Black Cat Syndicate Ltd (BC8) - Research Report

Confidence increasing ahead of July’s Myhree Resource update

Black Cat (BC8) is a junior gold explorer controlling 100% of the ~87km2 Bulong Gold Project, situated just 25km east of Kalgoorlie in WA. BC8 has been progressing well since we placed a Speculative Buy recommendation on the stock in May. Recent extensional and infill RC drilling along the Myhree-Boundary corridor has continued to show strong mineralisation, further increasing the geological confidence in the Resource. This bodes well for an upgrade at the Myhree deposit planned for next month. The release of further strong drilling results and Resource upgrade are expected to act as positive near-term share price catalysts in the current strong gold price environment with AUD gold recently hitting record highs.

Key Points

  • Resource upgrade expected in July 2019: Recent infill drilling has been able to demonstrate that mineralisation is consistent with previous results, with the average spacing between holes reducing to ~25 x 30m. BC8 expect that the increase in geological confidence for the Myhree deposit is likely to result in an upgrade of part of the resource from inferred to indicated and should increase in size when an update is provided next month. This should act as a positive catalyst for the share price in our view.

  • Strong mineralisation continues along the Myhree-Boundary corridor: The undrilled area between the Boundary and Myhree deposits has now been reduced to ~400m, with the combined mineralised strike length ~1,200m. Extensional and infill drilling is ongoing as BC8 look to close the gap along the corridor over the next few months. Assays are pending at the northern end of Myhree, close to the previous drilling intercepts which recorded 28m @ 5.06 g/t Au from 4m (included 9m @ 6.64 g/t Au from 4m and 10m @ 7.55 g/t Au from 20m) in May. If similar results are achieved, we expect the share price to rerate higher.

  • USD Gold price hits highest level since 2013: Funds have been flowing into gold on the back of safe haven buying with the potential for military conflict between the US and Iran intensifying in recent days. With equity markets trading near recent peaks, this has also led to portfolio diversification amongst fund managers, as any slip up in trade negotiations between the US and China could put pressure on global equity markets. With expectations that the US Federal Reserve may cut interest rates twice this year, this has put pressure on the US dollar which is positive for the gold price. Positive market announcements by gold equities with Australian assets are likely to be treated favourably in the current strong gold environment with the AUD denominated gold price hitting record highs in recent days.

Recommendation

With significant power, road and milling infrastructure close by, an available workforce at its doorstep and a proven board and management team, future resource growth is likely to result in a value re-set by the market, in our view. Substantial exploration upside exists with the strike length of the current resource comprising only 14% of the 17km interpreted extent of the three mineralised corridors. We maintain our Speculative Buy recommendation on BC8.


Disclosure Disclaimer

RCAN1496

This Research Report expresses the personal view of the Author. DJ Carmichael Pty Limited, including authors of this report, its directors and employees advise that at the time of publication they hold or may become entitled to securities of the issued capital of the company and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions in stocks mentioned in this report.

DJC acted as Lead Manager to a pre-IPO round of funding as well as the IPO for Black Cat Syndicate Ltd (BC8) in 2017/18 and a $2.5m Placement in April 2019, and it was paid fees for those services. Black Cat Syndicate Ltd (BC8) has engaged DJC to act as corporate adviser, and pays a fee for that service. DJC, its advisers and staff hold circa 2% of unrestricted Shares, circa 14% of restricted Shares and circa 18% of options (exercisable at $0.20 expiring 17 January 2023) on issue in Black Cat Syndicate Ltd (BC8), as at 15 May 2019.

The analyst does not hold securities in Black Cat Syndicate Limited.

DJ Carmichael Pty Ltd is a wholly owned subsidiary of DJ Carmichael Group Pty Ltd 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. The information contained herein relies on information obtained from third parties. While DJ Carmichael Pty Limited believes that the information herein is accurate, 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 document to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication and its attachments is strictly prohibited.

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 the company which is the subject of this report, the new recommendation supersedes this and therefore the recommendation in this report will become null and void.

The Author of this report made contact with Black Cat Syndicate 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.

Recommendation Definitions:

SPECULATIVE BUY – Potential 10% or more outperformance, high risk
BUY – Potential 10% or more outperformance
ACCUMULATE - 10% or more out-performance, buy on share price weakness
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.

© 2019 No part of this report may be reproduced or distributed in any manner without permission of DJ Carmichael Pty Limited.