More Positive Drilling Results at T3 Add Confidence to Potential U/G Development
Metal Tiger has announced the assay results for eight more holes from the T3 deposit on its 30%-owned Kalahari Copper/Silver JV in Botswana (MOD Resources holds 70%).
COMMENT: Of the eight holes, seven hit mineralisation (six of which included multiple intersections), extending the deposit down-dip of previous drilling and adding to the potential for the future development of an underground operation, which could augment production from the currently-planned open-pit project.
During 1Q18 the company is planning to announce an updated resource for the T3 Project, and also to release the PFS for the open-pit project, with the DFS to follow by the end of the year. The JV is targeting an open-pittable mineable inventory for the PFS of 25Mt at a grade of 1.1-1.2% Cu, containing around 275,000t of copper.
The JV has stated that it is considering the possibility of developing an underground operation simultaneously with the open pit, and is focused on increasing the production of profitable copper rather than mine life. It also notes the potential of the other satellite deposits in the area, such as the T1 deposit (100%-owned by JV partner MOD Resources), to supply higher-grade material to a central processing facility at T3. This suggests that the focus is on adding higher-grade underground material to increase the grade processed and copper output.
Exploration at T3 is continuing to deliver encouraging results and we await the results of the resource update and PFS with interest. We maintain our Buy rating and our target price of 3.6p. For further details see our initiation piece Metal Tiger — Earning its Stripes, 9 November 2017.
T3 is already an attractive project. The scoping study of December 2016 indicated the potential for the project to produce 22,000tpa of copper, with associated silver, at a C1 cash cost of US$1.29/lb and capex of US$135m, equivalent to a very competitive capital intensity of US$6,200/tpa. At a copper price of US$3.00/lb (cf the current price of US$2.97/lb) the pre-tax NPV10 was US$297m and the IRR 42%.
T3 resource update and PFS on the larger open-pit project due in 1Q18. An interim resource update was announced in August 2017, increasing copper from the 350,000t used in the scoping study to 409,000t. The ongoing infill drilling programme for the open-pit resource is nearing completion, with results planned to be released in January 2018. The PFS, also expected in 1Q18, will consider a throughput rate of 2.5Mtpa, 25% higher than that in the scoping study of late 2016.
Underground potential now the subject of a 30-hole drill programme. A three-rig drill program of around 30 holes is now planned to test the underground resource over a strike-length of 1.7km, initially to a depth of approximately 350-400m. Intersections from the latest announcement included 7.2m @ 1.9% Cu and 5.9m @ 1.7% Cu, with associated silver. Mineralisation dips shallowly to the north-west and is considered likely to be mineable using a room and pillar method. We anticipate that initial study work will be completed on the underground potential during 2018.
Kingsgate to hold a General Meeting on 9 January 2018. Kingsgate Consolidated (KCN AU | Mkt Cap US$69m), in which Metal Tiger holds a 6.7% stake valued at US$4.6m, has called a General Meeting for 9 January 2018. Metal Tiger requested the meeting and is seeking shareholder approval to replace three of Kingsgate’s four directors with five new Metal Tiger appointees. Both companies appear aware of the value of the Chatree mine in Thailand, but have a different view on how to best realise this for shareholders. Metal Tiger believes that it could come to a negotiated settlement with the Thai authorities that would allow a restart of the operation, while Kingsgate is pursuing compensation for the loss of the project under its political risk insurance cover and through arbitration under the Australia Thailand Free Trade Agreement.
BUY rating with a TP of 3.6p. The company’s current market cap is equivalent to approximately US$28m and our TP is based on a risked SoTP value of US$49m. This comprises US$13m of cash and investments, an adjustment of US$15m for corporate overheads, US$10m for the company’s other interests and a risked value of US$41m for its 30% interest in the Kalahari Copper JV.