Canaccord sets 30c price target for high-grade copper developer New World Resources

Canaccord Genuity has issued a Speculative Buy recommendation with a 30c price target for emerging copper explorer-developer New World Resources (currently 10c).
11th June 2021
Resources Rising Stars

In an initiation note, Canaccord cautions that its valuation is preliminary in nature and should be viewed as a what-if case, given no formal mining studies have been published and a maiden JORC resource is awaited, but outlines what it describes as a “likely development scenario” for the company’s Antler project in Arizona, USA.

“Based on the published drilling data to date, we have modelled a potential mine inventory for Antler,” Canaccord says. The project has a non-JORC historic resource of 4.7Mt at ~3.4% copper equivalent.

The broker says that, based on drilling in the Main and South Shoots, it estimates that the company can define 7.25Mt at 3.5% copper equivalent for ~250,000t of contained copper.

“If NWC can define a JORC resource in the region of +7Mt at ~3.5% CuEq, we see a potential scenario centring around a 1Mtpa operation producing ~30ktpa CuEq for six years,” the report says.

“We estimate CAPEX could be in the region of US$160 million to build a small footprint underground and flotation plant, and the high margin operation could yield a net smelter revenue of US$200/t for operating costs of ~US$100/t,” it says.

“If a resource approach 10Mt can be defined, a 1.25Mtpa plant producing 36ktpa CuEq over seven years seems likely to us.”

Canaccord says that for its valuation, it has modelled a hypothetical initial mine inventory and applied this to a number of possible development scenarios using a 1X forward curve, consensus and spot pricing and a conservative 12% discount rate.

“Given the strong tailwinds in the copper space currently, our 1Mtpa base case values NWC at ~$530 million or 33c per share at spot,” it says.

Canaccord says near-term catalysts include the publication of a maiden resource for Antler next month. “If it can achieve somewhere in the region of 3.5% CuEq, it will make Antler the highest grade, ASX copper dominant deposit among 36 peers in our copper database.”

“Drilling is ongoing and we expect it will likely feed further resource growth throughout 2022 as well as provide samples for metallurgical testwork.”

A PFS is scheduled to begin in the September quarter this year.

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