Frontier Mining’s resource potential bigger and less risky than thought, RFC Ambrian believes
Nov 27. Proactive Investors UK
By John Harrington
RFC Ambrian has initiated coverage of Frontier Mining (LON:FML), the AIM quoted copper company operating in Kazakhstan, with a ‘buy’ recommendation.
Valuing the company on a sum-of-the parts basis, the miner’s house broker has come up with a risked net asset value (NAV) of ?101.4m, equivalent to 5.4p a share.
“We value Benkala at a 0.9x risked NAV due to the ramp-up in production and debt refinancing required. The Benkala South historic resource and prospective Benkala extensions are valued in our discounted cash flow as an increase to the life of mine; we apply a 0.65x risked NAV to this net present value,” the broker said.
Share price catalysts over the next 12 months include this winter’s heap leach trials plus, in the first half of next year, the maiden JORC (industry body) resource estimate for the South Benkala project and the expanded oxide resource base for Benkala.
Ambrian thinks Frontier is capable of producing 5,000 tonnes of copper cathode next year, and this figure might even go as high as 7,000 tonnes per annum (TPA) if heap leach trials are successful over the harsh winter months when, the broker notes, processing may not be possible die to the freezing conditions.
“We believe the current mine life can potentially be extended from seven years to 11 years by increasing the potential Benkala oxide resource and integrating South Benkala. The resource potential is larger, less capital intensive and carries substantially less technical and implementation risk than had been previously anticipated,” argues Ambrian’s Craig Foggo.
Further down the road, expansion to 10,000 TPA of copper production by 2014 can be achieved with low capital expenditure and technical risk, Foggo asserts, on the back of the largely optimised processing circuit and existing infrastructure. The broker has pencilled in 19,250 TPA of copper for 2015.
“The modular design, existing infrastructure and permitted land holding of the current plant allows for simple duplication of the existing operation,” Foggo believes.
Frontier Mining Limited is a copper exploration and development company with a focus on Kazakhstan. The Company’s main activity is the Benkala Copper Project in North West Kazakhstan, which forms part of the Urals copper gold ore belt. Frontier has a 100% interest in Benkala through its subsidiary KazCopper LLP.