Hi Guys,
Below is the write on Kidman today in The Australian.
Kidman Resources (KDR) 42c
There’s every chance the Pilbara explorer is sitting on one of the country’s biggest lithium deposits — and it shouldn’t take too long for investors to find out if this is so.
Last week, Kidman revealed high grades from a further hole at its Earl Grey prospect, the most titillating being 93 metres grading 1.5 per cent lithium oxide. This confirmed the results of five historic holes grading an average 2.5 per cent.
As early as tomorrow, Kidman should reveal the assay results from five further holes which showed visual evidence of the pegmatite that bears spodumene, the hard-rock form of the coveted battery ingredient. The mineralisation is over a contained 700m area.
Intrigue centres on whether the mineralisation continues to an outcrop 1.5km south of the first hole. With two rigs drilling around the clock, this week’s update should also confirm whether the pegmatite extends beyond the 700m zone, which sits below an old gold pit.
PAC Partners analyst Andrew Shearer estimates a potential resource of 60 million tonnes. But Shearer says if the pegmatite continues to the outcrop uninterrupted, there’s “every chance” of a deposit similar to that of the Pilbara Resourcesproject at nearby Pilgangoora (129mt averaging 1.2 per cent). Two rigs are working around the clock to determine whether this is the case.
Earl Grey has the advantage of an existing mining lease, which Shearer says cannot be overstated. “With any hot commodity it’s a case of who gets to market first,’’ he says. “Also, Earl Grey is just one of a number of pegmatites on the Mount Holland project.’’
Pilbara Resources has a $580m market cap. As Shearer notes, Pilbara is at definitive feasibility stage and thus more advanced. Still, Kidman’s $129m valuation (backed by $20m of cash) implies relative upside should the follow-up results bear fruit.
Another comparison is with Altura Mining (AJM, 14c) and its Pilgangoora Lithium Project, currently rated at 36mt grading 1.05 per cent. The market values Altura at $178m. Given the chatter about the sector being overheated, Earl Grey may not be everyone’s cup of tea. But with the prospect of pending material news in coming days, this is one Kidman that may not be just acting. Spec buy.
The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author does not hold shares in the stocks mentioned.
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