We commence coverage of Strike Resources (SRK) with a BUY recommendation and a valuation of A$5.85/sh. We are of the view that SRK represents excellent value based on forecast EV/EBITDA and resources multiples relative to its peers. SRK is earning a 68.2% equity interest in the Apurimac and Cuzco projects in Peru through the purchase of shares in the Peruvian company that holds these projects, for a total consideration of US$44.5M over 4 years plus a further US$10M payment once production exceeds 20Mtpa. Inferred JORC resources of 172Mt @ 62.9%Fe with excellent potential to expand resources in this new iron ore province. A 3 Stage project development is being proposed with Stage 1 commencing in the Dec H09 using existing infrastructure , Stage 2 project capable of producing 20Mtpa of fines concentrate commencing in the Jun H11 and Stage 3 producing 20Mtpa commencing 2014-15. Access to labour and power, a favourable taxation regime and a government that supports mining will facilitate project development.
SRK Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held
