Breaker riding swell

11th August 2017
Resources Rising Stars

The pundits at the Diggers & Dealers bash seem to have decided that Breaker Resources is one to watch in the gold exploration space, reports Barry FitzGerald.

Breaker's Lake Roe discovery beneath thin cover and all of 100km east of Kalgoorlie underpinned a share price price to 78c this week and a market cap of more than $90 million.

But with a maiden resource due on the discovery later this year, and with growing expectations Breaker has a multi-million ounce find on its hands, the belief is that is a case of onwards and upwards for the stock.

Bell Potter analyst David Coates penned a research note to that effect ahead of the conference, placing a Spec Buy rating on Breaker and a $1.40 a share valuation.

"We believe that BRB represents a unique opportunity in the landscape for Australian gold assets and its Lake Roe gold project may well emerge as one of the landmark discoveries of the current decade,” Coates said.

"In short, we see potential for a multi-million ounce open-pit operation with a 7-10 year mine life at good grades (~2.0g/t Au), depth extensions to support a concurrent underground operation and untested exploration potential surrounding a significant mineral endowment."

Coates added that while he would not normally factor in the potential for corporate action in building an investment case, there was probably merit in doing so with Breaker.

"We think in this case it is too compelling to ignore," Coates said. "The re-emergence of the Australian mid-tier gold space through companies like Northern Star (NST) and Evolution (EVN) has been driven by aggressive acquisitive growth via shrewd corporate deals.

"This cycle however has since waned and the hunt is on for the next asset that can make meaningful contribution to production portfolios. We see several potential acquirers for the kind of asset Lake Roe is evolving into and the competitive advantage it would bring. We make no allowance for a ‘control premium’ in our valuation but in time we see the potential for stiff competition to own it," Coates said.

Smart bit of work too by Coates in having written up the report before the hard yards at D&D got started.

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