cardinal resources ltd (cdv) cardinal reso ltd cardinal ...€¦ · hartleys brief investment...

of 10

Cardinal Resources Ltd (CDV)

Gold

: E

xp

lore

r/D

eve

loper

CDV.asxSpeculative Buy

Share Price

Valuation $0.86

Price Target (12 month) $0.95

Brief Business Description:

Hartleys Brief Investment Conclusion

Directors

Top Shareholders

Gold Fields (AUS) 11.2%

Bank of Nova Scotia (Dynamic Fund) 8.6%

Van Eck Associates Corp (USA) 7.5%

Royal Bank of Canada (CAN) 7.1%

Sprott Asset Management (CAN) 5.0%

Company Address

Issued Capital

- fully diluted (ITM options)

Market Cap

- fully diluted (ITM options)

Cash (est)

Debt (est)

EV

EV/Resource oz A$21/oz

EV/Reserve oz A$30/oz

Prelim. (A$m) FY21e FY22e FY23e

Prod (Koz Au) - proj 0 172 347

Prod (Koz Au) - attr 0 155 312

Op Cash Flw -13 114 204

Norm NPAT -25 54 153

CF/Share (cps) -1.7 12.2 21.9

EPS (cps) 8.3 17.9 13.0

P/E -7.4 4.2 2.0

Resources (Moz) - 100% 7.0

Reserves (Moz) - 100% 4.8

Mike Millikan

Resources Analyst

Ph: +61 8 9268 2805

E: [email protected]

382.5m

499.2m

A$133.9m

A$174.7m

A$144.2m

A$34.8m

A$24.5m

Hartleys has been engaged by Cardinal Resources in

connection w ith arranging the early exercise of the CDVOA

listed options w ith an expiry date of 30 September 2019.

Hartleys may earn a fee for the value of proceeds raised

through the early exercise of options by clients of Hartleys.

The analyst has a beneficial interest in CDV shares.

27 Mar 2019

$0.350

Archie Koimtsidis (MD & CEO)

Suite 1, 28 Ord Street,

West Perth, WA, 6005

New signif icant gold discovery (Namdini) in northern

Ghana. Favourable economics. PFS delivered and BFS due

Q3 CY19. Strong regional exploration potential.

Kevin Tomlinson (Non-Exec Chairman)

West African gold explorer and developer

CARDINAL RESOURCES LTD (CDV)

Namdini BFS on track for early Q3 CY19 Cardinal Resources (CDV) remains focused on the delivery of a Bankable

Feasibility Study (BFS) into the development of the large Namdini Gold

Project in northern Ghana. The BFS is targeted for release in early Q3 CY19

for a final investment decision in Q4 CY19 and, subject to financing, has

targeted first production in H1 CY22.

The Pre-Feasibility Study (PFS) for Namdini was released in Nov’18, with the

study highlighting a strong investment case from a single open pit operation

with a low LOM strip ratio of 1.4:1 (waste to ore) and impressive maiden

reserve of ~4.8Moz (grading 1.14g/t Au). The large-scale operation

(+9.5Mpta) is expected to translate to high annual gold production at low

operating costs. The initial starter pit is expected to provide a low strip (0.5:1)

open pit producing +360kozpa at an AISC of <US$600/oz over the first 2.5

years, and over the life of mine (LOM) offers an average +290kozpa at an

AISC of <US$770/oz for +14 years. Mineralisation at Namdini spans +1.1km

in strike and is up to 350m wide, with the gold system still open at depth.

Construction costs are estimated to ~US$414M, and include a 15%

contingency. Assuming favourable gold prices (US$1,250/oz) once in

production, capital is expected to be repaid in under 2 years.

Optimisation of metallurgical recoveries is ongoing, and forms part of a key

input for the BFS, along with the refinement of the mine plan, with reserves

expected to be upgraded prior to the BFS release. Permitting approvals are

also ongoing, with the key environmental licence (EIA) due in Q3 CY19.

Regional exploration could add some high-grade ounces Ongoing regional exploration has the potential to add higher grade (but still

shallow) ounces to the Namdini project development. Further encouraging

results have been received from the Ndongo East prospect, which is located

~24km north of the Namdini. Gold mineralisation has been defined over some

1.2km of strike at the prospect, and is located along a prospective shear that

extends at least 7km (still largely untested).

Latest drill highlights includes 8.3m @ 11.3 g/t Au from 76m, 14m @ 7.0 g/t

Au from 69m (incl. 2m @ 42.2g/t Au from 80m), confirming mineralised

continuity around previously reported 9m @ 23.3g/t Au. The shallow gold

mineralisation at Ndongo East remains open along strike and at depth, with

delineation drilling ongoing. In addition, infill auger geochem drilling is

proposed along strike within the highly-prospective trend (adding targets).

Attractive metrics and we maintain our Speculative Buy

Our latest CDV NAV is $0.86/s (up from $0.80/s) and spot NAV is $0.96/s.

Our updated NAV adjusts for first production timing (H2 CY21 to H1 CY22),

and has improved through slightly adjusted gold prices (up 4.5% on long-run).

CDV remains undervalued our NPV estimates and on many peer metrics, in

particular EV/Reserve oz which highlights ASX-listed West African peers are

currently trading ~A$130-170 per reserve oz, with CDV trading ~A$30/oz.

We maintain our Speculative Buy recommendation with an unchanged

A$0.95/s 12-month price target (upside potential of 171%). The Company

was recently recognised for its 2014 discovery of the Namdini gold deposit,

winning the prestigious PDAC 2019 Thayer Lindsley Award, a fantastic

accolade for the CDV team and reflects the quality of the discovery.

Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000

Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the

firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys

website www.hartleys.com.au

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

.

.5

1.

1.5

2.

2.5

Mar-19Nov-18Aug-18Apr-18

Volume - RHS

CDV Shareprice - LHS

Sector (S&P/ASX SMALL RESOURCES) - LHS

A$ M

Cardinal Reso Ltd

Source: IRESS

http://www.hartleys.com.au/

Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019

of 10

SUMMARY MODEL

Cardinal Reso Ltd Share Price

CDV $0.350 Speculative Buy

Key Market Information Directors Company Information Share Price $0.350 Kevin Tomlinson (Non-Exec Chairman) Suite 1, 28 Ord Street,Market Capitalisation - ordinary A$133.9m Archie Koimtsidis (MD & CEO) West Perth, WA, 6005Net Cash (debt) -$10.3m Malik Easah (Exec Director)Market Capitalisation - fully diluted A$175m Dr Kenneth Thomas (Non-Exec Director) Phone: +61 8 6558 0573

EV - ordinary A$144m Trevor Schultz (Non-Exec Director)Issued Capital 382.5m Michele Muscillo (Non-Exec Director)Options (ITM) 116.7m www.cardinalresources.com.auIssued Capital (fully diluted inc. all options) 499.2m Bruce Lilford (Project Manager) Alec Rowlands (IR/Corp Dev)

Issued Capital (fully diluted inc. all options and new capital) 942.4m Richard Bray (Principal Geologist)

EV - fully diluted A$153m

Top Shareholders - est m shares %Valuation $0.86 Gold Fields (AUS) 42.7 11.2%

12month price target $0.95 Bank of Nova Scotia (Dynamic Fund) 33.0 8.6%Van Eck Associates Corp (USA) 28.7 7.5%

P&L Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 Royal Bank of Canada (CAN) 27.1 7.1%

Net Revenue A$m 0.0 0.0 0.0 0.0 248.2 Sprott Asset Management (CAN) 19.0 5.0%

Total Costs A$m -37.1 -28.4 -19.8 -12.0 -123.1 Commonwealth Bank Australia (AUS) 18.2 4.8%EBITDA A$m -37.1 -28.4 -19.8 -12.0 125.2 Directors 16.3 4.3% - margin - - - - 50%Depreciation/Amort A$m -0.2 -0.1 -0.5 -23.3 -48.4 Reserves & Resources Mt g/t Au Moz Au LCEBIT A$m -37.4 -28.4 -20.3 -35.3 76.8 Resources - Namdini Mar-18

Net Interest A$m 0.2 0.1 0.1 0.1 0.1 Measured 0 0.0 0.0 0.5g/t Au

Norm. Pre-Tax Profit A$m -37.2 -28.3 -20.2 -35.2 76.9 Indicated 180 1.1 6.5 0.5g/t AuReported Tax Expense A$m 0.0 0.0 0.0 0.0 0.0 Inferred 13 1.2 0.5 0.5g/t Au

Normalised NPAT A$m -26.0 -19.8 -14.1 -24.6 53.8 Total 193 1.1 7.0 0.5g/t AuAbnormal Items A$m -11.2 -8.5 -6.1 -10.6 23.1Reported Profit A$m -37.2 -28.3 -20.2 -35.2 76.9 Reserve - Namdini Sep-18 129 1.1 4.8 0.5g/t AuMinority A$m 0.0 0.0 0.0 0.0 0.0

Profit Attrib A$m -37.2 -28.3 -20.2 -35.2 76.9 Production Summary Unit Jun 20 Jun 21 Jun 22 Jun 23Mill Throughput Mt 0.0 0.0 4.8 9.5

Balance Sheet Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 Strip ratio (W:O) x 0.0 0.0 0.5 0.5

Cash A$m 7.3 11.6 43.4 11.6 82.9 Recovered grade g/t 0.0 0.0 1.1 1.1

Other Current Assets A$m 2.4 1.5 1.4 1.4 22.1 Combined Recovery & Payability % 0.0% 86.0% 86.0% 86.0%

Total Current Assets A$m 9.7 13.1 44.8 13.0 105.1 Gold - proj 100% koz 0.0 0.0 172.0 346.7

Property, Plant & Equip. A$m 0.6 0.5 0.0 531.8 490.7 Gold - attr. CDV koz 0.0 0.0 154.8 312.1

Exploration A$m 0.0 0.0 8.0 16.0 21.0 M&I Resource Conversion % 0% -17% -14% -12%

Investments/other A$m 0.0 0.0 0.0 0.0 0.0 Mine Life yr 14 14 14 13

Tot Non-Curr. Assets A$m 0.6 0.5 8.0 547.8 511.7Total Assets A$m 10.2 13.6 52.8 560.8 616.8 Costs Unit Jun 20 Jun 21 Jun 22 Jun 23

Cost per milled tonne $A/t - - 22.7 22.7

Short Term Borrowings A$m - - - - - EBITDA / tonne milled ore $A/t - - 26.3 28.3

Other A$m 4.8 2.4 1.7 1.0 10.2

Total Curr. Liabilities A$m 4.8 2.4 1.7 1.0 10.2 C1: Operating Cash Cost = (a) $A/oz - - 564 559

Long Term Borrowings A$m - 34.1 34.1 392.6 362.6 (a) + Royalty = (b) $A/oz - - 644 639

Other A$m - - - - - C2: (a) + depreciation & amortisation = (c) $A/oz - - 845 701

Total Non-Curr. Liabil. A$m - 34.1 34.1 392.6 362.6 (a) + actual cash for development = (d) $A/oz - - 636 596

Total Liabilities A$m 4.8 36.5 35.7 393.7 372.8 C3: (c) + Royalty $A/oz - - 925 782

Net Assets A$m 5.5 -22.9 17.1 167.1 244.0 (d) + Royalty $A/oz - - 716 676Net Debt A$m -7.3 22.5 -9.3 381.0 279.7 All In Sustaining Cost (AISC) $A/oz - - 869 825

All In Sustaining Cost (AISC) $US/oz - - 661 627

Cashflow Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22Operating Cashflow A$m -32.9 -29.9 -20.5 -12.6 113.6 Price Assumptions Unit Jun 20 Jun 21 Jun 22 Jun 23Income Tax Paid A$m 0.0 0.0 0.0 0.0 0.0 AUDUSD A$/US$ 0.73 0.75 0.76 0.76Interest & Other A$m 0.2 0.1 0.1 0.1 0.1 Gold US$/oz 1321 1338 1345 1360

Operating Activities A$m -32.7 -29.8 -20.4 -12.5 113.7 Gold A$/oz 1822 1795 1770 1789

Property, Plant & Equip. A$m -0.3 0.0 0.0 -555.1 -7.3 Hedging Jun 20 Jun 21 Jun 22 Jun 23Exploration and Devel. A$m 0.0 0.0 -8.0 -8.0 -5.0 Hedges maturing? No No No NoOther A$m 0.0 0.0 0.0 0.0 0.0

Investment Activities A$m -0.3 0.0 -8.0 -563.1 -12.3 Sensitivity Analysis

Net Borrowings A$m 0.0 34.1 0.0 358.6 -30.0 Base CaseEquity or "tbc capital" A$m 12.1 0.0 60.2 185.2 0.0 Spot PricesDividends Paid A$m 0.0 0.0 0.0 0.0 0.0 Spot USD/AUD 0.71, Gold $1317/oz.

Financing Activities A$m 12.1 34.1 60.2 543.8 -30.0 AUDUSD +/--10% 0.80 / 0.94 (-7.2% / 8.7%)Gold +/--10% 1.01 / 0.71 (16.7% / -17.1%)

Net Cashflow A$m -20.9 4.3 31.8 -31.8 71.4 Production +/--10% 0.86 / 0.86 (0.0% / 0.0%)Operating Costs +/--10% 0.78 / 0.94 (-9.0% / 8.9%)

Shares Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22Ordinary Shares - End m 373.6 382.5 553.0 931.3 931.3 Unpaid CapitalOrdinary Shares - Weighted m 339.7 378.0 462.2 742.2 931.3 Year Expires No. (m) $m Avg price % ordDiluted Shares - Weighted m 339.2 377.6 403.4 625.0 814.2 30-Jun-20 116.7 17.9 0.154 30%

30-Jun-21 1.9 1.9 1.000 0%

Ratio Analysis Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 30-Jun-22 18.5 9.3 0.500 5%Cashflow Per Share A$ cps -9.6 -7.9 -4.4 -1.7 12.2 30-Jun-23 3.0 2.7 0.894 1%Cashflow Multiple x 0.0 0.0 0.0 0.0 0.0 TOTAL 140.0 31.7 0.227 37%Earnings Per Share A$ cps -10.9 -7.5 -4.4 -4.7 8.3Price to Earnings Ratio x -3.2 -4.7 -8.0 -7.4 4.2 Share Price Valuation (NAV) Risked Est. A$m Est. A$/shareDividends Per Share AUD - - - - - 90% Namdini 9.5Mtpa (pre-tax NAV at disc. rate of 12%) 991.9 1.05Dividend Yield % 0% 0% 0% 0% 0% Exploration upside, other assets 60.0 0.06Net Debt / Net Debt + Equity % 399% -5687% -120% 70% 53% Forwards 0.0 0.00Interest Cover X 214.3 270.4 192.9 335.6 na Corporate Overheads -69.2 -0.07Return on Equity % na 0.9 na na 0.2 Net Cash (Debt) -10.3 -0.01

Tax (NPV future liability) -170.7 -0.18Options, Other Equity & Listed Investments 10.0 0.01Hedging 0.0 0.00Total 811.7 0.86

Analyst: Mike Millikan

+61 8 9268 3045

"tbc capital" could be equity or debt. Our valuation is risk-adjusted for how this may be obtained.

Sources: IRESS, Company Information, Hartleys Research

Last Updated: 27/03/2019

FY22 NPAT76.9

76.9 / 76.9 (0.0% / 0.0%)67.2 / 86.6 (-12.6% / 12.6%)

0.96 (11.9%)0.86

Valuation

100.3 / 53.4 (30.5% / -30.5%)

79.6 (3.6%)

64.4 / 92.1 (-16.3% / 19.9%)


of 10

NAMDINI GOLD PROJECT, GHANA

LARGE-SCALE, LONG-LIFE, EXPLORATION UPSIDE

The Namdini project area is located in the northern parts of Ghana, West Africa. In

mid-July 2017, CDV, through its 100%-owned Ghanaian subsidiary (Cardinal Mining

Services) was assigned a large-scale mining licence (ML) at Namdini. The granted

ML is larger than the original Namdini EL and as well as covering Namdini gold

deposit, spans more of the mineralised trend (major and parallel structures).

Namdini is located within a Paleoproterozoic (Birimian-aged) Greenstone Belt

comprising metavolcanics, granitoids, volcaniclastics and metasediments located to

the east of a major regional shear zone (~30km NS), with associated faults and to

the east of the Nangodi Fold Belt.

The Namdini deposit is a structurally controlled orogenic gold deposit with the gold

not constrained to any discrete mineralised shear zone(s), but largely disseminated

throughout a wide zone of altered metavolcanics, granitoids, diorite and

metasediments.

The current Namdini resource estimate is 193Mt grading 1.1g/t Au for 7.0Moz (at

a 0.5g/t Au lower cut). Importantly, ~93% of resources are Indicated (180Mt grading

1.13g/t Au for 6.5Moz), with the higher category tonnes from surface to ~400m

vertical depths.

Fig. 1: Project Tenement Location - Ghana

Source: Cardinal Resources Limited

Located in the

northern par ts of

Ghana, West Afr ica

Location

Source: CDV

The nor thern parts of

Ghana are considered

highly prospect ive but

are considered under

explored when

compared to Southern

Ghana

Namdini has good

local infrastructure

with grid power

(hydro) located ~30km

from the project, year -

round water from the

White Volta River

(only 7kms away) and

within 25kms of

sealed national

highway

Namdini has a granted

ML – 15 years

renewable

CDV has the f irst

mover advantage and

a dominant land

posi t ion cover ing

numerous promising

but early-stage

targets, we bel ieve

CDV is well placed to

unlock addit ional

explorat ion value


of 10

PFS RELEASED LATE CY18, BFS DUE Q3 CY19

The Namdini PFS highlighted a strong investment case to progress through to the

completion of the BFS, which is currently targeted for release in Q3 CY19.

The PFS has delivered an impressive maiden reserve of 129.6Mt grading 1.14g/t

Au for 4.76Moz, from a large-scale, single open pit, which has a life of mine (LOM)

strip ratio of only 1.4:1 (waste to ore), a very good outcome.

The PFS uses conventional crush (primary), grind (SAG/Ball mill), float

(concentrate), regrind, and CIL flowsheet. The preferred production scale of

9.5Mtpa, delivers the optimal project economics, and translates to high annual gold

production at low operating costs (AISC) over a long mine life (14 years).

Construction costs have improved on the PEA estimates, and are now US$414M

(down from US$426M).

Optimisation of metallurgical recoveries is ongoing. Assuming the project can be

successfully funded through construction, first production is targeted for H1 CY22.

The figure (Fig.2) below summarises the PFS outcome compared to the PEA.

Fig. 2: Namdini – PEA vs PFS- Key Outcomes

Source: Cardinal Resources Limited: Note the different gold prices used in the financial metric comparison above, at US$1,300/oz the

PFS Post Tax NPV@ 5% is US$672 (better than the PEA), and provides an IRR of 42%.

The central part of the deposit may also provide a higher grade “starter pit” which

would largely be hosted within the metavolcanic and granite units. This starter area

has a grade profile of +1.3g/t Au and provides a very low strip ratio of ~0.5:1 (W:O)

for the initial open pit. The early processing of this ore could increase capital payback

for the large scale (9.5Mtpa) operation.

PEA

Units 9.5Mtpa - LOM 9.5Mtpa - Starter 9.5Mtpa - LOM

Mining Method Type Open Pit

Resource Mt 204.7Mt @ 1.1g/t Au for 7.4Moz

Mining Inventory or Reserve Mt 113Mt @ 1.1g/t Au for 4.1Moz (MI) 24Mt @ 1.31g/t Au for 1.06Moz 129Mt @ 1.14g/t Au for 4.76Moz

LOM Strip Ratio W:O 1.2:1 0.5:1 1.4:1

Head Grade g/t Au 1.13 1.31 1.14

Mine Scale Mtpa 9.5 9.5 9.5

Mine Life Years 14 2.5 14

Total Recovery % 86% 86% 84%

Production -100% Kozpa 333 361 294

AISC US/oz 701 599 769

Capex pre-prod US$M 426

LOM sus capex US$M 154

Gold Price (used) US$/oz 1300

CDV Pre‐Tax NPV@ 5% US$M 1036

CDV Post‐Tax NPV@ 5% US$M 649

Pre-Tax IRR % 62

Post-Tax IRR % 44

Project pay-back Years 3.3

38

1.8

170

1250

927

586

Assumptions

PFS

Open Pit

193Mt @ 1.1g/t Au for 7.0Moz

414

49

The PFS has improved

on the PEA, and wil l

now progress to

Maiden reserve of

129.6Mt grading

1.14g/t Au for

4.76Moz

The potent ial starter

pit is expected to

provide higher grade

ores at a low str ip

rat io

Ear ly processing of

higher grade ore

should increase

capi tal payback


of 10

Fig. 3: Namdini– Processing Flowsheet


Fig. 4: Namdini –Long Section (Grade Distribution)



of 10

NDONGO EAST TAKING SHAPE

The Ndongo East prospect is located ~24km north of the Namdini. The prospect is

situated within NE-SW trending Birimian metavolcanics and metasediments, with

gold mineralisation defined over some 1.2km of strike, along a prospective shear

that extends at least 7km (but remains largely untested). CDV continues to delineate

mineralisation with some of the more significant drill intercepts including:

9m @ 23.3 g/t Au from 60m in NDRC248;

14m @ 7.0 g/t Au from 69m (incl. 2m @ 42.2g/t from 80m) in NDDD046;

8.3m @ 11.3 g/t Au from 76m in NDDD059;

3m @ 29.3 g/t Au from 45m in NDDD036; and

6m @ 12.6 g/t Au from 2m in NDRC275.

Mineralisation encountered thus far appears to be developed at, or near, the diorite-

granodiorite contacts, with mineralised horizons containing variable chlorite-silica-

carbonate-sericite alteration with sulphides (mainly pyrite with very minor

arsenopyrite). The mineralised system is open along a northeast-southwest strike

and at depth. Delineation drilling is ongoing.

CDV also plans to complete infill auger drilling and geophysical surveys along the

mineralised trend (~7km), with the work expected to commence in April.

Fig. 5: Ndongo Area Geology/Geochem (RHS); Ndongo East Geology and Drill ing (RHS)


The Ndongo East

prospect is located

~24km north of the

Namdini

Ongoing regional

explorat ion has the

potentia l to add higher

grade (but st i l l

shal low) ounces to the

Namdini project

development


of 10

Fig. 6: Ndongo East – Section E1 (LHS) and Section E-1 (RHS)



of 10

VALUATION AND PRICE TARGET

METHODOLOGY – UPDATE

Our CDV valuation (sum of parts) and price target is largely based on the PFS (which

includes a maiden reserve for Namdini). Metallurgical testwork is ongoing to

optimise recoveries. Latest metallurgical updates provide a good level of comfort

that total recoveries of 84-86% can be achieved, with the processing flowsheet now

determined and being fine-tuned.

We now model a ~4.8Moz mining inventory (same as the reserve) mined via open

pit, using estimated opex and capex based on the PFS estimates. We stress our

model inputs remain subject to change and we assume the project can be

successfully funded into production. We use a discount rate of 12% during

developments with the rate to be lowered upon reaching production. Our model is

fully funded (60:40 Debt to Equity ratio) and fully diluted.

Fig. 7: Hartleys CDV NAV

Source: Hartleys Estimate

Our 12-month price target is A$0.95/s (unchanged), derived from both a discounted

cashflow analysis of a successful gold operation at Namdini, cash and future cash

value and our perception of exploration value in the search of other gold deposits.

Fig. 8: Hartleys CDV Price Target

Source: Hartleys Estimates

Share Price Valuation (NAV) Risked Est. A$m Est. A$/share

90% Namdini 9.5Mtpa (pre-tax NAV at disc. rate of 12%) 991.9 1.05

Exploration upside, other assets 60.0 0.06

Forw ards 0.0 0.00

Corporate Overheads -69.2 -0.07

Net Cash (Debt) -10.3 -0.01Tax (NPV future liability) -170.7 -0.18Options, Other Equity & Listed Investments 10.0 0.01Hedging 0.0 0.00Total 811.7 0.86

Price Target Methodology Weighting 27/03/2019 12 Month

50% $0.86 $0.95

20% $0.96 $1.07

10% $1.26 $1.33

5% $1.48 $1.56

Exploration value no development 10% $0.39 $0.47

5% $0.00 $0.00

Risk weighted composite $0.86

12 Months Price Target $0.95

Shareprice - Last $0.350

12 mth total return (% to 12mth target + dividend) 171%

90% Namdini (NPV@12) - Open Pit 9.5Mtpa 15 yr- Hartleys

90% Namdini (NPV@12) - Open Pit 9.5Mtpa 15 yr- Spot

Base Case (9.5Mtpa) using 5% discount rate - Spot

Current Cash Backing

Base Case (9.5Mtpa) using 5% discount rate - Hartleys

Our CDV valuation

and pr ice target are

largely unchanged

The Company’s

current cash posit ion

provides funding for

ongoing explorat ion

and development

studies

Our latest CDV spot

NAV is A$0.96/s

We assume f irst

production in H1 2022

Our 12-month pr ice

target remains

unchanged at $0.95/s


of 10

RISKS Key risks for Cardinal include metallurgy, improving resources which can be

converted to reserves, development studies and funding (both for ongoing

exploration activities and any potential future development).

Fig. 9: Key assumptions and risks for valuation

Assumption Risk of not realising

assumption

Downside risk to share price if assumption is

incorrect Comment

Project ownership can be maintained

Low Meaningful We assume CDV project tenure agreements are enforceable and the Company will retain full mineral ownership and exploitation rights. We assume NSR payments will be made to

Savannah. The granted ML has been assigned to CDV.

Debt can be serviced and repaid

Low-Med Meaningful CDV now has fully drawn debt of US$25M (~A$34M), and needs cover interest

repayments and ultimately repay the facility. It has a 30 month term, and will likely be repaid at time of project financing, or rolled into an updated facility. Debt introduces additional

financial risks, which need to be considered.

Sovereign risk Low Meaningful We assume Ghana remains a stable country with favourable laws for foreign investment and

the repatriation of potential future earnings.

Model parameters for our preliminary CDV valuation and price target

Med Meaningful We have made a number of assumptions in our CDV valuation, based on information largely supplied in the PFS. CDV has no production history. Any changes to our

assumptions have both upside and downside risks.

Metallurgy outcome ultimately viable

Med Extreme The metallurgical testwork provided recoveries, which are now 84-86% from the processing flowsheet of crush-grind-float-regrind-CIL

(preferred route at this stage). Further optimisation is continuing.

Favourable commodity prices

Low Meaningful CDV remains sensitive to changes in commodity prices (particularly gold), exchange rates and market sentiment. Though with no

current operations, direct impact from commodity prices is limited. With exploration

tenure offshore, US$, AUD and local Ghanaian Cedi exchange rates are a risk.

Upside from exploration Med Moderate CDV is currently funded for planned

exploration activities (~A$25M in estimated funding). The Company also has in the money options which could provide additional future

funding. We consider the Company’s ground to be highly prospective and under-explored, and a significant gold discovery has already been

made at Namdini. However, the lack of exploration success would have a negative

impact on the Company.

Conclusion At this stage we consider the assumptions have a low to medium risk of not being achieved.

Source: Hartleys Research

of 10

HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Head of Research +61 8 9268 3052

Mike Millikan Resources Analyst +61 8 9268 2805

John Macdonald Resources Analyst +61 8 9268 3020

Paul Howard Resources Analyst +61 8 9268 3045

Aiden Bradley Research Analyst +61 8 9268 2876

Oliver Stevens Research Analyst +61 8 9268 2879

Michael Scantlebury Junior Analyst +61 8 9268 2837

Janine Bell Research Assistant +61 8 9268 2831

Corporate Finance Dale Bryan Director & Head of

Corp Fin.

+61 8 9268 2829

Richard Simpson Director +61 8 9268 2824

Ben Crossing Director +61 8 9268 3047

Ben Wale Director +61 8 9268 3055

Stephen Kite Director +61 8 9268 3050

Scott Weir Director +61 8 9268 2821

Scott Stephens Associate Director +61 8 9268 2819

Rhys Simpson Associate Director +61 8 9268 2851

Michael Brown Executive +61 8 9268 2822

Registered Office

Level 6, 141 St Georges Tce Postal Address:

Perth WA 6000 GPO Box 2777

Australia Perth WA 6001

PH:+61 8 9268 2888 FX: +61 8 9268 2800

www.hartleys.com.au [email protected]

Note: personal email addresses of company employees are structured

in the following manner: [email protected]

Hartleys Recommendation Categories

Buy Share price appreciation anticipated.

Accumulate Share price appreciation anticipated but the risk/reward is

not as attractive as a “Buy”. Alternatively, for the share

price to rise it may be contingent on the outcome of an

uncertain or distant event. Analyst will often indicate a

price level at which it may become a “Buy”.

Neutral Take no action. Upside & downside risk/reward is evenly

balanced.

Reduce /

Take profits

It is anticipated to be unlikely that there will be gains over

the investment time horizon but there is a possibility of

some price weakness over that period.

Sell Significant price depreciation anticipated.

No Rating No recommendation.

Speculative

Buy

Share price could be volatile. While it is anticipated that,

on a risk/reward basis, an investment is attractive, there

is at least one identifiable risk that has a meaningful

possibility of occurring, which, if it did occur, could lead to

significant share price reduction. Consequently, the

investment is considered high risk.

Institutional Sales Carrick Ryan +61 8 9268 2864

Justin Stewart +61 8 9268 3062

Simon van den Berg +61 8 9268 2867

Digby Gilmour +61 8 9268 2814

Jayme Walsh +61 8 9268 2828

Veronika Tkacova +61 8 9268 3053

Wealth Management Nicola Bond +61 8 9268 2840

Bradley Booth +61 8 9268 2873

Adrian Brant +61 8 9268 3065

Nathan Bray +61 8 9268 2874

Sven Burrell +61 8 9268 2847

Simon Casey +61 8 9268 2875

Tony Chien +61 8 9268 2850

Tim Cottee +61 8 9268 3064

David Cross +61 8 9268 2860

Nicholas Draper +61 8 9268 2883

John Featherby +61 8 9268 2811

Ben Fleay +61 8 9268 2844

James Gatti +61 8 9268 3025

John Goodlad +61 8 9268 2890

Andrew Gribble +61 8 9268 2842

David Hainsworth +61 8 9268 3040

Murray Jacob +61 8 9268 2892

Gavin Lehmann +61 8 9268 2895

Shane Lehmann +61 8 9268 2897

Steven Loxley +61 8 9268 2857

Andrew Macnaughtan +61 8 9268 2898

Scott Metcalf +61 8 9268 2807

David Michael +61 8 9268 2835

Jamie Moullin +61 8 9268 2856

Chris Munro +61 8 9268 2858

Michael Munro +61 8 9268 2820

Ian Parker +61 8 9268 2810

Matthew Parker +61 8 9268 2826

Charlie Ransom

(CEO)

+61 8 9268 2868

Heath Ryan +61 8 9268 3053

David Smyth +61 8 9268 2839

Greg Soudure +61 8 9268 2834

Sonya Soudure +61 8 9268 2865

Dirk Vanderstruyf +61 8 9268 2855

Samuel Williams +61 8 9268 3041

Disclaimer/Disclosure

The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold

shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities.

Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice

mentioned in publications to clients.

Hartleys has been engaged by Cardinal Resources Limited ("Cardinal") in connection with arranging the early exercise of the CDVOA listed

options with an expiry date of 30 September 2019. Hartleys may earn a fee for the value of proceeds raised through the early exercise of options

by clients of Hartleys.

Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting

your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs.

Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued.

Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in

negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.

cardinal resources ltd (cdv) cardinal reso ltd cardinal ...€¦ · hartleys brief investment...

Documents