Proactive Investor's  Instablog

Elemental Minerals (ASX: ELM) has earned itself a BUY recommendation and a 12-month share price target of C$1.30 (A$1.25) from Dundee Securities, after the broker initiated coverage of the stock.

The target is two-and-a-half times Elemental's last traded price of A$0.50.

The company's high grade, high purity, shallow Kola Deposit, within the Sintoukola Potash Project in the Republic of Congo, has caught the eye of Dundee, with the following an extract from the report.

Beyond Conventional Potash

We are initiating coverage of Elemental Minerals with a Buy rating and $1.30 target price.

Elemental's flagship project is the Sintoukola Potash Project (93% equity interest, 10% assumed government free carry interest) in the Republic of Congo (ROC), which is expected to produce 2 mln tpa of Muriate of Potash (MOP) from the Kola Deposit, primarily servicing Brazil.

Our target price is based on our NPV @ 13.5% and 0.6x DCF multiple, which captures country and financing risk. Our model reflects a conventional mine starting in 2017.

HIGHLIGHTS:

- High Grade, High Purity, Shallow Deposit: Elemental's sylvinite Measured and Indicated (M+I) Resource at the Kola Deposit is 573 million tonnes @ 20.9% K2O, approaching best-in-class grade found in Saskatchewan. Elemental's sylvinite has low impurities and the deposit is shallow (~280m).

- Potential for Upside with Inferred Hangingwall Seam (HWS) Resource: Elemental plans additional drilling and the inclusion of historical seismic data to support the classification of the high grade HWS resource starting in 2013.

- Proven Methods - Sylvinite Processing, Conventional Mining: Elemental plans to build a conventional mine and testing of ore has indicated that a conventional processing flowsheet can be used (89.5% recovery).

- Proximity to Coast and Brazil: The Kola Deposit is 30km (direct line) from the coast and there is a freight cost advantage to Brazil, a willing market.

- Infrastructure Support, Potential Outsourcing Opportunity: Power, gas and water exist although distribution build is required, along with a 36km haul road from the mine to the proposed plant and jetty at Tchiboula.

Infrastructure funds are potentially interested in ~$600mln of the ~$2.0bln initial capex.

Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.