Predictive Discovery Ltd (ASX:PDI)’s share price target has been doubled 42 cents with a Buy recommendation by Sprott Equity Research following the release of its maiden mineral resource estimate (MRE) for the Bankan Gold Project in Guinea’s Siguiri Basin.
The precious metals explorer tabled a 3.65-million-ounce gold resource across the NE Bankan and Bankan Creek deposits.
Potential suitors?
The broker said: ”The upside is simple, more ounces. While feasibility studies are key for M&A, African vanilla gold pits are routine to value.
It said with 28 metres at 12.1 g/t 1.5 kilometres from Bankan, 12 metres at 9.4 g/t at surface at Alamos Gold Inc, about 20 kilometres north, and 6 metres at 32 g/t from surface to EOH Holdings Ltd at the separate Koundian project, “it doesn’t take a PhD geologist to see the upside”.
Similarly, the around 5,000 oz/vm in the core of Bankan NE implies +1 million ounces from just the next 200 metres.
It noted that the similarity to the 460,000 ounces per annum at US$854/oz 1.65 g/t Fekola is striking.
Fekola’s owner, B2, along with the likes of Endeavour, Anglogold Ashanti Ltd, Goldfields Ltd, Barrick Gold Corp and Allied “could all be seen as potential suitors, with the quality of this asset perhaps, and quite astonishingly, putting it out of reach of ‘smaller’ producers Centamin PLC (LSE:CEY), Iamgold Corp and Perseus Mining Ltd (ASX:PRU, TSX:PRU, OTC:PMNXF)".
MRE estimate a beat
Sprott noted that the 3.6 million ounces at 1.56 g/t global resource was a “beat on all metrics”.
“The first take-home is that the resource is clearly larger than our expectations. Digging in to ‘double check’ assumptions, compositing, and methodology are in line.
Geologically, this generally consistent ore body with simple geometry, wide widths, consistent grades and limited nugget effect should be considered reliable.
The high-grade domain, where the shear sits exactly on the margin of the adjacent granitoid, is extremely important not just for endowment, but pit depth.
“While the constraining gold price is high compared to reserve-price constraints, we actually don’t see this as material as the sections show that the ore body and pit-shell are both drill-constrained, not economically constrained."
This checks Sprott’s own rough estimate of average 70-80 metres ore zone thickness, at 1.56 g/t reported, could sustain a 50% gross margin at US$1,500/oz at up to a 4:1 strip, which would drive a pit down to almost 500 metres.
“With the core running over 3 g/t and hosting 5,000 oz/vm, deeper pits here do seem likely, with potential for an UG very much real,” it added.
Lift projections
Sprott has lifted the 2.25 million tpa at 1.41 g/t 92,000 ounces per annum operation to 4.5 million tpa at 1.48 g/t at 221,00 ounces per annum, and 251,000 ounces per annum for year 1-3, given the higher grades at surface at Bankan Creek.
It noted that its mill throughput and 75% reserve-conversion assumptions appear conservative.
This is especially given that the Bankan Creek is wide open, the Bankan NE pit shells appear drill, and not margin, constrained in the HG core, and that it excludes an UG, LG stockpiling for end-of-life, and satellites, yet still sees a 13-year mine life.
Even modelling peer-capex plus 5% and peer processing +50% to account for rock hardness drives its updated net present value (NPV) at build start of A$1.5 billion, with AISC of just US$817/oz, a 1.75-year payback and nearly 50% internal rate of return (IRR).