Heron Resources (TSE:HER) has reported strong results from its metallurgical test program at its Woodlawn project, improving on historical mill performance, according to Dundee Capital Markets.
The brokerage lifted its price target on Heron on the back of the news, to 25 Canadian cents from 20 cents previously. Analyst Joseph Gallucci also maintained his buy rating on the Australian-based base metals developer.
Heron announced that recent metallurgical work shows that the Woodlawn zinc-copper mineralization, which represents the majority of the new mine production, has the ability to produce three saleable concentrates grading 45% zinc, 25.4% copper and 53.2% lead.
Dundee said there is also hidden value in Woodlawn's tailings blend, with the company having tested the performance of a blended zinc-copper and tailings material. Test work indicated this approach could produce readily saleable concentrates grading 45% zinc, 23.6% copper and 49% lead.
"We conservatively attribute no value to tailings re-processing at this time. These results would add upside to our very conservative NAV," Gallucci wrote in his research note released to investors earlier Wednesday.
The Dundee analyst also highlighted reasons to consider Heron as a zinc vehicle, including the fact that the Australia project is permitted and has low capital requirements of some $150 million, with existing infrastructure in place.
Production could begin as soon as 2018, pending a positive preliminary economic report and financing, Dundee said, noting that zinc-levered equities are scarce on the Toronto Stock Exchange.
"We note that, although we present an investment rationale for HER, the company is at a very early stage of developing and financing its project. However, we remain positive on the company's investment prospects," concluded Gallucci.
The company, which has a strong cash balance of $30 million, is due to release its preliminary econonic assessment on Woodlawn in the first half of this year.
Heron's 100 percent owned Woodlawn zinc project is located near Canberra in Australia. Shares were unchanged at 11.5 Canadian cents in Toronto on Wednesday.