Aggressive exploration at Red Mountain for 2018
White Rock Minerals Limited (WRM) is a mineral explorer and developer with two major, 100% owned, projects - the advanced, epithermal Mt Carrington gold-silver project in northern NSW, Australia and the Red Mountain VMS polymetallic project in Alaska. Alaska will be the focus for WRM during 2018 as it starts to ramp up an aggressive exploration program for the upcoming Alaskan field season. We believe there is potential for WRM to increase resources and possibly to establish a new, 100% owned, VMS camp just 100km south of Fairbanks.
- Red Mountain is an advanced project with plenty of upside: The Red Mountain Polymetallic Project in Alaska, is an advanced, zinc-dominated VMS (volcanogenic massive sulphide) exploration project located within 100km of Alaska’s second largest city, Fairbanks (pop. 32,000).
- Significant maiden resource: In 2017 WRM completed a maiden resource estimate for Red Mountain of 16.7Mt at 8.9% Zn equivalent (ZnEq), placing it on a par with projects such as Red River Resources’ Thalanga Project in QLD, now in production, and Heron’s Woodlawn Project in NSW. We believe a resource double that size would place WRM on a development footing.
- Aggressive exploration program: WRM has now defined its exploration program for the forthcoming 2018 Alaskan field season. Beginning in March/April, WRM intend to undertake up to 6,000m of a diamond drilling campaign to expand resources and identify additional areas of mineralisation; undertake high-powered geophysics to refine drill targets on the best of over 30 existing geophysical and geochemical anomalies; undertake further surface mapping sampling to assist in target definition; and, evaluate the potential for gold mineralisation, common in zoned metal systems, but as yet, untested.
- PFS completed on Mt Carrington: In December 2017, WRM completed a pre-feasibility Study (PFS) on a gold-only, Stage 1 development. A silver dominated, Stage 2 development is still under consideration, but more work needs to be done to establish its viability.
- Stage 1 technically and financially viable: WRM established the viability of the Stage 1 development, with total cashflow of A$36.7m (undiscounted, pre-tax) over a 4.3 year mine life, at an average annual production rate of 35,000 ozs at an AISC of A$1,236/oz.
- Valuation: We maintain our valuation estimates of $52.7m for Red Mountain based on previous M&A transaction history in the VMS space and $17.3m for Mt Carrington, as the increased gold output and longer mine life associated with the Stage 1 of the PFS study is balanced by more uncertainty around the value of the Stage 2, silver-dominant mineralisation.
- Recommendation: We place a Speculative Buy recommendation on WRM with a 12-month price target of $0.04 per share based on a successful exploration program and high associated newsflow from the Red Mountain Polymetallic Project over the course of 2018.
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This Research report, accurately expresses the personal view of the Author.
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SPECULATIVE BUY – Potential 10% or more outperformance, high risk
BUY – Potential 10% or more outperformance
HOLD – Potential 10% underperformance to 10% over performance
SELL – Potential 10% or more underperformance
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