The broker said the IPO of QMines “appears well-timed”, as the copper price is currently trading at US$9,463 per tonne.
QMines shares listed on the ASX on May 6, raising $11.55 million at $0.30 per share to fund exploration at its flagship 100%-owned Mount Chalmers copper project in Queensland.
The price target is based on an EV/resource multiple benchmarked against a range of copper exploration peers.
It is also based on the assumption that QMines successfully increases the resource to 120,000 tonnes of contained copper and a A$560 per tonne multiple was used, setting a 10% discount to the sector average.
There are very few ways for investors on the ASX to gain exposure to copper outside of the major diversified miners and larger companies such OZ Minerals Ltd and Sandfire Resources NL (ASX:SFR), the broker noted.
QMines is expected to regularly release drilling results over the coming months and release an updated Mount Chalmers resource in late 2021.
Once the resource has increased to a reasonable size of between 150,000 and 200,000 tonnes, the broker expects QMines to move to scoping and pre-feasibility studies in late 2022 and into 2023.
The Mount Chalmers project, about 17 kilometres northeast of Rockhampton in Queensland is a historic copper/gold mine that operated sporadically between 1898 and 1982.
Historical production totalled 1.24 million tonnes at 2.0% copper, 3.6 g/t gold and 19 g/t silver.
The mine had both underground and open pit operations, with 810,000 tonnes produced from open pit and 430,000 tonnes from underground operations.
Mount Chalmers currently has an inferred resource of 3.9 million tonnes at 1.15% copper, 0.81 g/t gold and 8.4 g/t silver for 71,000 tonnes of contained copper equivalent.
QMines aims to increase the resource to around 200,000 tonnes of copper equivalent over the next two years through a 30,000 metres drilling program.
Mt Chalmers is a Volcanic Hosted Massive Sulphide (VHMS) deposit, which are typically characterised by multiple deposits within a cluster.
QMines technical team believes there is strong potential of finding further VHMS mineralisation around the existing mine site, the broker added.
The company’s exploration program has three main components:
- Increasing the size of the existing Mount Chalmers main resource;
- Drilling near-mine exploration targets; and
- Discovering additional VHMS deposits in the region.
QMines is exploring for additional mineralisation near the existing Mount Chalmers open pit, particularly along strike and down-dip of the existing resource.
The company has advanced exploration targets at Woods Shaft, Botos and Mt Warminster.
It has also reworked and digitised historical soil sampling in the region and has identified four strong exploration leads at Striker, and at three locations to the west of Mount Chalmers (T1, T2 and T3).
The company recently completed an 11 hole 1,575 metres diamond drilling program on the main resource with excellent results including:
- 10.8 metres at 2.08% copper, 2.97 g/t gold and 55 g/t silver from 54.2 metres;
- 10.6 metres at 2.06% copper, 0.43 g/t gold and 3 g/t silver from 133.8 metres;
- 38.1 metres at 1.55% copper, 1.05 g/t gold and 3 g/t silver from 132.6 metres;
- 9.5 metres at 1.91% copper, 1.02 g/t gold and 5 g/t silver; within 40.3 metres at 0.81% copper, 0.41 g/t gold and 2 g/t silver from 48.3 metres; and
- 6.0 metres at 3.55% copper, 1.03 g/t gold and 5 g/t silver from 141.8 metres to EOH
QMines also holds a 100% interest in the Silverwood, Warroo and Herries Range projects southwest of Brisbane in Queensland.
These projects are at an earlier stage than Mount Chalmers.
The total exploration budget over the next two years is around A$1 million across the three projects and is focused on geological mapping, soil sampling and Auger/aircore drilling.