BW Equities bullish on BLK

Published at Mar 8, 2016, in Mining

BW Equities Research has slapped a 75c 12-month price target on Blackham Resources (ASX:BLK), which represents a 54% uplift on its recent price.

The increased valuation come on the back of BLK recently putting out its Definitive Feasibility Study on its Matilda gold project.

That report, written for wholesale investors, confirmed production for this year with start-up of throughput and production likely to take place in the third quarter of this year.

According to the DFS, BLK now has a mining inventory of 45 million tonnes of ore at a grade of 3.2 grams per tonne for 4.7 million ounces.

The surer indicated category makes up 21Mt @ 3.4g/t for 2.3Moz.

An extra 2.5 years was added to the project’s mine life from the project’s pre-feasibility study as well as a 44% increase in inventory.

At this stage it has a seven year mining inventory run planned, with the goal to produce 100,0000/oz per year.

When factoring in pre-production capital costs of around $32 million, BLK expects to hit around $234 million in cash flow and a net present value of $170 million.

The report’s author, Chris Bain, said the report’s price assumptions included a gold price of $1600/oz.

While the price of gold has been stronger in this in recent times, according to BLK’s PFS the price during the past five years was $1500/oz, but with forecasting notoriously difficult it is challenging to get a hard and fast reading on the gold price going forward.

Everything else about the project, however, is getting more solid as BLK approaches production according to Bain.

“Risks associated with the Matilda Gold Project are rapidly reducing as DFS work together with ongoing drilling progresses,” he wrote.

BW also projected revenue from the project, with Bain forecasting BLK to bag $117 million in the 2017 financial year – however forecasts continue to be estimates only.

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