MacPhersons Resources: Offers silver exposure at comfortable margin, broker

MacPhersons Resources (ASX: MRP) has received a Speculative Buy recommendation from Argonaut Equity Research with a price target of $0.34.
This
is almost 90% higher than its current price of $0.18 and is based on
offering significant exposure to silver through its high grade Nimbus
Silver-Zinc-Gold Project in Western Australia.
The following is an extract from the research report:
Quick Read
MacPhersons Resources is exploring and developing its 100% Nimbus - Boorara - MacPhersons deposits, located near Kalgoorlie, WA.
The
upcoming drilling program designed to test the depth extension of
existing mineralisation at Nimbus is expected to extend the current
5.5-year mine life.
Event & Impact | Positive
The
company is one of the few on the ASX offering significant exposure to
silver through its high grade (298g/t Ag-Eq) Nimbus silver project. On
Argonaut’s estimate the project could produce ~5.2Moz Ag Eq pa for 7.3
years, subject to exploration success.
The high grades translate
into a projected “all-in” sustaining cost of ~$15/oz Ag on an Ag-Eq
basis, producing a buffer against metals price volatility.
Centralised operation at Nimbus
MRP’s
key assets are located around Kalgoorlie, the mining capital of the
Eastern Goldfields region of Western Australia. The company is in the
process of completing its Feasibility Study, in which a centralised
480ktpa processing facility at Nimbus is envisaged.
Infrastructure
Nimbus
benefits from well-established infrastructure, being on the door-step
of Kalgoorlie. This includes power, water, gas, rail, roads, airport and
a well-established residential mining force. The project is located ~4
kilometres from the Trans-Australia railway main line and 15 kilometres
from a railway crossing and station.
Geology
Nimbus
is classified as a Volcanogenic Hosted Massive Sulphide (VHMS) deposit
analogous to Independence Group’s Jaguar / Bently and MMG’s Golden Grove
deposits.
The Nimbus Project lies within the major greenstone
belt which extends from Norseman to Wiluna in the Eastern Goldfields
Province.
Exploration upside
The
mineralisation at Nimbus remains open, particularly at depth. The
existing Resource has been limited by the extent of drilling (to ~200
metres). Argonaut considers the extension of Resource likely with
further extension drilling, particularly at the Ag211 lens.
Boorara - Heap leach operation
The
Boorara deposit is located adjacent (~1km away) to the operation at
Nimbus. The Resource is 258koz @ 1.1g/t. The proposed operation is an
oxide, gold heap leach with potentially high margins due to the low cost
nature of heap leach operations and the strip ratio of ~3:1.
Boorara - Potential feed for the superpit
The
oxide feed from Boorara could alternatively be trucked to the Fimiston
Operation (Superpit, Barrick/Newmont JV) ~10 kilometres away as a
supplement feed.
MacPhersons - Gold feed to supplement operation at Nimbus
The
MacPhersons gold mine is situated in the south east of the Coolgardie
goldfield, ~6 kilometres south east of the town of Coolgardie, ~50
kilometres from Nimbus. Access is via the Great Eastern Highway and
unsealed roads. The Resource is 198koz @ 1.6g/t.
The ore would
supplement the Nimbus plant towards the end of the operation, however
any mine life upside from Nimbus or Boorara would likely push out
MacPhersons production.
Flowsheet
The proposed processing facility at Nimbus is versatile and capable of processing different types of ore.
Due
to the presence of multiple types of ore feed, the plant incorporates a
Merrill-Crowe circuit (catering for the high silver content), a
flotation circuit (to produce a Zn concentrate), a mercury retort (low
temperature oven to recover mercury), and a gold heap leach circuit.
Capex requirement
Total start-up capex requirement is estimated to be $58 million to $66 million, inclusive of contingencies.
Valuation
Argonaut’s valuation of $0.34 is based on the project parameters and price assumptions.
We
have assumed a combined mine life of 7.3 years (vs existing 5.5 years)
by factoring an additional ~ 9 million ounces of silver. The plant is
estimated to process about 453kt ore pa, producing ~5.2Moz of Ag Eq pa.


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