viewSt George Mining Ltd

St George Mining retains speculative buy recommendation from Bell Potter

The stockbroker sees 2019 as an important year for St George as it increases its activities with a strong focus on moving towards potential nickel development.

Drilling in 2018 has increased the high value nickel-copper-cobalt mineralisation

St George Mining Ltd’s (ASX:SGQ) diamond drilling during 2018 has increased the footprint of the shallow, high-value nickel-copper-cobalt mineralisation at its Mt Alexander Project in Western Australia, with definition drilling being planned for 2019.

Bell Potter has retained its speculative buy recommendation as it sees 2019 as an important year for St George as the company increases its activities with a strong focus on moving towards potential nickel development of the Cathedrals Belt.

The following is an extract from Bell Potter’s research report on St George:

Expanded footprint of high value nickel+ mineralisation

SGQ’s considerable diamond drilling over 2018 of electromagnetic (EM) targets in the 75% owned Cathedrals Belt of the company’s Mt Alexander Project has expanded the footprint of the high-grade nickel-copper-cobalt-PGM mineralisation.

While there is much still to be resolved about the geology of the nickel occurrences at the Investigators, Cathedrals and Stricklands Prospects, there is growing evidence now that they do have meaningful connectivity and constitute an economically attractive, high-value opportunity that warrants more detailed investigation.

Increased exploration activity with new management

The company’s recent appointment of Dave O’Neill as Exploration Manager signals SGQ’s intentions to escalate exploration activity at Mt Alexander including definition drilling along the Cathedrals Belt and to initiate regional exploration on underexplored areas, including regionally in the Mt Alexander Greenstone Belt.

Dave O’Neill is an acknowledged nickel sulphide expert, having had over 20 years of experience in the mining industry, which included gaining considerable expertise in the nickel sulphide sector through senior roles with WMC Resources, BHP and Western Areas.

Nickel price stabilising around US$5.30/pound

Nickel prices are stabilising at around US$5.30/pound after having retraced by 26% from the recent peak of US$7.14/pound in June 2018 despite the continued production deficit that has significantly reduced LME nickel stockpiles to around 200,000 tonnes, down from 368,000 tonnes a year ago.

LME nickel price (US$) from 2017 to 2019

The ongoing production deficit of over 110,000 tonnes per annum is likely to stay around that level for the next few years even with further increases in lateritic nickel output in the form of Asian nickel pig iron and the planned increase in high purity material from several major sulphide producers.

Nickel demand is forecast to increase strongly over the next few years from its role as a key ingredient in new generation batteries, particularly for the forecast strong rise in electric vehicle (EV) production.

Investment thesis – Speculative Buy, valuation $0.26/share (previous $0.30)

Diamond drilling over 2018 has increased the footprint of the shallow, high-value nickel-copper-cobalt-PGM mineralisation in SGQ’s Mt Alexander Project, with definition drilling being planned for 2019.

SGQ also intends to initiate regional exploration of underexplored parts of the Mt Alexander Greenstone Belt.

We have reduced our heavily risked and equity diluted valuation of the company by 13% to $0.26 per share after incorporating the 2018 drilling results and SGQ’s current share capital, share price and cash position.

Speculative Buy recommendation retained.

Disclosure of interest: Bell Potter Securities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document.

Quick facts: St George Mining Ltd

Price: 0.115 AUD

Market: ASX
Market Cap: $57.83 m

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