Breaker Resources NL (BRB)Multiple potential catalystsLake Roe...

Breaker Resources NL (BRB)Multiple potential catalystsLake Roe Resource update imminentBRB is targeting the release of an updated Resource for Lake Roe in either the December 2021 quarter or early in CY22. BRB’s current Resource estimate (released April 2021) for Lake Roe stands at 27.9Mt at 1.5g/t Au for 1.37Moz Au contained. A further ~30,000m of RC and diamond drilling has since been completed and will underpin the upcoming Resource update. We also estimate that a further A$10m has been spent since the drilling cut-off for the previous Resource update. Taking the assumption that a discovery cost of ~A$45/oz is maintained, this implies Resource growth of ~220koz (16%) to ~1.6Moz. We have applied an adjusted market EV/ Resource ounce valuation of A$88/oz (reflecting the relative cost and time of BRB’s Resource delineation to date) to inform our updated valuation for Lake Roe. Manna lithium prospect on the radarWe have also updated our BRB valuation to reflect the advancement of the Manna lithium prospect. Manna is located ~15km south of the Bombora deposit within the Lake Roe Gold Project. Most recently, the results from a follow-up 2,000m RC drill program have returned intersections that have demonstrated continuity with previous reconnaissance drilling. The grades being drilled at Manna are comparable with the Resource grades of known lithium deposits that are currently under development or in production in Western Australia. We do not anticipate its development on a stand-alone basis by BRB as being likely, however it may provide the opportunity for a farm-in agreement, Joint Venture or asset sale that is material to BRB’s valuation. Corporate activityCorporate activity in the sector and at neighbouring assets has also increased which, in our view, is raising BRB’s corporate profile. In our view, the most relevant transaction is the acquisition of Apollo Consolidated Ltd. (AOP, not rated) by Ramelius Resources Ltd. (RMS, not rated). The cash and scrip deal values AOP’s equity at A$181m and implies an EV/oz valuation of A$133/oz. This is a significant premium to BRB’s current EV/Resource ounce valuation of A$63/oz. While there are a number of factors driving this, the Lake Roe Resource is larger, higher grade and is strategically located between two producing operations. Further de-risking and Resource growth has the potential to increase BRB’s corporate appeal. Investment thesis – Speculative Buy, Valuation $0.53/shWe have updated our valuation to reflect the current Resource and market valuation metrics, plus an allowance for the Manna lithium prospect which is showing potential to have strategic value material to BRB’s valuation. These are the prime drivers of an 8% increase to our sum-of-the-parts valuation. BRB continues to offer exposure to the potential Resource growth and corporate appeal of its Lake Roe gold project Resource base and exploration success at its Manna lithium prospect. We retain a Speculative Buy rating, in conformity with our recommendation structure.