---ADDS COMMENTS FROM CEO AND HOUSE BROKER---
An independent report has raised the technical valuation of Sula Iron & Gold's (LON:SULA) Ferensola project by more than 50% to US$56mln.
SRK Exploration Services combined several valuation methods to arrive at a "technical value" for the Sierra Leone property; SRK's valuation is what it considers to be a fair and reasonable value for the property, based upon the geological information available and SRK's view on the status of the assets.
Work done over the past year by Sula, a company valued at less than £4mln by the stock market, has increased the technical value to US$56mln and the maximum potential value of the property to US$210mln, in SRK's view.
The previous valuation figure, which SRK had derived prior to the exploration undertaken during the past twelve months, was US$36.7mln, with a maximum potential value of US$200mln.
The report follows the release of a maiden mineral resource estimate by SRK in December 2014 that was better than had been expected.
The total JORC-compliant resource was 514mln tonnes at 31.8% iron with an easily accessible oxide component of 55.5mln tonnes at 45.39% iron. Sula set itself the task of discovering 500mln tonnes.
What’s more, SRK agreed there is a deeper lying exploration target that could add 100-250mln tonnes to the overall figure.
Nick Warrell, chief executive officer of Sula, was understandably delighted with the uplift in the perceived value of the project.
"We have demonstrably unlocked and enhanced shareholder value during 2014 and are determined to replicate that
during 2015," he said.
Speaking to Proactive Investors, Nick Warrell said the 53% uplift was better than the company had been expecting.
Warrell said he was not surprised but he was disappointed that the share price had not reacted more favourably to the valuation upgrade.
"This is a demonstrable statement by SRK of the inherent value of Sula's assets," Warrell said, adding that a valuation of US$56mln on Ferensola equates to 10p per Sula share.
Shares in Sula Iron currently trade at around 1.11p but house broker VSA Capital believes the shares should be up around the 4p level.
"We find this new estimate of the technical value of the project encouraging, and supportive of management’s use of funds in exploration on the Ferensola Licence," said VSA Capital, as it reiterated its 'buy' recommendation and 4p price target.
Warrell said he considered VSA's price target to be conservative.
"The next stage operationally, is to secure a joint venture partnership, which will eventually lead to a trade sale," Warrell said.
Either of those events should get the share price moving if the SRK revaluation does not do the trick, Warrell asserted.
"Mineral exploration is not an overnight success story," he advised.
"We're not a one trick pony. Although we've parked the iron development, we were pleased to find coltan at Ferensola and we've known about the gold since day one, so we will move on with the gold and coltan, and wait for the price of iron to come back."