However, the broker added that based on medium term newsflow and its production scenario assumptions, could see a share price of well over $3.00 per share.
This is more than six-times the last traded price of $0.475.
The following is an extract from the report.
Value adding highest grade Sri Lankan graphite
- BBR is a graphite focused exploration and development company which has a 75% interest in the Matale Graphite Project in Sri Lanka, surrounding an existing graphite mine that has had continuous production for over 100 years.
- Sri Lanka graphite is well known for its very high +90% C grades and also its high purity.
- BBR recently flew a VTEM survey over the Matale Project delineating a substantial bullseye graphite anomaly over the existing Kahatagaha-Kolongaha mine that provides an excellent analogy for any anomalies outlined within the Matale Project.
- With the release of the VTEM results we anticipate several anomalies to follow up with ground based exploration and drilling.
Graphite in demand
- The boom in graphite is being driven primarily by a new generation of Li-ion batteries for Electric Vehicles, mobile phones etc… for which graphite is a significant anode component.
- Coated spherical graphite is a high end value add product (up to $20,000/t) that is used in the burgeoning battery market.
- Graphene is an even higher value add product (up to $100,000/t) which will be used in a variety of applications due to its unique optical, thermal, mechanical and electrical properties.
- The high grade vein graphite from Sri Lanka is ideal for coated spherical graphite and graphene market opportunities.
- Sri Lanka vein graphite is very high grade (+90% C ROM) and high value with excellent and well known purity. A vein of one metre in width could provide a long mine life off a small reserve base. The adjacent Kahatagaha-Kolongaha mine has produced over 300kt of high grade graphite lump over its +100 year life.
- With exploration success we see the potential for a +10 year operation producing ~10ktpa of +90% C ROM ore followed by minimal processing prior to upgrading to coated spherical graphite and/or graphene.
Recommendation and price target
- We initiate coverage and recommend a SPECULATIVE BUY based on positive VTEM anomalies and follow up ground based exploration and drilling newsflow over the next 6 months to provide a further share price re-rating.
- Our 6 month price target of $1.40 per share is based on medium term newsflow and our production scenario assumptions, which if applicable could see a share price of well over $3.00 per share.
BBR is a Sri Lanka graphite focused exploration and development company. The company's Matale Project surrounds the Kahatagaha-Kolongaha mine which has been in continuous production since 1872 producing very high grade +90% C ROM lump graphite.
Sri Lanka natural graphite is well known for its high grades, high purity and suitability in Liion rechargeable battery applications. We also see a natural preference for the production of graphene from Sri Lanka graphite.
We see considerable low risk value upside to BBR as it progresses the Matale Project through exploration and potential development and production. The recent VTEM has already provided a bullseye anomaly over the Kahatagaha-Kolongaha mine and we anticipate anomalies of a similar order to be defined on the BBR tenure.
We see newsflow to include VTEM results with anomalies to be followed up with mapping and rock chip sampling, trenching and drilling before a potential resource calculation.
The target mineralisation is high grade (+90% C) graphite veins up to 2 metres in width which with limited strike and depth will convert to an economic reserve.
The increasing demand for quality coated spherical graphite for use in new age Li-ion batteries is a focus for BBR as this high end product can sell for up to $20,000/t.
The early stage graphene market is also a focus for the company as this product may sell for up to $100,000/t.
We have completed a conceptual production scenario to provide value upside parameters for BBR. The basis for the scenario is a minimum 10 year LOM from a 110,000t resource (200m strike x 250m depth x 1m width) and low capital expenditure for a ROM production of approximately 10,000tpa at +90% C prior to further processing to coated spherical graphite and/or graphene.
Our preliminary analysis as shown below provides for a potential NPV of $259m or $4.51 per fully diluted share for capital cost assumptions.
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