White Rock Minerals Ltd (WRM)

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.

Key Points

  • 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.

Disclosure and Disclaimer

RCAN1464

This Research report, accurately expresses the personal view of the Author.

DJ Carmichael Pty Limited, members of the Research Team; including authors of this report, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions in stocks mentioned in this report. DJ Carmichael Pty Limited and or its employees hold an immaterial holding in unlisted options in White Rock Resources Limited. The author of this report does not own shares in White Rock Resources Limited. DJ Carmichael Pty Ltd acts as Corporate Adviser to White Rock Resources Limited and is paid a fee for that service.

DJ Carmichael Pty Limited is a wholly owned subsidiary of DJ Carmichael Group Pty Limited ACN 114 921 247.

In accordance with Section 949A of the Corporations Act 2001 DJ Carmichael Pty Limited advises this document contains general financial advice only. In preparing this document DJ Carmichael Pty Limited did not take into account the investment objectives, financial situation and particular needs (‘financial circumstances’) of any particular person. Accordingly, before acting on any advice contained in this document, you should assess whether the advice is appropriate in light of your own financial circumstances or contact your DJ Carmichael Pty Limited adviser. DJ Carmichael Pty Limited, its Directors employees and advisers may earn brokerage or commission from any transactions undertaken on your behalf as a result of acting upon this information. DJ Carmichael Pty Limited, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly, from client transactions. DJ Carmichael Pty Limited believe that the advice herein is accurate, however no warranty of accuracy or reliability is given in relation to any advice or information contained in this publication and no responsibility for any loss or damage whatsoever arising in any way for any representation, act or omission, whether express or implied (including responsibility to any persons by reason of negligence), is accepted by DJ Carmichael Pty Limited or any officer, agent or employee of DJ Carmichael Pty Limited. This document is intended only for the use of the individual or entity to which it is addressed and may contain information that is privileged, confidential and exempt from disclosure under applicable law. If you are not the intended recipient or employee or agent responsible for delivering the message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication and its attachments is strictly prohibited.

The Author of this report made contact with the White Rock Resources Limited for assistance with verification of facts, admittance to business sites, access to industry/company information. No inducements have been offered or accepted by the company.

The recommendation made in this report is valid for four weeks from the stated date of issue. If in the event another report has been constructed and released on White Rock Resources Limited, the new recommendation supersedes this and therefore the recommendation in this report will become null and void.

Recommendation Definitions

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
Period: During the forthcoming 12 months, at any time during that period and not necessarily just at the end of those 12 months.

Stocks included in this report have their expected performance measured relative to the ASX All Ordinaries index. DJ Carmichael Pty Limited’s recommendation is made on the basis of absolute performance. Recommendations are adjusted accordingly as and when the index changes.

To elect not to receive any further direct marketing communications from us, please reply to this email and type 'opt out ' in the subject line. Please allow two weeks for request to be processed.

© 2018 No part of this report may be reproduced or distributed in any manner without permission of DJ Carmichael Pty Limited.

Paul Adams

Head of Research

Paul joined DJ Carmichael in 2006 as a Resource Analyst. Paul has an honours degree in Geology, is a member of the Australian Institute of Mining and Metallurgy and has 16 years experience in the mining industry in exploration, open pit, underground and operational roles, both in Australia and overseas. Before joining the company, he was Chief Geologist and Evaluations Manager at Placer Dome's Granny Smith mine. Paul has a Graduate Diploma in Applied Finance and Investment, fromthe Financial Services Institute of Australasia.