🕐17.09.13 - 09:54 Uhr

INVESTEC: BELLZONE MINING - KALIA OXIDE SUPPORTS A ROBUST FEASIBILITY STUDY - BUY



Bellzone Mining (Price: 4.03p | Target: 10.00p | Rec: Buy) New management at Bellzone has introduced a strong emphasis on technical rigour and this shows through in the quality of the bankable feasibility study (BFS) recently completed on Kalia’s oxide resources.

The BFS suggest a positive valuation, with Bellzone indicating an IRR of 38.6% and NPV of US$1,454m at the current 58% CFR North China price of US$130/t.

Our iron-ore pricing assumptions are more conservative, but deliver a positive NPV nonetheless, lifting our TP and recommendation. * The BFS on Kalia’s oxide resources (termed KP1) outlines a 10yr, 7mtpa (dry) iron ore operation producing a 58% Fe material from the oxide resource base, at cash costs just short of $35/t (FOB), which potentially makes it a serious junior iron ore player. * As with all development projects in the current climate, the key challenge for Bellzone will be in securing financing for the $865m of capex required to construct the Kalia KP1 project.

The independence and high quality of the positive BFS should assist the company in this regard, as should the fact that Bellzone already has a production base in Guinea, and has therefore already established a “licence to operate” in the country. * Our risked valuation for Kalia, assuming a long-term iron ore price of $85/t (62% fines, FOB, Western Australia) has increased from $36.5m to $104.8m.

This includes risking the project to 40% of our NPV, reflecting the fact that a comprehensive BFS has now been undertaken, but that the project still carries financing, development and commissioning risk.

As a consequence, our overall risked NPV (and therefore our target price) for BZM has increased from 5p per share to 10p per share and we have increased our recommendation to a Buy accordingly.
To access the full note please click here Analyst: Hunter Hillcoat
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