Ann: 64% Increase of Mt Carbine Indicated Resources (In-Situ), page-22

Chris Brown from Morgan's in the process of updating numbers.

Below he works a simple cost exercise. He suggests 450k mtu produced a year giving a cash profit of $US84 mtu. That's about $A54m per year EBITDA.

Pretty positive.

EQ Resources (ASX:EQR) Market Cap @ A6.4cps: A$93.7M Valuation & TP: Under (upwards) review. Financed for Phase 2 project development
Mt Carbine tungsten mine - another lift in resources. Below is a plan of the mineralisation just below the floor of the existing open pit – shown in grey with the existing benches. ● The Cross Section below hows the higher grade mineralisation below the existing open pit (the black line), and in what was the proposed deepening of the pit (the blue line). It also shows the high grade zones in the new Resource below the existing and proposed open pits, and to the north (right) of the Iron Duke veins. The squares are 100m, so it’s eminently open pittable. The Iron Duke mineralisation indicates that a cut-back of the northern pit wall may be worth while. But the grade supports underground mining as well, so it’s a matter of economics. Which is more profitable? Our view and interpretation OK, 9.6 million mtu in the Resource. I’d expect a conversion to Reserves of better than 60%, and let’s say 80% recovery to saleable product – say a touch under 5 million mtu of product. I’m being hard here. EQR projects a cash cost of US$118/mtu. Let’s allow for inflation and operator optimism, and call it US$130/mtu – to make the maths simple for me. The existing open pit is dewatered. The mining contractor is mobilising to site. EQR is currently running two TOMRA X-ray transmission ore sorters to process a 11Mt low grade stockpile – 0.075% WO3 – to optimise the process plant recovery in a JV with offtaker CRONIMET Group of Germany. There’s not much we don’t know – except probably the ultimate size of this thing. With a ROM grade of 0.3% WO3 - 4 times the grade currently being processed - and mining 2million tonnes per year (Mtpy), that’s somewhere north of 450,000mtu saleable product per year. EQR is selling a tungsten concentrate, and likely paying a 30% penalty compared with the ammonium paratungstate (APT) price. Cash margin – US$224-US$140=US$84/mtu. You can do the maths on project revenue – before non-cash D & A, ongoing capex (not much), interest, corporate and other, and of course tax. Both Mt Carbine and King Island Scheelite closed in 1987 when China, which dominated the tungsten market, collapsed the ammonium paratungstate (APT) price from US$150/metric tonne unit (MTU) to US$50/MTU. The strategic importance of tungsten is now recognised. Mt Carbine is the most advanced tungsten play in Australia. Our expectation is that the resource will be increased (further) by drilling, and that there will be further additions to the Reserve base. I’m reviewing my valuation and target price, and it’ll probably go up in line with the increase in the Resources.
Disclosure: Morgans Corporate Limited was a lead Manager to the Placement of shares in EQ Resources Limited in March 2021 and received fees in this regard Morgans Corporate Limited holds 25.0m Options in EQ Resources Limited at an exercise price of $0.0432 expiring 19 March 2024 as a result of capital raising activities. The Consultant involved in the preparation of this Research Flash holds shares in EQ Resources (ASX:EQR).

Regards,

Chris Brown
SeniorAnalyst

Level 29, Riverside Centre, 123 Eagle St Brisbane, QLD 4000
Email: [email protected]
Direct: 07 3334 4885 | Mobile: 0418 737 810

morgans.com.au | Facebook | Twitter | Linkedin

Morgans Financial Limited | ABN 49 010 669 726 | AFSL 235410