QMines Ltd (ASX:QML) has received a price target of $0.74 from Shaw and Partners based on an EV/resource multiple benchmarked against a range of copper exploration peers.
Shaw has maintained its Buy recommendation and believes QMines will successfully increase its resource to 130,000 tonnes of contained copper.
The following is an extract from Shaw’s research update:
Event
QMines has released the results of some early metallurgical test work at its Mount Chalmers copper/gold project in Queensland. The results are very encouraging, but not unexpected given the historical production from this asset. Drilling activities are ramping up, and assay results from 11 diamond drill holes are pending. Another resource update is expected in 2Q22.
Highlights
- QMines holds a 100% interest in the Mount Chalmers project, located approximately 17km north-east of Rockhampton in Queensland. It is a historic copper/gold mine that operated sporadically between 1898 and 1982. Historical production totalled 1.24Mt @2.0% Cu, 3.6g/t Au and 19g/t Ag. The mine had both underground and open pit operations, with 810kt produced from open pit and 430kt from underground operations.
- The Mount Chalmers resource increased in late 2021 by 38% to 5.8Mt @ 1.04% Cu and 0.63 g/t Au, from 3.9Mt @ 1.15% Cu and 0.81g/t Au. The contained copper equivalent resources increased from 73kt to 101kt. We expect another resource upgrade in 2Q22.
- Importantly, the quality and confidence in the resource improved significantly with the last upgrade. 78% of the Resource is now in the Measured and Indicated category, whereas previously the resource was 100% inferred. This will allow Qmines to progress development studies in parallel with the ongoing drilling activities. Qmines may move directly to a Pre-feasibility Study (PFS) in 2022.
- Drilling recommenced in February 2022 with an eight hole 1,000m diamond drill program being completed. This adds to three diamond drill holes that were completed in Dec-21. Assay results from all 11 holes are pending.
- A 10,000m RC drilling program has now commenced. This program will continue to focus on infill drilling at Mt Chalmers and will also target the Woods Shaft exploration target with the objective of converting the exploration target into Resource.
- QMines has also released the results from initial metallurgical testwork on the stringer and massive sulphide mineralisation at Mt Chalmers.
- A composite of stringer mineralisation with a head-grade of 1.22% Cu, 0.2% Pb, 0.02% Zn and 1.05g/t Au was subjected to two preliminary open circuit flotation tests. Sequential flotation wassuccessful in producing a copperrougher concentrate. Copper recovery was 97.1%. The lead and zinc grade in this composite were low and therefore a copper only circuit flowsheet can be considered for this mineralisation type.
- A composite of massive sulphide (copper, lead and zinc exhalite) with a head-grade of 1.28% Cu, 1.42% Pb, 3.51% Zn and 4.31g/t Au was subjected to ten preliminary open circuit flotation tests. Sequential flotation was successful in producing rougher concentrates of copper/lead and zinc. Recoveries of 88.8% copper, 76.6% lead and 83.6% zinc are very encouraging for these initial tests.
- Mt Chalmers is a Volcanic Hosted Massive Sulphide (VHMS) deposit. These deposits are typically characterised by multiple deposits within a cluster. QMines technical team believe there is strong potential of finding further VHMS mineralisation around the existing mine site.
Recommendation
We maintain our Buy recommendation and price target of 74cps. Our price target is set based on an EV/resource multiple benchmarked against a range of copper exploration peers. We assume QMines successfully increases the resource to 130kt of contained copper and we use a A$558/t multiple which is in-line with the peer average.