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10 Bagger, Friday 13th June
Leading Melbourne analyst lifts valuation of Syndicated Metals to 10.5c ahead of impending resource upgrade and new drilling push
The prospect of an imminent resource upgrade at the Barbara copper-gold project near Mt Isa has prompted Melbourne research and advisory outfit Beer & Co to upgrade its valuation of emerging copper producer Syndicated Metals (ASX: SMD) to 10.5c per share.
Syndicated recently completed a resource upgrade drilling program at Barbara which delivered some spectacular copper intersections including 25.9m @ 4.24% Cu including 7.5m @ 10.76% Cu which featured in this column last month.
According to Beer & Co’s experienced research analyst Pieter Bruinstroop in a fresh note released this week, the stunning hits are likely to drive a “significant” increase in resource grade resulting in more contained copper when Syndicated releases its new resource estimate over the coming weeks.
“We expect that the Mineral Resource estimate will contain more copper from both higher grade and more tonnes, but that the open cut mining inventory will increase only a little as we expect that SMD will pursue underground mining,” he says.
The current resource estimate is 5.3Mt grading 1.4% Cu and 0.1g/t Au for 75,000t of contained copper and 25,000oz of contained gold.
The new resource will form the foundation of a Definitive Feasibility Study which is already well underway at Barbara under the 50/50 joint venture between Syndicated and its partner, Queensland copper producer CopperChem (a subsidiary of WH Soul Pattinson Group).
The joint venture is aiming to bring Barbara into production early next year, with the ore to be trucked to CopperChem’s treatment plant at Cloncurry. With no delay for construction, that means Barbara can move swiftly into production, propelling Syndicated into the ranks of junior copper miners.
“Our valuation is based on a mining inventory of 1.2Mt at 1.9% Cu for the open cut at Barbara plus a further 600kt at 1.3% in resources near Barbara and the recent results at Lillymay and Mt Olive are not included in these estimates,” Bruinstroop says.
“Our valuation has been revised from 8.5c to 10.5c/share due to the above factors,” he adds. “We expect to further upgrade our valuation when SMD announce their feasibility study as the project is progressively de-risked.
“We affirm our BUY recommendation.”
Readers of Ten Bagger who have kept an eye on SMD would have noted that the price has moved from 3c to around 5c over the past two months – helped along in part by some of the stunning drill hits from the resource drilling.
Syndicated has flagged the start of a major new drilling program in June to chase potential depth extensions of the Barbara deposit and further test the new Lillymay regional discovery. Given the success of the last round of drilling, investors will be watching closely to see what happens.
If Beer & Co’s assessment is right – helped by another round of drilling and a resource upgrade looking – the 60 per cent price jump seen to date could be just the beginning!
LME copper 3-month up to $US6691 a tonne
16/06/2014
