Black Cat Syndicate Ltd (BC8) - Research Report

Further regional consolidation increases BC8’s tenement position by 46%

Black Cat Syndicate (BC8) announced that it has agreed with Pioneer Resources (PIO) to enter into a Farm-In and Joint Venture agreement at PIO’s Balagundi Project, located directly adjacent to the north-west portion of BC8’s Bulong Gold Project. The tenements are prospective for both gold and VMS base metal deposits with five key targets identified. The Farm-in will see BC8’s tenement position increase by around 46% from 87km2 to 128km2 as it continues on its path of consolidating underexplored tenement holdings around the Bulong Project. With the acquisition cost of only $40,000 in BC8 scrip, we expect BC8 to unlock the value in the tenement, providing further upside for shareholders.

Key Points

Key terms of the Farm-in:

  • BC8 will issue 122,820 ordinary shares worth $40,000 to PIO with a 12-month escrow period.

  • BC8 to spend a minimum of $150,000 within two years (with $50,000 in the first year), after which BC8 can withdraw.

  • BC8 can earn into 75% of the project provided a total of $600,000 is spent within five years. PIO to retain a 25% free carried interest to completion of an approved Bankable Feasibility Study and mining approval license.

  • Past exploration at Balagundi has been limited: PIO and previous tenement holders have collected excellent geochemical and soil data across the project. Historical drilling has been shallow, averaging only 72m and limited to 281 RAB and 20 RC drill holes and remains underexplored. Some of the better gold drill intersections include:

    • 2m @ 6.33 g/t Au from 49m

    • 4m @ 3.16 g/t Au from 60m

    • 2m @ 5.34 g/t Au from 42m

    • 1m @ 8.54 g/t Au from 56m

    • 4m @ 2.17 g/t Au from 60m

      A significant copper hit was recorded with further work warranted to test the potential for base metals:

    • 4m @ 3.2% Cu from 20m

  • Acquisition cost an endorsement of BC8’s management team: The $40,000 Farm-in cost is at the lower end of agreements to buy into gold projects in Australia over the past quarter. We see this as an endorsement of BC8 management’s ability to unlock value in tenement holdings, with their focus on progressing the Myhree and Trump deposits towards a decision to mine next year, after only initially drilling Myhree in July 2018. We expect additional value to be unlocked for BC8 shareholders.

Recommendation

With only 21% of the prospective corridors drilled at the Bulong Project, strong news flow is expected to continue as BC8 looks to rapidly build up its resource base. With a proven management team and in a prime location with nearby infrastructure, we expect to see a higher market cap as BC8 further progresses towards mine development. We maintain our Speculative Buy recommendation on BC8.


Disclosure Disclaimer

RCAN1498

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.

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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.

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