Harvest Minerals Ltd’s (LON:HMI) house broker Beaufort Securities is earning its corn with a bullish update and a price target of 32p or three times current market value.
The core of the valuation is the Arapua licence, where this week the Brazil-focused fertiliser group substantially upgraded its Maximus prospect.
There was a 37% increase to the high grade tonnage to 1.2mt within a 1380% overall rise.
Beaufort adds that from here the share price performance should follow "field trial progress at Arapua, new customer wins, testwork results, stonemeal certification and first sales".
“Test work thus far and the views of Harvest’s agronomist give us confidence that the KPFértil product will be saleable at or around US$60/t,” said the broker, which has a buy rating.”
Beaufort sees the mine developing in two stages to a 500,000 tonne annually operation, capex of US$1.0m, total mine operating costs of $7/t and a conservative long-term sales price of $55/t.
For a mine life to 2028 that gives a net present value [future cash flows] estimate of US$68mln, to which the broker has applied a 40% risk factor discount.
The broker also notes that Harvest based its latest resource estimate on only 6.7% of the area identified through mapping as Kamafugite and only from the upper weathered zone.
Extrapolating from the last upgrade would push the mine life out to 40 years.
Beaufort attributed US$12.5mln for the smaller potash project and added that worries over the cash position are overdone.
Beaufort expects Harvest to have cash of around A$0.7mln at the end of this year before income from any sales of its KPfertil direct application fertiliser product.
That compares with A$1.5mln at the end of December a sum that has since been bolstered by an A$1.57mln warrant issue.
Shares rose 17% today to 13.2p.