Extract Resources - Quarterly cashflow and activities report
Extract Resources, in which Kalahari Minerals* owns 39.1%, reported negative operating cashflows of A$7.5m for the quarter ended 31 December. Cash on hand stands at A$20.5m.
Previously reported highlights for the quarter were continuing massive zones of uranium mineralisation intersections at the Rossing South Prospect. Zone 1 is now defined over 2.4km and is open along strike and at depth, while Zone 2 has been extended to 2km and is open along strike and at depth. An independent resource estimation on Zone 1 is awaited and resource definition drilling of both zones resumes this month.
The proposed merger between Extract and Kalahari was terminated by Kalahari.
Comment
We remain confident that the company will meet or exceed the 92Mlbs target for Rossing South Zone 1. Based on the Zone 1 and Zone 2 guidance of 220-300Mt, and consistent grades well in excess of peers, we reiterate our confidence in the asset quality.
Kalahari's 39.1% interest in Extract has a market value of A$118m (or £54m = 30p per Kalahari share). Kalahari had £4m in cash at the end of the half year and raised a further £4m in December. Assuming a current cash balance of £7m, which would amount to an equivalent of a further 4p per share, the leaves the balance of Kalahari's assets having a market value of around £16m.
Recommendation
Ahead of any resource definition, and subsequent scoping studies, we retain our SPECULATIVE BUY recommendation on Kalahari.
EXT Price at posting:
$1.46 Sentiment: LT Buy Disclosure: Held
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