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Blackham Resources Ltd: Broker increases price target on Matilda DFS

Blackham Resources Ltd (ASX:BLK) has received a buy rating and an increased price target of $0.75 from stockbroker BW Equities.

The price target reflects a 54% premium to the recently traded price and is based on a risked NPV derived from the brokers DCF model of the Matilda Gold Project assuming an eight year mine life.

Shares in Blackham last traded at $0.49. The following is an extract from the report.

Study adds significant mine life and improves quality of mining inventory - Further Upside Exists

Investment Summary

Blackham Resources has completed a Definitive Feasibility Study (NYSE:DFS) on the Matilda Gold Project and is another step closer to recommencing production at the Wiluna Processing Facility.

The DFS has provided a mine life of 7+ years, with substantially improved mining inventory.

Underpinned by a large tenement position and a growing gold resource Blackham will emerge in the September qtr 2016 as a producer of over 100,000 ozs of gold per year with the potential to grow both mine life and production.

Investment Highlights

- BW valuation lifted to 75 cents per share based on 8 years mine life and AUD $1600 gold price.

- Recent drilling is not yet in mine plan. Ongoing drilling will expand Resources and Reserves increasing mine life towards ten years with the real possibility of increasing gold output in the medium term from a potentially large at Matilda with the addition of several new gold loades identified as yet unexplored.

- On track for gold production in September Quarter 2016 to re-establish >100,000ozpa gold production.

- Tenements of 780km2 surrounding the Wiluna Processing Facility with a total gold resource of 4.7million oz.

Valuation Change

Following Blackhams release of the Definitive Feasibility Study at the Matilda Gold Project we have revised our DCF valuation at A$1600 per ounce gold price on a fully diluted after tax basis, net of the project debt to $0.75 (75 cents) per share.

This includes modest upside from the stated DFS to 8 years life coming from the recent drilling announced at Matilda. Timing for this value to be realised is progressive share price increase as the company moves to plant commissioning in about August this year. We have applied a discount of 15% to the valuation to allow for commissioning risk. However, valuation is still expected to rise prior to commissioning as Blackham announces additional mine life from ongoing drilling.

Investment Recommendation

BUY Rating on an increased price target of $0.75

Our price target reflects a 54% premium to the recently traded price and is based on a risked NPV derived from our DCF model of the Matilda Gold Project assuming an eight year mine life.

Risks associated with the Matilda Gold Project are rapidly reducing as DFS work together with ongoing drilling progresses. Redevelopment is fully funded and the target price is based on the completion of Blackham Board approval to formally commence engineering work for recommencement of production.

The DFS demonstrates that re-commencement of gold production with a low capital cost refurbishment of the Wiluna Processing Facility can be achieved by September 2016.

Resource drilling is ongoing. Recently announced results not in the DFS will add to the mine life as resources continue to be upgraded prior to production start.

BW expects that by the time production re-starts later this year the mine life will be at close to ten years and growing.

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