Small Caps | Dec 18 2014
-Upgrading quality resource
-Interest in off-take, funding
-Could move to 95%
[Since publication of this story, we have been informed by the company Toyota Tsusho made their final payment for their 20% project interest. In the original story this was indicated as being a possibility. That sentence has been removed in this updated version]
By Eva Brocklehurst
Kasbah Resources ((KAS)) is an emerging tin explorer, announcing a number of developments which could act to considerably enhance its profile in 2015. The company will complete further metallurgical test work on the Meknes trend mineralisation and integrate the upgraded western zone resource into its Achmmach project's Definitive Feasibility Study (DFS). Enhancements that are underway are expected to be finalised next quarter.
Canaccord Genuity believes Morocco's Achmmach project is the best, most advanced, undeveloped tin asset globally. The decision to make enhancements to the DFS has pushed project financing back around three months. Nevertheless, there are a number of catalyst with the potential to re-rate the company in the first half including off-take announcements and the results of the enhanced DFS. The company is confident that estimated metallurgical recovery have increased materially from the original DFS. The western zone resource was not included in the March 2014 DFS and, with a grade of 1.25% tin and very favourable metallurgical characteristics, this should lead to improved project economics.
In parallel to the debt financing process, non-binding expressions of interest have been received for concentrate off-take as well as additional project funding from tin industry trading houses and participants. Off-take for up to 75% of the tin concentrate is yet to be committed and this leverage provides the opportunity for additional sources of funding, in the broker's view. On Canaccord Genuity's estimates the company should become profitable by 2017.
The ore body at Achmmach is complex and requires technical expertise for the day-to-day mining operations. This, and the ability to fund the project to production stage, should be considered the key investment risks, in the broker's view. Obviously, the company is also highly sensitive to movements in the tin price.
The broker maintains a Buy rating, reducing its target to 14c from 16c on the back of the delay in the development timetable and changes to equity dilution estimates. Kasbah Resources, listed in 2007, operates primarily in Morocco, holding a 75% interest in the Achmmach project which consists of two exploration permits. The company also holds an interest in the Bou El Jaj tin project.
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