received with the company’s shares up 13% this morning.

Further testing is occurring to assist in synchronising and optimising the graphite recovery process prior to recommencement of graphite production in the coming days.

Debt free with cash flow in sight

Completion of stage I provides cash flow visibility and importantly the company is debt free.

Bass has an offtake agreement in place, producing premium large flake graphite concentrates at a time of rising prices, providing revenue predictability.

The company is now established as one of only two ASX listed producers and one of only four publicly listed graphite producers globally.

Graphite market remains supply constrained

Graphmada is moving rapidly into the commercial ramp-up phase to supply international customers with high value, premium large flake concentrates, with the aim of delivering positive cash flow.

Baillieu Holst analyst Warren Edney recently initiated coverage on Bass.

He forecasts that the company will generate operating cash flow of $8.3 million in fiscal 2019, increasing to $19.7 million in 2020.

Management expects stage II will mark the expansion to annual production of 20,000 tonnes.

Based on this rate, Edney forecasts a net profit of $14.8 million in fiscal 2020.

Trading at steep discount to price target

Edney has a buy recommendation on the stock with a price target of 7 cents.

This implies share price upside of about 100% relative to this morning’s opening price of 3.4 cents, up 13% on Tuesday’s close.

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