VSA Morning Miner, 29/06/20
NQ Minerals (NQMI:PZ)
NQ Minerals (NQMI:PZ) has announced that it has completed payments and signed the remaining agreements necessary to take ownership of the brownfield and high grade Tasmanian gold mine at Beaconsfield. Acquired out of administration for A$2m we believe that NQMI has completed a shrewd deal which will enable the company to realise significant upside as well as strengthen the NQMI’s credentials as a producing mining company with strong gold and silver exposure; we forecast contained gold and silver production of 8koz and 1,134koz in 2020 respectively. This currently comes in the form of by-product credits from the Hellyer tailings retreatment operation which makes NQMI the only diversified and producing miner listed in London operating exclusively in a top tier jurisdiction.
The timing and completion of the deal is in line with previous announcements and is the first of a number of upcoming milestones that the company has achieved since our recent initiation. NQMI will now focus on restarting underground mining and recommissioning the gold plant and has a team which includes external consultants focused on permitting and engineering studies to expedite a restart. The major focus is a new decline to access the historic workings while a recent resource upgrade to 483koz Au at 10.3g/t is a strong starting point with further exploration upside from surface to the start of historic workings and at depth where the resource remains open. With the mine bought out of administration and NQMI already having an operating presence in Tasmania, the company is uniquely positioned to realise value; our recent analysis demonstrate a fair value of US$84/oz EV/resource for similar high grade projects implying a fair value of US$41m or 9.4p/sh.
We reiterate our Buy recommendation and 21p/sh. target price.