Predictive Discovery Ltd (ASX:PDI) has secured a BUY rating and price target of A$0.16 per share from Sprott Equity Research which initiated coverage of the explorer in a report titled ‘Initiation: leading the West African discovery pack.’
The company’s flagship NE Bankan open pittable gold asset in Guinea was only discovered last year, with the main deposit extending over 1.3 kilometres and diamond-drill highlights of 52 metres true thickness (TT) at 2.9 g/t and 82 metres (TT) at 1.8 g/t demonstrating the scale and grade.
Report analysts Brock Salier, Justin Chan and Brandon Gaspar said the company stood out from its peers due to the second satellite discovery at Bankan Creek.
They said: “Post ‘first satellite’ peers often struggle to find more; Predictive has made a second discrete discovery ~3 kilometres away at Bankan Creek after auger drilling returned 3 metres at 7 g/t 3 kilometres further west pointing to growth.”
Strong team backed by science
While born from science and geology, Sprott said Predictive had matured into a commercial company with mine-build bench strength after two recent hires.
“Non-executive chair Francis Harper is an ex-Rothchild mining banker, chair of Ivorian developer Tietto Minerals Ltd (ASX:TIE), and former chair of West African Resources Ltd (ASX:WAF) (OTCMKTS:WFRSF) (FRA:W25), now a 250,000-ounce producer.
“Andrew Pardey is the former CEO of Centamin PLC (LON:CEY) (TSE:CEE) (OTCMKTS:CELTF) (FRA:7CT) with earlier roles at AngloGold Ashanti Limited’s (NYSE:AU) (JSE:ANG) (OTCMKTS:AULGF) Siguri and Nordgold’s Lefa mines, both in Guinea.”
"A profitable pit"
The report noted that drill hole BNERD001 hit 50 metres at 1.3 g/t and another 42 metres at 2.3 g/t in the same hole, with 12 metres of other intervals for cumulative 97 metres at 1.6 g/t.
“Given the broad widths, we would expect most of these to convert to reserve.
“From there, we overlay a 25x25 metres, showing a resource of 954,000 ounces to 225 metres below surface, the limit of drilling.
“Ahead of any deeper drilling, a pro-rata extension, but constrained to a natural pit shell lifts this to 1.2 million ounces.”
The average composite drill width (true) is 75 metres for the holes shown below, implying ~1.2 g/t grade across the deposit, however, the core is much higher grade, potentially over 2 g/t.
The report said: “We show that a simplistic maximum strip to allow 50% gross margin at US$1,500/ounces stands at about 1.6:1 at 1.25 g/t, lifting quickly to 373 metres at 1.50 g/t.
“As such, we expect the core of the pit to pull together well and/or all ounces outlined below to fall into a profitable pit.”
Plan map of regional and Guinea (inset) holdings, and (B) Bankan project permits.
Bankan Creek potential
Sprott said: “We haven’t been as detailed on our review of Bankan Creek, but ‘several’ hundred thousand ounces could be reasonable, putting the overall project endowment on a runway to 2 million ounces.
“Of note, this excludes detailed exploration on essentially the entire rest of the project. Hence a 70% reserve conversion could well see ~1.5 million ounces, supporting a 150,000 ounces per annum operation.
“While it is very early days, the potential here is outstanding in our view.”
Guinea “hottest part of West Africa”
Since its inception, Predictive has taken advantage of cutting-edge academic understanding of West African prospectivity.
Bankan sits on 358 square kilometres and to date Predictive has completed auger over <15 square kilometres, leaving around 40 kilometres of strike untouched.
Throughout West Africa. the company holds 5,276 square kilometres, with Resolute Mining Limited (ASX:RSG) (LON:RSG) (FRA:RSM) JV’ing into the Ivory Coast licences for an attributable ~2,350 square kilometres.
The report notes that, as a science-driven quasi prospect generator, the discoveries to date were all found on the ‘smell of an oily rag’ with only $531,000 raised pre-discovery in 2Q19, and that partly from driller Capital Drilling.
Extensive regional upside
The regional upside is also considerable and the anaylsts believe the company will be drilling at Bankan NE and Bankan Creek for years.
“CEO Paul Roberts now has his ‘eye in’ on the ~ENE-WSW cross faults, and 3 kilometres west of Bankan Creek (itself ~3 kilometres west of Bankan NE) has hit 3 metres at 7.3 g/t in first pass aircore grids.
“This is still just the beginning in our view as ~30 kilometres of N-S strike remains to be tested.”
Valuation and catalysts
The analysts estimate a global 1.4 million ounces, from which they model a 1.1 million ounce mining inventory at 1.45 g/t.
“We model a 2 million tonnes per annum US$174 million CIL running 10% over nameplate for 100,000 ounces per annum at US$753/ounces given the low strip and thick oxides, driving a A$586 million asset NPV from build start.
“To this, we add A$19 million cash and cash from options A$18 million for resources outside inventory at US$50/ounces, and a nominal amount for exploration upside, initiating with a BUY rating and 0.3xNAV5%-1850 A$0.16/share PT.
“Key catalysts include the funded 25,000-metre drill campaign, which we expect to lead to a maiden JORC this year.
“Thereafter investors have exposure to value-add through engineering studies, and simultaneous blue-sky from exploration given the, dare we say, ‘ease’ at which new satellites are being discovered, with three core/diamond rigs and two auger rigs drilling now.”