Baobab Resources (LON:BAO) shares advanced around 13 percent today after it identified a 200 - 250 million tonne exploration target at the Monte Maunde project..
Monte Maunde is a joint venture with North River Resources (LON:NRRP), whose shares gained around 4 percent. In November Baobab agreed to earn-into the project area, which is near Baobab’s flagship Tete project, in the Tete province of Mozambique.
Now independent consultant Coffey Mining has assesed an area of Monte Maunde that is prospective for iron and phosphate.
Coffey concluded that there could be between 200 to 250 million tonnes of ore to depths of 40 metres. But the consultants also said that it is reasonable to assume that deeper drilling will encounter further mineralisation below this depth.
After a strong start the day Baobab shares have maintained most of the gains throughout the session. At 15:00 the shares were up 4.375 pence, 12.6 percent, and they were trading at 39.125 pence each.
While the shares were among the top risers on the London’s AIM market the news was also welcomed by the City’s analysts, with Northland Capital’s Andrew McGeary saying the study confirms Monte Maunde is a significant asset.
Adding the target to the Tete project’s substantial 400 - 700 million tonne exploration target, McGeary highlighted that Baobab has about 1 billion tonnes in gross global resource potential.
“Baobab continues to drive value potential,” McGeary said.
He adds: “Although we point out that these would form two unique projects, this nevertheless bulks up Baobab’s presence ahead of the need to attract capital to develop its asset base.”
“It seems likely the Monte Maunde estimate could turn out to be conservative given the shallow basis of the study at only 40 metres.” McGeary said that he continues to see significant value potential in spite of a strong run in Baobab’s shares.
Meanwhile Fairfax Securities analyst John Meyer said: “Baobab is moving forward with the Muande project and appears to be making good progress.”
Looking a North River specifically Ambrian Capitals’ Duncan Hughes said it is a positive outcome that is in-line with the company’s plan to fast track exploration in Mozambique. He also stressed that North River is ‘free-carried’ to pre-feasibility.
In a separate statement North River’s managing director David Steinepreis said the newly defined exploration target demonstrates the Monte Maude’s significant potential. He highlights that a Baobab-funded drill programme is expected to start in the second quarter of 2011, to test Monte Maunde’s deeper geology.
Meanwhile Baobab's managing director Ben James said: "The exploration target results further endorse the project's potential to host substantial magnetite and phosphate resources, particularly considering the shallow depth of the modelling.
"Previous metallurgical test work indicates that the magnetite and phosphate may be easily liberated; allowing us to consider exploiting lower grade halos encompassing higher grade zones.”
He also highlighted that there is higher grading eluvial mineralisation, a 3 - 5 million tonne target, which may provide a source of direct shipping ore. James said that Baobab plans to fast-track the assessment of this part of the project.
“There are also real opportunities for outlining additional eluvial deposits within the southwest extension area," James added.
Overall the exploration target comprises both high and low grade material. Baobab said that a magnetite concentrate of 67 percent iron could be made through a simple and cost-effective process and it could also produce a concentrate with 36 percent phosphate (P2O5).