celsius resources ltd (cla) e: [email protected] d … · ev/resource t co a$924/t...
TRANSCRIPT
Page 1 of 11
Celsius Resources Ltd (CLA)
Coba
lt /
Base M
eta
ls:
Exp
lore
r
CLA.asxSpeculative Buy
Share Price
Price Target (12 month) $0.26
Brief Business Description:
Hartleys Brief Investment Conclusion
Chairman & MD
Top Shareholders
Gecko Nambia (Pty) Ltd 8.5%
Directors and Management 3.2%
Company Address
Issued Capital
- fully diluted
Market Cap
- fully diluted
Cash (31 Mar 2018e)
Debt (31 Mar 2018e)
EV - current
EV - fully diluted
EV/Resource t Co A$924/t
EV/Reserve t Co -
Resources (kt Co) -attr. 119,795
Reserves (kt Co)-attr. -
Mike Millikan
Resources Analyst
Ph: +61 8 9268 2805
A$130.3m
Cobalt and base metal (copper) focused explorer and
potential developer.
Hartleys has assisted in capital raisings in the past 12
months for Celsius Resources Limited ("Celsius") for w hich it
has earned fees. Hartleys has a beneficial interest in 16
million options in Celsius.
598.2m
16 Apr 2018
$0.190
Brendan Borg (Managing Director)
Level 3, 216 St Georges Tce
Perth WA 6000
Controls 95% of the f lag-ship Opuw o Cobalt Project in
Namibia. Large maiden resource estimated exceeding all
expectations. Cobalt thematic continues to look good, w ith
grow ing demand for use in electric vehicles, storage
batteries and smartphones.
Bill Oliver (Non-Exec Chairman)
A$3.0m
A$0.0m
A$110.7m
A$139.5m
A$113.7m
733.9m
CELSIUS RESOURCES LTD (CLA)
Maiden Cobalt Resource Exceeds All Expectations Celsius Resources Ltd (CLA) has delivered an impressive maiden cobalt
resource for the 95%-owned Opuwo project in Namibia, significantly
exceeding expectations and the Exploration Target for the project.
The initial total resource (100% basis) consists of 112.4Mt grading of 0.11%
cobalt, 0.41% copper, and 0.43% zinc for some 126,100t of contained
cobalt, ~464,280t of contained copper and ~483,750t of contained zinc (at a
cut-off grade of 0.06% cobalt). Approximately 64% of the resource is in the
Indicated resource category, with fresh sulphide ores comprising over 95% of
the overall resource, which bodes well for the proposed processing flowsheet
of conventional flotation. Further resource growth is anticipated as the deposit
remains open along strike and at depth, with drilling ongoing to increase
resource confidence and extend mineralisation nearer to surface.
Initial resource provides base for scoping studies due late Q2 The resource has been estimated from 128 drill holes (largely drilled on a
200m x 100m grid) covering ~10km of strike over the mineralised Dolomite
Ore Formation (DOF). However, the DOF has been drill-tested over +15km,
and mapped/sampled over +30kms, so the resource has substantial upside.
The maiden resource significantly exceeds (+174%) the Company’s original
Exploration Target tonnage of 33-41Mt, with grade slightly lower than forecast
(target of 0.13-0.17% cobalt and 0.45-0.65% copper). However, at a higher
cut-off grade of 0.10% cobalt the resource is still an impressive 66.4Mt
grading 0.14% cobalt, 0.46% copper and 0.45% zinc. It is likely CLA, will use
a head grade of ~0.14% cobalt in the upcoming project scoping studies which
is expected to be released in late Q2 CY18. Where the mineralised DOF is
located near to surface and outcropping, open pit mining is expected to be
selected, but depth of open cut mining will be determined by the cost of waste
removal, with high strip ratios envisaged. CLA expects that the deeper parts
of the orebody can also be extracted via underground open stoping and due
to the dip of the deposit is amenable to vertical crater retreat (VCR) stoping.
VCR has the advantages of high production rates and when used in
combination with cemented backfill can provide close to 100% orebody
extraction. A detailed mining study will be provided in the scoping study.
Cobalt remains in short supply and in high demand – 26cps PT Due to the large maiden resource and off the expectation a hefty available
mining inventory we have increased our project scale, from 2Mtpa to 3Mtpa.
We assume favourable cobalt (~80%) and copper (~85%) recoveries and zinc
can also be recovered without being a penalty. Our modelling at this stage
does not consider further downstream processing to produce cobalt sulphate
products or copper cathodes, which are expected to be value adds.
We maintain our Speculative Buy on CLA with our latest price target of 26cps
(up from 19cps). Current estimated cash is ~A$3M which provides some
exploration funds, but additional funding is required for development studies.
CLA provides quality exposure to cobalt (+70% cobalt value), as well as
providing other base metal (copper, zinc) upside. Cobalt remains in short
supply and in high demand, and we like the thematic for increased demand,
as it is one of the key ingredients for use in the cathode combination of
popular (and in demand) lithium-ion batteries.
Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000
Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys
website www.hartleys.com.au
0.00
0.05
0.10
0.15
0.20
0.25
.
5.
10.
15.
20.
25.
30.
35.
40.
45.
50.
Apr-18Dec-17Aug-17May-17
Volume - RHS
CLA Shareprice - LHS
Sector (S&P/ASX SMALL RESOURCES) - LHS
A$ M
Celsius Resource Ltd
Source: IRESS
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 2 of 11
SUMMARY MODEL
Celsius Resources Limited Share Price
CLA $0.190 Speculative Buy
Directors & Management Company Details
Share Price $0.190 Bill Oliver (Non-Exec Chairman) Level 3, 216 St Georges Tce
Market Capitalisation $113.7m Brendan Borg (Managing Director) Perth WA 6000
Net Cash (debt) $3.0m Pine van Wyk (Non Exec Director) +61 8 9226 4500
Issued Capital - current 598.2m Ranko Matic (Non Exec Director)
Issued Capital - diluted ITM options 728.4m Melanie Ross (Company Secretary)
Options - all 135.7m www.celsiusresources.com.au
Issued Capital - fully diluted all options 733.9m
EV Substantial Shareholders (est) m shs %
- current $110.7m Gecko Nambia (Pty) Ltd 50.8 8.5
- diluted ITM $130.4m Directors and Management 19.4 3.2
- diluted fully $130.3m
12Mth Price Target $0.26
Investment Summary
Projects Interest Location
Opuwo 95% Namibia
Carnilya Hill JV* 30% WA
Abednegno Hill 100% WA
* JV with Mincor Resources NL Milestones and Newsflow Project
Q4 CY16 Name change and reinstatement to ASX Corporate
Q1 CY17 Option to acquire Opuwo Cobalt Project Opuwo
Resources Q1 CY17 Acquisition approved and maiden drilling Opuwo
Q1 CY17 Brendan Borg appointed MD Corporate
Opuwo Type Mt Co% Cu% Zn% Cut-off Q2 CY17 First assays confirm extensive mineralisation Opuwo
Indicated Oxide 3.8 0.10 0.39 0.36 0.06% Co Q2 CY17 A$3.5M Capital Raise @ 3.7cps Corporate
Indicated Trans 1.6 0.10 0.42 0.38 0.06% Co Q2 CY17 Initial Exploration Target for Central Zone Opuwo
Indicated Fresh 66.5 0.11 0.42 0.41 0.06% Co Q3 CY17 Commences Scoping Studies Opuwo
Total Indicated 72.0 0.11 0.42 0.41 0.06% Co Q4 CY17 Moves to 95% project interest Opuwo
Inferred Fresh 40.5 0.12 0.41 0.46 0.06% Co Q4 CY17 15,000m resource drill-out commences Opuwo
TOTAL 112.4 0.11 0.41 0.43 0.06% Co Q4 CY17 A$3.9M Capital Raise @ 5.5cps Corporate
Contained 126,100 464,280 483,750 Q4 CY17 Preliminary metallurgical results Opuwo
Co t Cu t Zn t Q4 CY17 Completes initial resource drilling Opuwo
Q1 CY18 Drill assays Opuwo
Q1 CY18 Metallurgical study update Opuwo
P&L FY2017A FY2018F FY2019F FY2020F Q2 CY18 Maiden Resource Opuwo
Q2 CY18 Scoping Study Opuwo
Net Revenue A$m 0.0 n/a n/a n/a Q3 CY18 PFS expected to commence Opuwo
Total Costs A$m -0.8 n/a n/a n/a CY18 Ongoing exploration drilling - resource extensions Opuwo
EBITDA A$m -0.8 n/a n/a n/a
Deprec/Amort A$m - n/a n/a n/a Unpaid Capital
EBIT A$m -0.8 n/a n/a n/a Year Expires No. (m) $m Avg. Price % ord
Net Interest A$m 0.0 n/a n/a n/a 30-Jun-19 Listed 71.2 0.7 0.010 12%
Pre-Tax Profit A$m -0.8 n/a n/a n/a 30-Jun-20 Unlisted 22.0 1.7 0.075 4%
Tax Expense A$m 0.0 n/a n/a n/a 30-Jun-21 Unlisted 42.5 3.8 0.090 7%
NPAT A$m -0.5 loss loss loss 30-Jun-22 0.0 0.0 0.000 0%
Abnormal Items A$m -0.2 n/a n/a n/a 30-Jun-23 0.0 0.0 0.000 0%
Reported Profit A$m -0.8 loss loss loss TOTAL 135.7 6.2 0.046 23%
Analyst: Mike Millikan
Phone: +61 8 9268 2805
Sources: IRESS, Company Information, Hartleys Research
Nickel
Nickel
Apr 2018
Cobalt and base metal (copper) focused explorer. Controls 95% of the flag-ship
Opuwo Cobalt Projet in Namibia. Maiden resource now estimated with Scoping
Study due for release late Q2 CY18. Cobalt thematic continues to look good, with
growing demand for use in electric vehicles, storage batteries and smartphones.
Junior exploration company focused on the delineation of significant cobalt and
base metal deposits. Potential development options being scoped.
Last Updated: 16/04/2018
Key Market Information
Commodity
Cobalt, Copper, Zinc
Comments
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 3 of 11
OPUWO COBALT PROJECT, NAMIBIA In early CY17, Celsius entered into an option agreement for the right to earn a
controlling interest in the Opuwo cobalt project in Namibia. An interest of 30% was
earned in the project in August 2017, following which the Company moved to a 95%
interest through the issuance of CLA shares to Gecko Namibia (now CLA’s largest
shareholder). The remaining 5% in the project is held by local Namibian Company
Amor Investments. Opuwo is CLA’s flagship project.
The Opuwo Cobalt Project is located in north-western Namibia, ~800 km by road from
the capital, Windhoek, and ~750 km from the port of Walvis Bay. The Project has
excellent infrastructure, with the regional capital of Opuwo only 30 km to the south,
providing good services. Sealed roads connect Opuwo to Windhoek and Walvis Bay.
A hydro-power station (320 MW) is located nearby, and a transmission line (66 kV)
passes through the eastern boundary of the project. Project tenure currently spans
~1,470km2.
Fig. 1: Project Location – Opuwo Cobalt Project, Namibia
Source: Celsius Resources Ltd
The mineralisation at Opuwo is hosted in the Dolomite Ore Formation (DOF) within
Neoproterozoic sediments of the Kaoko Belt in northern Namibia. The Kaoko Belt is
considered by some as the western extension of the Central African Copper belt. The
DOF is an organic carbon rich, marly dolomitic horizon consisting of clastic and
carbonate lithologies. The DOF horizon has been mapped and sampled along a strike
length of +30 km, but the prospective horizon extends over 100km within the expanded
project area. The DOF horizon is of variable dip and thickness, ranging 5m to +15m
in parts, with extensive areas of outcrop. The DOF horizon appears to be mineralised
throughout its extent. The DOF horizon has now been drill tested over 15km with
potential for extensions along strike along with additional mineralised zones and
parallel lodes. Mineralisation outcrops at surface and is easily visible from
satellite/aerial photos. Mineralisation is also interpreted to continue undercover to the
east, which is supported by aeromagnetic data.
The mineralisation in the DOF unit is disseminated and vein hosted sulphide
mineralisation, with chalcopyrite (CuFeS2) the main copper mineral, linnaeite (Co2S4)
the main cobalt mineral, and zinc as sphalerite (ZnS). The mineralisation is relatively
fine grained but is low in deleterious elements such as arsenic (As), cadmium (Cd)
and uranium (U).
CLA has a current
95% interest in Opuwo
with 5% held by local
Namibian Company
Amor Investments
Opuwo is an emerging
cobalt-copper distr ict
which has received
very l i t t le modern
explorat ion
Importantly the cobalt -
dominant
mineralisat ion (wi th
copper and z inc)
remains open along
str ike and at depth
Sediment-hosted
mineralisat ion,
structurally inf luenced
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 4 of 11
Impressive maiden resource with system still open
Celsius completed resource drilling in preparation of the maiden JORC-compliant
resource estimate in mid-December 2017.
The maiden resource (100% basis) consists of 112.4Mt grading of 0.11% cobalt,
0.41% copper, and 0.43% zinc for some 123,640t of contained cobalt, 464,280t of
contained copper and 483,750t of contained zinc (at a cut-off grade of 0.06% cobalt).
Approximately 64% of the resource is in the Indicated resource category, with fresh
sulphide ores comprising over 95% of the overall resource, which bodes well for the
proposed processing flowsheet of conventional flotation.
Fig. 2: Maiden Opuwo Resource Estimate – April 2018
Source: Celsius Resources Ltd
The resource has been estimated from 128 drill holes (largely drilled on a 200mx 100m
grid) covering ~10km of strike over the mineralised Dolomite Ore Formation (DOF),
from independent resource consultants, DMT Kai Batla.
The majority of the modelled area was drilled on a 200m x 100m grid. The maiden
resource well exceeds (+174%) the Company’s original Exploration Target for 33-
41Mt grading 0.13-0.17% cobalt and 0.45-0.65% copper. The mineralised widths
ranged from 5m to 15m.
Further resource growth is anticipated as the deposit remains open along strike and
at depth, with drilling ongoing to increase resource confidence and extend
mineralisation nearer to surface.
Fig. 3: Opuwo Resource Block Model – Oblique View (+0.06% Co cut-off)
Source: Celsius Resources Ltd
Cobalt
Cut-off
(Mt) (%) (%) (%) (t) (t) (t) (% Co)
Oxide 3.8 0.10 0.39 0.36 3,900 15,180 13,790 0.06
Transition 1.6 0.10 0.42 0.38 1,700 6,780 6,140 0.06
Fresh 66.5 0.11 0.42 0.41 73,700 277,960 275,920 0.06
72 0.11 0.42 0.41 79,300 299,920 295,850 0.06
Inferred Fresh 40.5 0.12 0.41 0.46 46,900 164,360 187,900 0.06
112.4 0.11 0.41 0.43 126,100 464,280 483,750 0.06
Copper ZincContained
Copper
Contained
Zinc
Contained
Cobalt
Indicated
TOTAL INDICATED
TOTAL
Category Ore TypeTonnage Cobalt
Largest cobalt
sulphide resource on
the ASX
Maiden resource
(100% basis) consists
of 112.4Mt grading of
0.11% cobalt, 0.41%
copper, and 0.43%
zinc for some
126,100t of
contained cobalt,
464,280t of contained
copper and 483,750t
of contained z inc
Mineralisat ion remains
open
Further resource
growth is anticipated
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 5 of 11
Fig. 4: Opuwo Resource Block Model – Oblique View (+0.10% Co cut-off)
Source: Celsius Resources Ltd
Fig. 5: Opuwo Resource Block Model – Cross Section 365350mE
Source: Celsius Resources Ltd
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 6 of 11
Metallurgy being fine-tuned, with Scoping Studies due Q2
Cobalt, copper and zinc sulphide mineralisation is present predominantly as linnaeite,
chalcopyrite and sphalerite respectively. Minor zones of oxidised and partially oxidised
mineralisation occur in the upper portion of the deposit.
The favourable mineralogy (sulphide-related) is considered amenable to conventional
flotation techniques to generate bulk cobalt-copper-zinc concentrates. Preliminary
metallurgy has returned recoveries of up to 88% on the cobalt and 87% on the copper,
but further cleaning of the concentrate is required to achieve the targeted concentrate
grades (~1.5% Co). Met-testwork is ongoing to optimise recoveries and concentrate
grades, and will feed into the Scoping Study due late Q2 CY18.
Further optimisation work will aim to improve the concentrate grade along with
recoveries, whilst trying to remove any deleterious minerals. The work will include re-
grinding the concentrate and re-floating.
Other metallurgy test-work has included leaching to investigate the feasibility of
producing a cobalt sulphate chemical from the concentrates produced at Opuwo.
Leach extraction test work on the sulphide concentrates has demonstrated high leach
extractions of ~95% for the metals of interest, into a sulphuric acid medium, under
relatively low pressure and temperature conditions. All work to date has been
completed on fresh mineralisation, which is the dominant ore type in the resource, with
test work currently underway on the minor oxide and transition ore types.
An added benefit of the CLA’s mineralogy being cobalt sulphide (linnaeite) as opposed
to other cobalt sulphide minerals (such as cobaltite) is the low levels or total lack of
arsenic. This is significant as concentrates that contain arsenic can incur penalties
when sold to refineries and would therefore reduce the value of the concentrate. This
may compensate for the relatively low concentrate grade CLA plans to produce at this
stage.
Another unique aspect of CLA’s deposit is that ~70% of its in-situ value is in the cobalt
with the remainder in copper (and potentially zinc), this is compared to the majority of
cobalt production where cobalt is the by-product of copper and nickel. This gives CLA
greater exposure to cobalt than many of its developer peers.
The mineralisation is
sulphide re lated and
as such amenable to
simple f lotation
processing, with
preliminary
metal lurg ical test -work
providing favourable
cobalt (up to ~88%)
and copper (up to
~87%) recoveries
More detai led met-
test-work is ongoing
Scoping Study due for
release in late Q2
CY18
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 7 of 11
PEERS AND COMPETITORS Cobalt exploration/developer’s peers can be seen in Figure 6. Important to note that
many of the larger cobalt deposits are laterite deposits. Laterite deposits historically
have higher opex and capex figures.
Fig. 6: Cobalt Peers – Market Capitalisation
Source: Hartleys Estimates – IRESS; Market open 16 April 2018
Fig. 7: Cobalt Peers – Enterprise Value
Source: Hartleys Estimates – IRESS
Fig. 8: Cobalt Peers – EV/Resource Cobalt Equivalent Tonnes
Source: Hartleys Estimates – IRESS
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
CLQ MLX AUZ PAN AML COB CLA ARV NZC ARL JRV FCC GME CLL EUC HAV LFR BSX AZS PGM BAR MEI CZI CZN CNJ N27 HMX CAZ BMT MTH
Market Capitalisation
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
CLQ MLX AUZ PAN AML COB CLA ARV NZC ARL JRV GME CLL HAV FCC LFR EUC BSX AZS BAR PGM MEI CZI CZN CNJ CAZ N27 HMX MTH
Enterprise Value
659751
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
MEI MLX CLQ FCC AUZ NZC LFR AML CLL COB CZI BAR PGM CLA N27 ARL BMT GME CNJ HAV CAZ
EV/Resource Co Eq t
Median
CLA’s (at tr .)
EV/Resource Co Eq t
is A$659/t which is
wel l below the peer
median of A$751/t
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 8 of 11
Fig. 9: Peer Analysis – Cobalt grade and contained metal
Source: Hartleys Estimates – Company Reports: Bubble Size = Co t
CLA now has the largest cobalt sulphide resource on the ASX. Further resource
growth is anticipated as the deposit remains open along strike and at depth. Drilling is
ongoing to increase resource confidence and extend mineralisation nearer to surface.
Fig. 10: Peer Analysis – Cobalt-equivalent grade and contained metal
Source: Hartleys Estimates – Company Reports: Bubble Size = Co t
CLQ - Sunrise
AUZ - Sconi
ARL - KNP
CLL - Collerina
GME - NiWest
PGM - Owendale
BAR - CNJ - Mt ThristyCLA - Opuwo
NZC - Kalongwe**
COB - Thackaringa***
HAV - Mutooroo
N27 - Wollogorang
BMT - Lainejaur
JRV - Nico Young
CZI - Nebo-Babel
MLX - Wingellina
PAN - Savannah
AML - Walford Creek
MTH - Basil
HMX - Millennium
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000
Co
bal
t gr
ade
% C
o
Cobalt contained metal tonnes
Cobalt grade and contained Cobalt metal
CLQ - Sunrise AUZ - Sconi ARL - KNP CLL - Collerina GME - NiWest
PGM - Owendale BAR - CNJ - Mt Thristy CLA - Opuwo NZC - Kalongwe** COB - Thackaringa***
HAV - Mutooroo N27 - Wollogorang BMT - Lainejaur JRV - Nico Young CZI - Nebo-Babel
MLX - Wingellina PAN - Savannah AML - Walford Creek MTH - Basil HMX - Millennium
Bubble Size = Co t
Laterite deposit
Sulphide deposit
MLX - Wingellina
CLQ - Sunrise
AUZ - Sconi
ARL - KNP
CLL - Collerina
GME - NiWest
PGM - Owendale
BAR - CNJ - Mt ThristyCLA - Opuwo
NZC - Kalongwe**
COB - Thackaringa***
HAV - Mutooroo
N27 - Wollogorang
BMT - Lainejaur
JRV - Nico Young
CZI - Nebo-BabelPAN - Savannah
AML - Walford Creek
MTH - Basil
IGO - Nova
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 100 200 300 400 500 600
Co
bal
t va
lue
% o
f to
tal v
alu
e
In-situ value per tonne
In-situ value per tonne vs Cobalt Value % of total value
MLX - Wingellina CLQ - Sunrise AUZ - Sconi ARL - KNP CLL - Collerina
GME - NiWest PGM - Owendale BAR - CNJ - Mt Thristy CLA - Opuwo NZC - Kalongwe**
COB - Thackaringa*** HAV - Mutooroo N27 - Wollogorang BMT - Lainejaur JRV - Nico Young
CZI - Nebo-Babel PAN - Savannah AML - Walford Creek MTH - Basil IGO - Nova
Bubble Size = Co t
Laterite deposit
Sulphide deposit
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 9 of 11
PRELIMINARY PRICE TARGET
METHODOLOGY
Our CLA price target is considered highly speculative.
Celsius moved to 95% project interest in September 2017, and controls over 100km
of the highly prospective cobalt-copper horizon within the project area (~1,470km2).
Opuwo is being advanced, with a scoping development study expected to be released
in late Q2 CY18. CLA has confirmed mineralisation over a +15km zone, with strong
potential for adjacent and parallel systems. The Company has now calculated a large
maiden resource which consists of 112.4Mt grading 0.11% Co, 0.41% Cu and 0.43%
Zn over a 10km zone. Mineralisation remains open.
Work completed by CLA indicates that the mineralisation is sulphide-related (with
cobalt present as linnaeite, copper present as chalcopyrite and zinc present as
sphalerite) and considered amenable to simple, conventional flotation techniques. The
sulphides are largely disseminated and vein-hosted but coarser semi-massive
sulphides have been intersected.
Early metallurgical test-work by CLA has returned flotation recoveries of up to ~88%
on the cobalt and ~87% on the copper from a rougher concentrate. A concentrate
grade of 1.5% Co was achieved with recoveries of ~80% indicated. Metallurgical test-
work is ongoing, aimed at improving the grade of the concentrate while maintain high
recoveries and cleaning the concentrate to reduce mass and increase grades. The
Company has an internal target of recoveries in excess ~80% Co and cobalt
concentrate grade of +1.5% Co. The concentrate is low in deleterious elements such
as arsenic (As), cadmium (Cd) and uranium (U) and as such could attract good
payable terms.
Our preliminary valuation is now largely derived from a 3Mtpa (up from 2Mtpa)
sulphide plant generating a desirable bulk concentrates. We assume favourable cobalt
recoveries and now use ~80% (up from 75%) and copper recoveries ~85%
(unchanged), and assume grades at the higher cut-off grade (ie 0.10% Co). The
release of the Scoping Study will update our preliminary estimates. Our modelling at
this stage does not consider potential value add opportunities such as further
downstream processing to produce cobalt sulphate products or copper cathodes.
Our preliminary price target of 26cps (up from 19cps) is derived from both a discounted
cashflow analysis of a scaleable cobalt operation at Opuwo and perception of
exploration value in the search of more mineralisation.
Fig. 11: Hartleys CLA Price Target
Source: Hartleys Research
Price Target Methodology Weighting Spot 12 mth out
55% $0.19 $0.21
35% $0.36 $0.39
5% $0.09 $0.12
Cash Backing 5% $0.01 $0.01
Risk weighted composite $0.24
12 Months Price Target $0.26
Shareprice - Last $0.190
12 mth total return (% to 12mth target ) 36%
95% Opuw o (NPV 14%) Base + Exploration value
95% Opuw o (NPV 14%) Spot + Exploration value
Exploration value - no development
Our CLA valuation and
price target is
considered highly
speculative
Preliminary price
target of 26cps
Current estimated
cash of ~A$3M
provides some funding
towards ongoing
explorat ion
Our base valuat ion
uses Consensus
pric ing for cobalt and
copper, which are
considered
conservative
At current spot
commodity pr ices the
project has signif icant
value
Hartleys Limited Celsius Resources Ltd (CLA) 16 April 2018
Page 10 of 11
RISKS Key risks for CLA include making an economic discovery at the Opuwo project and
obtaining funding for ongoing exploration. Weather, land access, drill rig availability,
retaining key people are all risks.
Fig. 12: Key Risks
Assumption Risk of not realising
assumption
Downside risk to share price if assumption is
incorrect Comment
Funding for ongoing exploration
Med
Med-High
We estimate CLA has a current cash position of ~A$3M. The Company has a number of options to raise additional funds for future exploration, including new equity issuances. The Company operates under a lean corporate structure (low cost base). The Company is funded for some
planned exploration drilling in 2018.
Discovery Success
Med-High
Med
The Company has confirmed extensive mineralisation within the project area, and has
strong potential for additional mineralised zones. A large exploration target has been reported which is in the process of being updated by latest drilling. The maiden resource is large (exceeds expectations) but considered to be
interim, as the full strike and depth potential of the system is yet to be defined.
Viable resource progresses through development studies
Med-High
High
We assume a viable mining inventory (reserve) can be released for the project. On the current
timing a Scoping Study is planned to be released in Q2 CY18, which will incorporate the maiden resource, processing flowsheet, and indicative costs (both capex and opex). Preliminary met-testwork has been favourable but needs to be
refined.
Commodity Prices Med
Med-High
The projects remain highly sensitive to commodity price movements and sentiment.
Current exploration focus is cobalt and copper.
Conclusion At this stage we consider the assumptions have a medium to high risk of not being achieved. At this stage we have only a preliminary speculative valuation for CLA. The Company’s extensive project portfolio
with high prospectivity and low current market cap, implies the Company is undervalued.
Source: Hartleys Research
Page 11 of 11
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
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
Mark Sandford +61 8 9268 3066
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 assisted in capital raisings in the past 12 months for Celsius Resources Limited ("Celsius") for which it has earned fees. Hartleys has
a beneficial interest in 16 million options in Celsius.
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.