Tamesis Partners Research Note for MOD Resources LSE/ASX

MOD Resources (ASX/LSE: MOD, Market Capitalisation US$50 million)

Just prior to Christmas, MOD announced further drilling results at their 70% owned A4 Dome discovery. A4 Dome is 8km from MOD’s 100% owned flagship T3 Copper Project for which a DFS is in the process of being completed following a positive PFS.

The T3 open pit is targeted to produce circa 30,000tpa Cu with A4 and other satellite deposits representing potential sources of additional underground ore which could support a production expansion for relatively modest additional capex.

The positive news was that wide spaced drilling to date has identified three layers of copper and silver mineralisation to support a potential satellite underground operation:

  • Initial shallow high-grade vein hosted mineralisation (recent intersections include 15m @ 1.1% Cu &16 g/t Ag from 39m and 21m @ 1.1% Cu & 8 g/t Ag)
  • High-grade NPF contact mineralisation (3-6 metres at ~1.5% – 2.4% Cu with silver credits) at the base of the Kalahari Copperbelt structure; and
  • Substantial disseminated widths of 15-50m @ 0.9% – 1.1% Cu overlaying the NPF contact zone.

Importantly, the results announced continue to support this thesis. Work is still ongoing on the vein structures, however a conceptual mining study suggests that the core of a mining scenario will be the mining of the high grade contact zone by room and pillar with long hole stoping mining of the overlaying disseminated mineralisation. This should mean relatively low decline development costs and a low capital intensity route to higher grade ores for processing at the T3 plant.

CommentThese results categorically support the company’s hypothesis that there is potential for multiple underground mining scenario at nearby satellite deposits which are complimentary to the 100% owned T3 project. During weak market sentiment at the end of ’18, the stock was sold down disproportionately on low volume and poor global sentiment for both mining investments and equities in general. What stands out for us is that copper assets in safe jurisdictions, with district potential, are scarce. MOD’s T3 project has a pre-tax NPV8% of approx. US200 million at $2.70/lb Cu per the PFS. Since then, the resource base has been increased substantially to support an increased plant throughput with other improvements announced re metallurgy should positively impact economics. We therefore look forward to the DFS due in March with optimism. For the US$50 million market cap investors get this, the expansion potential from A4 Dome and other T3 satellite targets, plus the exciting regional potential across the 140km copper belt under MOD’s control.   

 


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