Equatorial Resources Ltd (EQX, $0.65, Mkt Cap ~$80m) – Hematite resources jump ~80% to >180Mt.
SPEC BUY
•Congo iron ore development company Equatorial Resources (EQX) yesterday announced that hematite resources at the Mayoko-Moussondji Project increased by 78% to 182Mt at 35.7% Fe. Total JORC resources now stand at 917Mt at 31.4% Fe (including both hematite and magnetite).
•The hematite is envisaged to be easily upgraded to a premium fines product of +64% Fe.
•The increase in resource inventory is a big positive in our view given it has the potential to increase both the scale and mine life of the mine when developed.
•Our team caught up with management in Perth last week and we understand progress is being made on securing a strategic/financial partner to assist with the development of the project. This would likely lead to a sell-down of project equity in exchange for project funding. This would leave EQX with a free carried interest in the Mayoko development and cash of ~$45m which can be deployed to other initiatives.
•A quick recap of the Mayoko-Moussondji Project is as follows:
ü Detailed Scoping Study has previously been completed;
ü Existing resource of 917Mt @ 31.4% Fe and includes 182Mt @ 35.7% Fe;
ü Significant infrastructure advantages present with operational railway running 500m from the main prospect and leading directly to Port at Pointe-Noire;
ü Production profile initially 0.5Mtpa and ramping up to steady state 2Mtpa;
ü Capex to initial production US$114m and LOM US$231m stock;
ü LOM average FOB US$41/t;
ü First production will be 15 months from FID;
ü Cash holdings of ~$45m imply an EV of ~$35m; and
ü Potential for a near-term catalyst should a strategic partner be introduced to fast track the financing and development.
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