Sundance Resources Limited (“Sundance”, “Company”) is progressing its large Mbalam iron ore project in the Republic of Cameroon, on the central west coast of Africa. The Company is currently undertaking a definitive feasibility study into the development of the project, which is due to be completed by mid 2009. Sundance plans to produce a lump and fine direct shipping ore product from an enriched hematite ore at surface in 2012, before moving to a hematite concentrate product in 2019 produced from itabirite ore as the direct shipping ore resource is exhausted. The project has the potential to generate large cash flows of ~US$1,000m per annum from the enriched direct shipping hematite ore and ~US$500m per annum from the itabirite ore. However, it is not without its risks, which include defining sufficient ore reserves; large infrastructure requirements including construction of a port and ~500km of railway; unknowns relating to the final fiscal regime; as well as perceptions of sovereign and political risk. Sundance is currently trading at a substantial discount to our conservative valuation of 52cps, and as the Company continues to de-risk the project, we expect it to be re-rated, leading to significant share price appreciation. We rate Sundance Resources Ltd as a Speculative Buy.
SDL Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held