ABM Resources (ASX: ABU) last traded at $0.071, but an Australian broker has placed a speculative buy recommendation and a valuation of $0.09 on the stock, with a twelve month price target of $0.12.
The following is an extract from the report.
Finding the Treasure in the Tanami
ABM Resources NL (“ABM”, “ABU”, “Company”) is an early stage gold explorer with an exciting portfolio of projects in the Northern Territory,
Australia. The Company has a large 31,000km2 tenement position in the Tanami and Arunta regions.
Since securing the ground in 2009/10 ABU has defined a JORC Inferred 1.19Moz gold resource (at 0.5g/t cut-off) at the Buccaneer deposit.
Multi-million ounce potential at Twin Bonanza
Centred ~50km northwest of Newmont‟s 5Moz Callie gold mine, the Twin Bonanza Gold Camp has the potential to host multi-million ounce deposits. The Camp is prospective for large bulk tonnage deposits and high-grade vein hosted mineralisation; ABU has discovered both.
The Old Pirate prospect consists of gold in quartz veins and drilling has intersected some significant high-grade including 9m at 100.9g/t and 5m at 274g/t.
Impressive results have also been returned from surface trench sampling of the veins with 282m at 22.45g/t from a combined sample of several veins.
Early metallurgical testwork has shown excellent recovery with 85% in gravity tests and 99.5% with cyanide extraction. At Buccaneer, only 1.8km away ABU has delineated a JORC Inferred resource of 1.19Moz at 1.01g/t (at 0.5g/t cut-off).
The resource is being extended and has the potential to support a long-life bulk tonnage operation similar to Alacer‟s Çöpler mine in Turkey. Elsewhere in the Camp ABU have identified 30 encouraging grassroots targets and, at the Hyperion Gold Project a, potential +100koz oxide resource only 18km from the Groundrush Mine.
Iron Oxide Copper Gold potential at Lake Mackay
The Lake Mackay tenements cover a different geological terrane to the rest of the land package and offer different, but no less exciting greenfield Iron Oxide Copper Gold (IOCG) opportunities.
ABU holds approximately 8,000km2 of exploration licences and applications in one of the least explored regions of Australia. Recently released results from Tekapo are encouraging with 26m at 2.22g/t gold from 28m and 17m at 0.25% copper.
ABU – A compelling exploration story
Our model for ABU is speculative and makes a number of assumptions. The current resource is uneconomic so we assume the resources at Twin Bonanza grow to support a +200kozpa operation. We then envisage an $80m capex 1Mtpa start-up at Old Pirate that enables the funding of a high capex $300m 5Mtpa operation.
Our price target assumes a number of different scenarios over the next 12 months. In our view the most likely is that the Company continues to explore and develop the Twin Bonanza deposits together.
We include single project development paths, but believe that this is an unlikely strategy in the near-term. Also included is the possibility that ABU are taken out by a major; in this case we value ABU as Old Pirate developed with 50% equity plus Buccaneer‟s undiluted valuation.
Finally, we include the downside risk of cash plus exploration as a scenario in which neither Old Pirate nor Buccaneer eventuates. Key risks to our model are the metallurgy of Buccaneer, capital funding and the realisation of sufficient resources.
With a Price Target of 12cps we initiate coverage of ABM Resources NL with a Speculative Buy recommendation.