Zacks initiates coverage of Colt Resources with an
Outperform rating
Steven Ralston, CFA
Zacks has initiated coverage of Colt Resources (V.GTP: TSX-V) with an
Outperform rating and a target of $1.35. Colt Resources is a junior
gold exploration company with two advanced stage projects in
Portugal: the Boa Fé gold project and the Tabuaço tungsten project.
Drilling programs are proceeding at both properties with positive
assay results having been announced 14 times thus far in 2012. The
company has been very successful in obtaining equity capital to
finance the exploration and development of these gold and tungsten
projects. Both Boa Fé and Tabuaço have NI 43-101-compliant
estimated resource reports.
We believe that the Chaminé and Casas Novas gold deposits at Boa
Fé and the São Pedro das Águias scheelite (tungsten) deposit at
Tabuaço are readily recoverable. Management's internal goal is to
initiate production at both locations in 2014. The Chaminé deposit
at Boa Fé is well-suited for an open pit mining project under the
experimental mining license, which allows for an open pit with a
maximum surface area of 5 hectares. An initial NI 43-101-compliant
resource estimate for the Chaminé and Casas Novas deposits was
released on July 3rd, 2012. Management has accelerated
drilling in order to evaluate nearby deposits and plans to complete
a preliminary economic assessment by the first quarter of 2013. At
Tabuaço, drilling continues in order to better delineate and
upgrade the tungsten resource estimate, which is expected later
this year. An internal preliminary conceptual mine plan has been
completed, and management plans to apply for an experimental mining
license. Management is in discussions with a number of unnamed
parties to act as a potential partner to bring the scheelite mine
to production within two to three years.
Colt Resources is also drilling areas adjacent to the deposits
slated for production. The Boa Fé shear zone hosts a series of high
grade, near-surface gold deposits and occurrences. Within the
confines of the Boa Fé experimental mining license, confirmatory
and exploratory drilling is also occurring at the Banhos, Braços,
Covas and Ligeiro deposits. Historical drilling at these deposits
suggests significant potential. At Tabuaço, other promising
occurrences of scheelite around the São Pedro das Águias deposit
are being investigated, namely, Quinta das Herédias, Quintã, Quinta
do Paço and Quinta da Aveleira. These numerous targets at Boa Fé
and Tabuaço have the potential to define additional economic
deposits that could be brought into production with Chaminé, Casas
Novas and San Pedro das Águias.
Nikolas Perrault, CFA, was appointed CEO in December 2008. While
at Colt Resources, Mr. Perrault has a track record of
opportunistically pursuing acquisitions of concessions in Portugal,
most recently the Boa Fé gold project. Prior to Mr. Perrault's
arrival, the Penedono concession had been the company's primary
focus. Mr. Perrault is fast-tracking the development of the Boa Fé
and Tabuaço projects.
Our price target is based on an estimated share value of
attributable resources. The methodology ascertains a value for each
property and accounts for relevant balance sheet items such as
working capital, PPE (property, plant and equipment), marketable
securities and debt. The value of each individual property is
determined by adjusting the value of current resources for the
expected recovery rate, mining/processing costs and net smelter
royalties. Based on our calculation of share value of attributable
resources, the target for Colt Resources' stock is $1.35 supporting
our Outperform rating. The valuation model is quite conservative in
that it includes the development costs of two mining operations
(gold at Boa Fé and tungsten at Tabuaço). In general, these costs
are not usually incorporated into resource-based models. For
comparison purposes, removing the development costs would produce a
$2.26 per share value of attributable resources.
Please visit scr.zacks.com to access a free copy of the full
initiation report.
(V.GTP): ETF Research Reports
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