Baobab Resources (LON:BAO) shares advanced 10 percent in early deals, as it unveiled more encouraging results from the South Zone of the Tete project in Mozambique.
It began the 2011 phase of exploration drilling earlier this month and two reverse circulation (RC) drill rigs are working on the South Zone, in Blocks 1 and 7. In this morning’s update Baobab gave the results from a three hole drilling cross-section in Block 1 - the southernmost portion of the South Zone.
In Block 1 Baobab has delineated a broad 140 metre wide body of heavily mineralised iron ore (magnetite).
The three holes hit multiple intercepts with lengths ranging between 15 to 48 metres with concentrate grades ranging from 60 to 64.7 percent iron and 0.59 to 0.74 percent vanadium (V2O5). Mass recoveries ranged from 32 to 91 metres.
"Block 1 is demonstrating excellent continuity between completed drill sections with current work programmes pushing the model out to the north,” managing director Ben James said.
James adds: “all areas drilled to date have delineated substantially wider zones of mineralisation than anticipated. Following earlier positive results, Baobab's exploration management team has designed an expansion drilling programme to test continuations of the ore zones," James said.
"The company recommenced drilling in early February and intends to have 3 RC rigs set to be operational by the end of the month.
Baobab expects to release the next batch of results from Block 1 within the next two weeks. It also said that the current drilling continues to delineate substantial mineralisation to the north.
The shares started the day very strongly gaining over 10 percent to reach 24.5 pence in early trades. The early enthusiasm has eased somewhat, but by 9:50 am the stock was up about 6.3 percent, trading at 23.6 pence a share.
In a note to clients Andrew McGeary, equity analyst at Northland Securities, said: “We take heart from the continuing outperformance of widths which are improving confidence in the universal resource target.
“Baobab may be able to make significant steps outlining a proportion of its 400 - 700 million tonnes resource target by the middle of this year which would be a significant valuation milestone.”
He adds: “We find Baobab to be trading at an undemanding rating (considering) the very likely resource upside. We continue to see Baobab as a significant potential value opportunity, somewhat under the radar, in the sector.”
Broker Fairfax featured Baobab in its Daily Market Report, saying "The company is progressing rapidly with its drilling programme and the Tete project is looking increasingly attractive."
"Activities by other miners in the region are de-risking the project potential as infrastructure will be developed to support the various assets other miners plan to develop," it added.