FROM THE BROKING DESK
Base Resources*† (ASX:BSE) (A$0.25) — FULL REPORT ON IMPRESSIVE FY18 RESULTS
We have released a detailed report on Base’s latest results: Base Resources — FY18 Financials and Outlook, 3 September 2018. Record numbers for the company reflected the ongoing strong operating performance at Kwale in Kenya and the improved pricing across its product range. The key for Base’s future are the results of the ongoing exploration programme at Kwale and the completion of the PFS for the Toliara Project in Madagascar, both of which are due in 1Q19.
Base reported record EBITDA of US$109m for FY18 and reduced net debt by US$66m to US$33m. A small fall in production was more than offset by an increase in prices across the company’s products. EBITDA increased YoY from US$83m to US$109m, which allowed the company to reduce debt by US$66m to US$33m. Base aims to repay its remaining debt during FY19.
We maintained our Buy rating, while adjusting our target price (TP) from A$0.62 to A$0.51. Our TP assumes long-term prices of US$170/t for ilmenite, US$1,000/t for rutile and US$1,250/t for zircon. It includes a risked value for the company’s interest in Toliara, which is based on our conceptual development parameters for the project and a risk multiple of 0.4x. We believe that the market value is more than covered by the value of the current reserves at Kwale and that the potential additions to mine life and the value of Toliara are currently being overlooked. We expect that the results of the ongoing exploration at Kwale and the Toliara PFS should act as catalysts to narrow the discount to our TP.
(LON:MTR) | 2.6p | US$38m | Buy | TP : 3.6p
More Positive Drill Results from the A4 Dome
Metal Tiger and JV partner MOD Resources have announced the full assay results from two holes drilled at the A4 Dome:
- Hole A4-003D intersected 52m @ 1.5% Cu from 232m in vein stockwork mineralisation in sandstones of the overlying D’Kar Formation (this interval was previously reported on 6 August) and 31m @ 1.1% Cu from 560m on the contact with the underlying Ngwako Pan Formation (NPF).
- Hole A4-004D intersected 19m @ 1.0% Cu from 485m, including a high-grade interval of 4.3m @ 2.3% Cu from 500m on the NPF contact.
COMMENT: These assays confirm the presence of two styles of mineralisation: an upper zone of vein stockwork mineralisation and a deeper zone of mineralisation associated with the NPF contact, which is a key mineralised marker horizon in the Kalahari Copper Belt and the host of much of the mineralisation discovered in the region to date. These results also indicate that the airborne electromagnetic (EM) surveys used by the company to identify drill targets are proving reliable.
The A4 Dome is defined by a 4km by 2km EM anomaly and is located 8km from the location of the planned T3 Project processing facility and could therefore potentially be a satellite operation to that plant. It is obviously early days, with the NPF-associated mineralisation significantly deeper than that discovered at the flagship T3 deposit. Further drilling will target both the NPF contact and extensions of the shallower, higher-grade mineralisation associated with the vein stockwork material discovered in the upper interval in Hole A4-003D.
A total of five rigs are now operating on site and more are planned to commence in the next few days. The results are a reminder of the prospectivity of the exploration package that the JV controls along 200km of the Kalahari Copper Belt and on which the EM survey has defined numerous other high-quality drill targets to be tested in due course.
The DFS on the lead T3 Copper Project is on track for completion by the end of 1Q19. We reiterate our Buy rating and target price of 3.6p.