AZY Resource Valuations (Exploration vs Production)

AZY Exploration Spend Valuation (short term) – $0.10

A recent HotCopper blogger suggested assigning an upside share price potential based on exploration dollars being spent. Since the $159 million JV’s exist then it is fair to say the shares could be worth $0.065 per share as a minimum during the exploration phase. Given the maturity of the ground, a premium should be applied to the share price to reflect the success of drilling within Antipa leases to date. Combined with close proximity of known deposits including Rio Tinto’s Winu Project and Telfer operation, strong demand for gold-copper projects as a result of record Au/Cu metal prices, scale of identified mineral systems that are still open at depth and the multi-metal exploration potential of the region (Cu, Au, Ag, Co, W, Pb, Zn). Therefore, the hot brownfield leases owned by Antipa Minerals Ltd could easily be worth $0.10 per share (200% premium on a $0.033 share price) in a short period of time.

AZY Exploration to Production Valuation (long term) - $0.60 to $1.55

To go to the next stage for valuing the potential of what has been found and the longer term impact on the share price, I reviewed recent published Antipa Minerals Ltd and Rio Tinto resource information to allow a better understanding of the economic potential of the Paterson province if it was in production.

As a disclaimer, I am no Geologist or Mine Planner, simply a curious Metallurgist. The following analysis is very high-level, tonnage and grade estimates are of varying levels of accuracy (low to high) due to the quality of published data I could source from market releases.

The global potential of the resource rich province is amazing (Table 1). The Antipa Minerals holdings offers a vast array of metals such as gold, copper, silver, cobalt, tungsten, lead and zinc in a mining area known for its manganese deposit at Woodie Woodie minesite, Nifty Copper mine and the large Newcrest Telfer gold-copper operation nearby.

At a high level, all the Antipa Minerals Ltd leases contain at least 148 Mt at 0.76 g/t gold, 0.27 g/t copper, 26.7 g/t silver, equivalent to 3.6 Moz gold, 400 kt copper and 127 Moz silver. Based on the current metal prices, the resource is worth $15.1 billion (preliminary estimate). The multi metal resource can be simplified to a resource of 148 million tonnes at 1.2 g/t equivalent gold.

The nature of the shallow deposits lead to the likelihood of a centralised processing facility treating multiple open cut satellite mines. Alternatively, future options for toll treating at Telfer or directing ore to a potential Rio Winu processing facility could be possible with the added benefit of ultimately reducing upfront capital costs. Ore haulage distances to either processing facility would be manageable over the typically flat terrain.

Antipa Minerals Ltd is essentially four exploration companies in one with a budget of $159 million (Table 2). The Paterson tenements of Antipa Minerals has allowed the IGO JV to significantly de-risk its exploration budget through access to valuable exploration data for this brownfield property. Classification of the joint-venture leases indicates IGO may have picked up a timely bargain to gain access to Grey, Ghost, Reaper, Serrana, Pobland and Arbol deposits worth an estimated $6.4 billion (based on published grades and estimated ore block dimensions).

Rio’s JV on Calibre, Magnum, Corker and Colt in the northern region of the lease offers up to 68 Mt of ore worth potentially $6.2 billion that ultimately compliments the Winu project hence the massive drilling program underway. This resource remains open at depth, in all directions, so has plenty of upside. AZY management believe the Calibre deposit to be a “staggeringly large mineral system” which could match the Winu deposit, thus further upgrade potential.

The Newcrest joint-venture greenfield deposits require further drilling to expand the 2.6 Mt at 1.2 g/t gold resource worth $226 million.

The 100% owned AZY land appears to have been cherry picked by management to retain some 14 Mt at 2.0 g/t gold equivalent worth $2.3 billion.

Until Rio Tinto release details on their Winu project, my best estimate (Table 3) of the Tier one project has it containing between 128 Mt at 0.4 g/t gold, 0.7 g/t copper and 3.8 g/t silver (base-case). Upside is 400+ Mt of similar grade based on the observable drilling footprint. The economics of Winu project offer a project worth between $11-$35 billion (on today’s inflated COVID-19 gold-copper prices). This brings the Winu project into the league of Telfer or Boddington mining operations (Table 4) if it can live up to the hype of being an extremely large deposit!!!!

As further exploration results are released and the company undertakes future Feasibility Studies and ultimately moves into production I see a major increase in the share price inevitable due to;

• The diverse four-pronged $159 million Joint Venture exploration effort occurring at the moment, recently blogged as the “Antipa Group”. This only accelerates someone finding a decent economic deposit in a short period of time. Potentially Rio is maximising it’s RC-Diamond drilling campaign to maximise its direct ownership of the landholdings it wants as to align Winu 2023 development schedules.
• The transition of Rio to develop the Winu project by 2023 offers AZY an avenue for ore treatment, or royalty-based revenue options going forward to return value to shareholders. Therefore, why not let an experienced multi-national miner do all the hard work given it has the experience, capital and human resources to build new mines. Maybe it is a case of sitting back and getting royalties like Lang Hancock did with Iron Ore exports from the Pilbara.
• The huge array of significant mineral deposits within Antipa leases highlights each joint-venture partner’s potential to develop standalone operations as the resource is upgraded by current drilling programmes. Eg. Rio JV offers Calibre/Magnum deposit development with Winu Project as a source of mill feed, IGO JV offers Serrano/Grey/Pobland development potential.
• AZY could complete a Feasibility Study for mine development at WACA-Minyari-Judes region. Toll treatment of any ore will offer the lowest risk option in the near term to help Newcrest feed the hungry Telfer mine.
• Current Antipa Minerals Ltd shares are significantly undervalued. Today’s share price of $0.033 is equivalent to 0.53% of the known resource value for the 2.44 billion shares registered (Table 5).
• A conservative longer-term share price of $0.60 to $1.60 as the project moves into the production phase over the next 3 years is still only valuing the company between 10% to 25% of the resource valuation.

As mentioned by other HotCopper bloggers, Antipa Group is essentially an exploration powerhouse, backed by major Australian mining companies, it is in the right commodities, perfect location and with a share price with so much upside potential. My resource estimates, although not truly accurate (disclaimer), indicate a share price of $0.033 (@15/07/20) moving to a short-term price of ($0.10) and then a value of $0.60 and even $1.60 should the miners deem certain deposits economic to mine and process into gold and copper concentrate. An anticipated Rio Winu announcement may be the stimulus to achieving a higher share price.