White Rock Minerals Ltd (WRM)

Transcription

1 Price Vlume (in millins) D.J. Carmichael Pty Limited ABN Australian Financial Services Licence N: Level 14, Parmelia Huse 191 St Gerges Terrace, Perth, Western Australia 6000 PO Bx Z5186, Perth, Western Australia 6831 T: +61 (0) F: +61 (0) Date: 12 February, 2018 Recmmendatin: Speculative Buy Valuatin: Red Muntain Prject $0.06 Mt Carringtn Prject $0.02 Ttal $0.08 Price target $0.04 Cmpany Infrmatin ASX Cde WRM Last Price ($) $ mnth share lw $ mnth share high $0.02 Shares n Issue (m) 871m Market Capitalisatin $13m Daily Vlume 870k CapIQ, DJC White Rck Minerals Ltd (WRM) Aggressive explratin at Red Muntain fr 2018 White Rck Minerals Limited (WRM) is a mineral explrer and develper with tw majr, 100% wned, prjects - the advanced, epithermal Mt Carringtn gld-silver prject in nrthern NSW, Australia and the Red Muntain VMS plymetallic prject in Alaska. Alaska will be the fcus fr WRM during 2018 as it starts t ramp up an aggressive explratin prgram fr the upcming Alaskan field seasn. We believe there is ptential fr WRM t increase resurces and pssibly t establish a new, 100% wned, VMS camp just 100km suth f Fairbanks. KEY POINTS Red Muntain is an advanced prject with plenty f upside: The Red Muntain Plymetallic Prject in Alaska, is an advanced, zinc-dminated VMS (vlcangenic massive sulphide) explratin prject lcated within 100km f Alaska s secnd largest city, Fairbanks (pp. 32,000). Significant maiden resurce: In 2017 WRM cmpleted a maiden resurce estimate fr Red Muntain f 16.7Mt at 8.9% Zn equivalent (ZnEq), placing it n a par with prjects such as Red River Resurces Thalanga Prject in QLD, nw in prductin, and Hern s Wdlawn Prject in NSW. We believe a resurce duble that size wuld place WRM n a develpment fting. Aggressive explratin prgram: WRM has nw defined its explratin prgram fr the frthcming 2018 Alaskan field seasn. Beginning in March/April, WRM intend t undertake up t 6,000m f a diamnd drilling campaign t expand resurces and identify additinal areas f mineralisatin; undertake high-pwered gephysics t refine drill targets n the best f ver 30 existing gephysical and gechemical anmalies; undertake further surface mapping sampling t assist in target definitin; and, evaluate the ptential fr gld mineralisatin, cmmn in zned metal systems, but as yet, untested. 12 Mnth Perfrmance PFS cmpleted n Mt Carringtn: In December 2017, WRM cmpleted a pre-feasibility Study (PFS) n a gld-nly, Stage 1 develpment. A silver dminated, Stage 2 develpment is still under cnsideratin, but mre wrk needs t be dne t establish its viability. Stage 1 technically and financially viable: WRM established the viability f the Stage 1 develpment, with ttal cashflw f A$36.7m (undiscunted, pre-tax) ver a 4.3 year mine life, at an average annual prductin rate f 35,000 zs at an AISC f A$1,236/z /17 5/17 8/17 11/17 2/18 Vlume Price Analyst Details Paul Adams padams@djcarmichael.cm.au 10 Surce: Capital IQ 5 Valuatin: We maintain ur valuatin estimates f $52.7m fr Red Muntain based n previus M&A transactin histry in the VMS space and $17.3m fr Mt Carringtn, as the increased gld utput and lnger mine life assciated with the Stage 1 f the PFS study is balanced by mre uncertainty arund the value f the Stage 2, silver-dminant mineralisatin. Recmmendatin: We place a Speculative Buy recmmendatin n WRM with a 12-mnth price target f $0.04 per share based n a successful explratin prgram and high assciated newsflw frm the Red Muntain Plymetallic Prject ver the curse f DJ Carmichael Pty Limited ABN AFSL Telephne: inf@djcarmichael.cm.au Webpage:

2 Overview f WRM White Rck Minerals Limited (WRM) is a mineral explrer and ptential develper with tw majr, 100% wned, prjects. The advanced, epithermal Mt Carringtn gld-silver prject in nrthern NSW, Australia and the Red Muntain plymetallic prject in Alaska, USA. The Red Muntain Plymetallic Prject in Alaska, is an advanced, zinc-dminated VMS (vlcangenic massive sulphide) explratin prject lcated within 100km f Alaska s secnd largest city, Fairbanks (pp. 32,000). The Mt Carringtn gld-silver prject has seen histrical prductin and has existing pen pits and remnant infrastructure. Epithermal mineralisatin is assciated with a large cllapsed caldera in the nrthern regin f the New England Fld Belt. In December 2017, WRM published a Pre-feasibility Study fr Stage 1 (gld nly) Mt Carringtn, cnfirming the technical and financial viability f a small-scale gld peratin. Additinal ptential cmes frm a Stage 2, silver-dminant, pen pit peratin plus near-mine explratin n ther gld-silver depsits. In 2017 WRM cmpleted a maiden resurce estimate fr Red Muntain, placing it n a par with prjects such as Red River Resurces Thalanga Prject in QLD and nw in prductin, and Hern s Wdlawn Prject in NSW, which will be in prductin. Red Muntain will be the fcus f the cmpany thrugh 2018 with an aggressive explratin prgram building n the success achieved in In 2017 WRM established a maiden resurce estimate fr Red Muntain f 16.7Mt at 8.9% Zn equivalent (ZnEq). Figure 1. Red Muntain (Alaska) Surce: WRM 2 12 February 2018

3 Red Muntain Plymetallic Prject 2018 field prgram nw defined WRM has defined the Red Muntain 2018 field seasn wrk prgram. WRM intend t maximise the available time f the field seasn t cmplete an aggressive prgram f gephysics, gechemistry, gelgical mapping and tw drilling prgrams aimed at: a) Infilling and extending the knwn mineralisatin envelpes at the tw already identified depsits at West Tundra Flats and Dry Creek; and b) Recnnaissance drilling n the best f sme 30 targets already identified frm new and previus gephysics. Given the lack f any mdern-day explratin, where techniques have advanced significantly in the last decade, and with n drilling having ccurred since the 1990s, we believe the tenement package has significant explratin upside ptential. The Red Muntain Plymetallic Prject ( RMP ) tenement package was vastly expanded by WRM during 2016 t encmpass a large number f near-surface cnductivity anmalies assciated with VMS alteratin hales. We believe ptential exists t build n the tw knwn depsits and establish a new VMS camp in Alaska. Specifically, the intended wrk prgram fr the 2018 field seasn cnsists f: Up t 6,000m f diamnd drilling: WRM intend t have ne diamnd drill rig turning thrughut the summer field seasn (May thrugh t Octber) fcused initially n ptential thickened intervals within the tw knwn depsits (5-10 hles) and extensinal targets defined by early grund gephysical and gechemical surveys (5-10 hles). A ttal f hles will target new areas. An rientatin grund gephysics prgram ver bth West Tundra Flats and Dry Creek will be cnducted early in the field seasn (May-June) t define which grund gephysics techniques can best be applied t the mineralisatin in the tenement package. The best techniques can then be applied t the ther anmalies within the package t define drill targets. In additin t the rientatin wrk, 1,800 line kms f high-pwered airbrne EM (electrmagnetic) gephysics is planned, depending n funding, t identify cnductivity anmalies within 500m f the surface. WRM intend t cmbine this with the existing shallw EM t assist in determining thse targets with the best ptential fr large VMS systems (>10Mt). Mapping and sampling f the 30 near surface anmalies will be cnducted by a dedicated grund recnnaissance crew, including systematic rck chip traverse sampling detailed wrk n any massive sulphide hrizns discvered. High ranking targets utside the existing tw depsits will then underg mre detailed grund wrk t define drill targets. Lastly, drilling will be cnducted n the best targets identified (10-15 hles). WRM als intend t evaluate the ptential fr gld mineralisatin in adjacent dmains t the VMS mineralisatin already identified. Metal znatin in VMS depsits is well knwn and this has nt yet been investigated at Red Muntain February 2018

4 Figure 2. Existing Red Muntain depsits and prximal reginal targets Surce: WRM Target 4 cnductr SW f Dry Creek Figure 3. New targets t be explred in 2018 Surce: WRM Explratin Funding WRM had cash f $2.2m as at the end f December An equity drawdwn facility f $7.2m has been arranged thrugh Kentgrve Capital in terms determined by WRM and at their electin. We believe WRM has the necessary funds, r access t funds, t begin the aggressive drilling prgram at Red Muntain February 2018

5 VMS systems in Yukn-Tanana Terrane There are several VMS depsits in the Yukn-Alaska regin that can be cmpared with Red Muntain. Perhaps the mst interesting is the Kudz-Ze-Kayah depsit (KZK) wned and perated by the private cmpany, BMC Minerals plc. Like Red Muntain, KZK is a plymetallic VMS system cntaining zinc-lead-cpper-silver-gld in tw majr separate but prximal znes ABM and Krakata with the ther depsits als within, and adjacent t, the KZK prject area. BMC aim t put KZK int prductin in 2021 after a tw-year prject build. Like Red Muntain, the majr znes at KZK are relatively flat lying and utcrp r sub-crp n surface in an area verlain by glacial till. Mining is anticipated t be via bth pen pit and undergrund methds. JORC Resurce Unit KZK (ABM) Red Muntain (HG) Tnnes (Mt) Zinc % Lead % Cpper % Silver g/t Gld g/t Zinc equivalent % Pre-prd capex US$m 298 Prcessing rate Mtpa 2.0 LOM years 9.3 Operating margin % 45.0 NPV (after tax, 7%) US$m 594 IRR % 38 Figure 4. Resurce cmparisn between KZK and Red Muntain with KZK PFS metrics Surce; DJC and cmpany reprts Figure 5. Red Muntain vs KZK and ther VMS depsit peers Surce: cmpany reprts Using KZK as a reference, we believe the Red Muntain ttal and HG resurce needs t duble frm current levels, t arund 30Mt and 18Mt respectively, t place Red Muntain nt a develpment fting. We wuld assume that capex and pex csts fr Red Muntain wuld nt be t dissimilar frm thse f KZK and this therefre gives a reasnable indicatin f the resurce size and metrics necessary see Red Muntain mve t the next level and generate real value fr WRM sharehlders. BMC Minerals has raised US$100m in debt and equity t fund prject develpment February 2018

6 ASX-listed Peer Grup cmparisn Figure 6. Zn vs ZnEq grade in Peer prjects t Red Muntain cmpany reprts Surce: SNL, DJC, We maintain ur Valuatin at $52.7m, r $0.06 per share, as in ur September 2017 reprt based n previus transactins in the VMS space and a peer review f similar sized prjects February 2018

7 Mt Carringtn Gld-Silver Prject Pre-feasibility cnfirms viability WRM cmpleted its pre-feasibility study n its Mt Carringtn gld-silver prject in December The study cnsidered a tw-stage apprach with Stage 1 cncentrating n the gld-nly mineralisatin. The silver mineralisatin wuld cme in stage 2 which was nt included in the prefeasibility study as additinal metallurgical testwrk is required t cnfirm recvery rates. The Mt Carringtn JORC resurce cntains 341,000 zs f gld and 23.2 millin zs f silver. Mt Carringtn has a maiden JORC reserve f 159,000 zs upn which the prefeasibility Study is based. High-level metrics fr the Stage 1 PFS include: Ttal reserves : 159,000 zs Ttal Tnnes in reserves : 3.47Mt Gld grade : 1.43 g/t Gld recvery : 82% Recvered gld : 147,300 zs Recvered grade : 1.17 g/t Life-f-mine (LOM) : 4.3 years Average gld prductin : 35,000 zs LOM strip rati : 2.67 Prcessing rate : 1.0Mtpa Initial CAPEX : A$35.7m Site perating cst : A$46.23 per tnne re milled C1 cash cst : A$1,078 per z prduced AISC : A$1,236 per z prduced Cashflw generated : A$36.7m, undiscunted, pre-tax IRR : 34.0% Stage 1 wuld cnsist f mining and prcessing the Strauss and Kyl depsits with ttal resurces f 188,000 z frm 4.1Mt at 1.4g/t gld. Ptential exists t make additinal gld discveries and add unces t the LOM frm the All Natins Zne (2 targets) and frm the Pineer Zne which included the Perseverance Prspect with 400m f undrilled strike ptential. Figure 7. Additinal ptential at Mt Carringtn Surce: WRM 7 12 February 2018

8 Silver in Stage 2 Stage 2 f the Mt Carringtn Scping Study envisaged mining the silver dminant znes at Lady Hamptn and White Rck depsits. The staged develpment apprach wuld see these depsits mined pst the gld stage which wuld allw fr additinal metallurgical testwrk, design f the ptimum silver flw sheet and develpment f cncentrate sales cntracts with traders and smelters. The silver resurces were nt part f the PFS released in December 2017 due t cntinuing metallurgical and prcess flw sheet studies. WRM state that the additinal capital required t upgrade the prcessing flw sheet fr silver prductin wuld be funded frm the internal cashflws generated frm the gld-nly Stage 1. Current silver resurces in the Indicated categry amunt t 3.5Mt at 73g/t silver fr 8.2 millin unces. Mt Carringtn peer grup analysis and valuatin We used a cmbinatin f M&A transactin analysis and average peer grup EV/resurce Oz metrics t derive a value f the Mt Carringtn depsit f A$17.3m, r 1.9c per share based n the full gld and silver, tw stage develpment scenari, as cnsidered in the updated 2016 Scping Study. The December 2017 PFS has established the technical and financial viability f the Stage 1 gldnly develpment scenari, with increased gld prductin ver a lnger Stage 1 mine life than in the Scping Study, leaving the Stage 2 silver dminant develpment as ptential upside. This can nly be quantified after further metallurgical testwrk and prcess design wrk is cmpleted and indicative ff-take agreements fr the silver cncentrate can be btained. The timing f this will be dependent n btaining sufficient funding t cmplete this wrk. The PFS has established that n a capital intensity (capex per z f prductin) and n AISC metrics, Mt Carringtn sits mid-grup amngst its peer prjects at just under A$1,000 per z and A$1,236/z, respectively. Figure 8. Prducers AISC actuals vs Mt Carringtn PFS ASIC Surce: WRM 8 12 February 2018

9 Figure 9. Capital Intensity f ASX-listed develpment prjects Surce: WRM We maintain ur valuatin f Mt Carringtn at $17.3m as in ur September 2017 reprt, as the increased gld utput and lnger mine life assciated with the Stage 1 f the PFS study is balanced by mre uncertainty arund the value f the Stage 2, silver-dminant mineralisatin February 2018

10 Private Client Dealing Telephne Hug McChesney Institutinal Adviser Chad Suth Head f Retail Advisry csuth@djcarmichael.cm.au Tim Bennett Investment Adviser tbennett@djcarmichael.cm.au Matthew Blake Executive Directr - Investment Adviser mblake@djcarmichael.cm.au Eve Bradley Investment Adviser ebradley@djcarmichael.cm.au Gregry Chinh Investment Adviser gchinh@djcarmichael.cm.au Andrew Cx Investment Adviser (Equities & Derivatives) acx@djcarmichael.cm.au Tby Jefferis Investment Adviser (Equities & Derivatives) tjefferis@djcarmichael.cm.au Michael Maran Investment Adviser mmaran@djcarmichael.cm.au Zac Paul Investment Adviser zpaul@djcarmichael.cm.au Adam Russ Investment Adviser aruss@djcarmichael.cm.au Derek Steinepreis Investment Adviser dsteinepreis@djcarmichael.cm.au Chris Jnes Dealers Assistant chris.jnes@djcarmichael.cm.au Julie Martin Dealers Assistant jmartin@djcarmichael.cm.au Paul Rebel Dealers Assistant prebel@djcarmichael.cm.au Vanessa Sctt Dealers Assistant vsctt@djcarmichael.cm.au Wealth Management Telephne Brad Clarke Wealth Adviser bclarke@djcarmichael.cm.au Paul Elkingtn Wealth Adviser pelkingtn@djcarmichael.cm.au Daniel Fnseca Wealth Adviser dfnseca@djcarmichael.cm.au Dmenic Macri Wealth Adviser dmacri@djcarmichael.cm.au Nick Casale Prtfli Administratin Manager ncasale@djcarmichael.cm.au Telephne Paul Adams Directr - Head f padams@djcarmichael.cm.au Michael Eidne Directr - meidne@djcarmichael.cm.au Michael Rn Analyst mrn@djcarmichael.cm.au Crprate Finance Telephne Davide Bsi Managing Directr & Head f Crprate Finance dbsi@djcarmichael.cm.au Matthew Hall Directr Crprate Finance mhall@djcarmichael.cm.au Oliver Mrse Directr Crprate Finance mrse@djcarmichael.cm.au Carly Terzanidis Manager - Crprate Finance ccircsta@djcarmichael.cm.au Administratin Telephne Cadell Buss Chief Executive Officer cbuss@djcarmichael.cm.au Belinda Rychwdhury Administratin Manager brychwdhury@djcarmichael.cm.au Gabrielle Buffler Head f Risk and Cmpliance gbuffler@djcarmichael.cm.au Janelle Whyte Chief Financial Officer jwhyte@djcarmichael.cm.au Michelle Perrett Assistant Accuntant mperrett@djcarmichael.cm.au Kerry Mrrice Administratin Assistant kmrrice@djcarmichael.cm.au February 2018

11 Disclsure and Disclaimer RCAN1464 This reprt, accurately expresses the persnal view f the Authr. DJ Carmichael Pty Limited, members f the Team; including authrs f this reprt, its directrs and emplyees advise that they may hld securities, may have an interest in and/r earn brkerage and ther benefits r advantages, either directly r indirectly frm client transactins in stcks mentined in this reprt. DJ Carmichael Pty Limited and r its emplyees hld an immaterial hlding in unlisted ptins in White Rck Resurces Limited. The authr f this reprt des nt wn shares in White Rck Resurces Limited. DJ Carmichael Pty Ltd acts as Crprate Adviser t White Rck Minerals Limited and is paid a fee fr that service. DJ Carmichael Pty Limited is a whlly wned subsidiary f DJ Carmichael Grup Pty Limited ACN In accrdance with Sectin 949A f the Crpratins Act 2001 DJ Carmichael Pty Limited advises this dcument cntains general financial advice nly. In preparing this dcument DJ Carmichael Pty Limited did nt take int accunt the investment bjectives, financial situatin and particular needs ( financial circumstances ) f any particular persn. Accrdingly, befre acting n any advice cntained in this dcument, yu shuld assess whether the advice is apprpriate in light f yur wn financial circumstances r cntact yur DJ Carmichael Pty Limited adviser. DJ Carmichael Pty Limited, its Directrs emplyees and advisers may earn brkerage r cmmissin frm any transactins undertaken n yur behalf as a result f acting upn this infrmatin. DJ Carmichael Pty Limited, its directrs and emplyees advise that they may hld securities, may have an interest in and/r earn brkerage and ther benefits r advantages, either directly r indirectly, frm client transactins. DJ Carmichael Pty Limited believe that the advice herein is accurate, hwever n warranty f accuracy r reliability is given in relatin t any advice r infrmatin cntained in this publicatin and n respnsibility fr any lss r damage whatsever arising in any way fr any representatin, act r missin, whether express r implied (including respnsibility t any persns by reasn f negligence), is accepted by DJ Carmichael Pty Limited r any fficer, agent r emplyee f DJ Carmichael Pty Limited. This dcument is intended nly fr the use f the individual r entity t which it is addressed and may cntain infrmatin that is privileged, cnfidential and exempt frm disclsure under applicable law. If yu are nt the intended recipient r emplyee r agent respnsible fr delivering the message t the intended recipient, yu are hereby ntified that any disseminatin, distributin r cpying f this cmmunicatin and its attachments is strictly prhibited. The Authr f this reprt made cntact with the White Rck Resurces Limited fr assistance with verificatin f facts, admittance t business sites, access t industry/cmpany infrmatin. N inducements have been ffered r accepted by the cmpany. The recmmendatin made in this reprt is valid fr fur weeks frm the stated date f issue. If in the event anther reprt has been cnstructed and released n White Rck Resurces Limited, the new recmmendatin supersedes this and therefre the recmmendatin in this reprt will becme null and vid. Recmmendatin Definitins SPECULATIVE BUY Ptential 10% r mre utperfrmance, high risk BUY Ptential 10% r mre utperfrmance HOLD Ptential 10% underperfrmance t 10% ver perfrmance SELL Ptential 10% r mre underperfrmance Perid: During the frthcming 12 mnths, at any time during that perid and nt necessarily just at the end f thse 12 mnths. Stcks included in this reprt have their expected perfrmance measured relative t the ASX All Ordinaries index. DJ Carmichael Pty Limited s recmmendatin is made n the basis f abslute perfrmance. Recmmendatins are adjusted accrdingly as and when the index changes. T elect nt t receive any further direct marketing cmmunicatins frm us, please reply t this and type 'pt ut ' in the subject line. Please allw tw weeks fr request t be prcessed N part f this reprt may be reprduced r distributed in any manner withut permissin f DJ Carmichael Pty Limited February 2018