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  • Elemental Minerals Receives "Buy Rating", C$1.10 Target From Dundee Capital Markets 0 comments
    Apr 11, 2013 9:34 PM

    Elemental Minerals (ASX: ELM, TSX: ELM) has received a Buy recommendation from Canada-based investment bank Dundee Capital Markets, with a target price of C$1.10 (A$1.03) - which is around three times the A$0.35 last traded price.

    The following is an extract from the report:

    We are maintaining our Buy rating on the back of Phase 3A drill results.

    Boreholes EK46 and EK47 (please see map in Exhibit 1) intersected both the Upper Seam (US) and Lower Seam (LS) at a shallow depth, which demonstrates the extent of mineralization. The data will be incorporated into an updated mineral resource estimate for the Kola deposit that will be part of the BFS (now expected in early Q2 14 (was Q3 13)).

    We expect more work to be done on the Hangingwall Seam (HWS), which could have a positive impact on economics, and await details of a new ramp up schedule (in response to challenging market conditions).

    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.

    Extension of sylvinite mineralization in NW portion of Kola deposit.

    Mineralization of the Upper Seam (US) and Lower Seam (LS) was extended by 1.5-2km laterally and the width of the deposit was extended to over 9 km. The deposit remains open in most directions laterally.

    The deposit remains shallow (220m) and high grade. EK46 included 4.92m at 23.59% K2O and EK47 included 3.05m at 23.1% K2O. The thickness of the halite above the US exceeds 20m in both boreholes, which satisfies the requirement for the saltback.

    Hangingwall Seam (HWS) remains a target.

    The HWS was not present in the boreholes but remains a focus at the Kola and Dougou Prospect areas. More detailed seismic work is needed to guide the drill hole targeting. As a reminder, ELM introduced a maiden Inferred resource for the high grade zone in August, 2012 of 47mln t at 34.75% K2O.

    In Sept., results were announced from the first drill hole from the Dougou Prospect, 15km SW of the Kola Deposit, which intersected the HWS (4.47m at 36.4% K2O). We believe there is potential for continuity of the high grade seam, which would have a potential positive impact on project economics.

    Updated mineral resource expected with BFS - potential for expansion and upgrade.

    ELM has acquired additional 2D seismic data covering 40km² of the western portion of the Kola deposit and possible extension, which will be used along with existing data sets and the drill results to model the resource. The current M+I sylvinite resource is 573mln t at 20.9% K2O.

    BFS now expected in early Q2 14 (was Q3 13); Expecting an update soon on a revised ramp up schedule.

    ELM is in the process of revising a ramp up schedule that better suits the challenging market conditions faced by all junior mining companies.

    We expect an update soon. We also await further drill results on the HWS. While the BFS has been pushed out ~6 months (now expected in early Q2 14), we do not expect a significant impact to our 2017 start date (although we currently forecast a ramp up to 2mln tpa in 2019, which now may take longer).

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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