broker update

SIRIUS RESOURCES NL
Bollinger – Champagne “Supernova” in the “Eye”
Sirius Resources NL (“Sirius”, “SIR”, “Company”) has now completed four
drill holes to follow-up the new Bollinger discovery, located to the east of
Nova, part of the Fraser Range project (SIR 70%).
The Company has intersected more substantial nickel and copper
mineralisation in two holes drilled ~60m to the west and ~100m to the east
of the discovery hole confirming Bollinger’s potential of being a significant
new deposit with the scale-potential to match and possibly exceed Nova.
Over 40m of massive and breccia sulphides, from a mineralised intercept
of over 55m was intersected in the western hole and 30m of disseminated to
stringer sulphides, from a thicker 118m zone of (trace to stringer) sulphide
mineralisation encountered in the eastern hole, from depths of ~430m,
highlighting the flat-lying nature of this new deposit. Assays are pending.
Sirius has also completed two holes into the feeder zone confirming the
connection of the Nova and Bollinger (magma) chambers. The feeder zone
remains mineralised with breccia and stringer sulphide (up to 32m thick),
stringer and disseminated sulphides (up to 21.5m thick) with massive
sulphides (2.5m thick) encountered.
A fifth hole located ~150m south east of Bollinger has intersected only weak
mineralisation but completed DHEM has identified a strong off-hole
conductor (Conductor 6) to the south east of the hole which remains a
priority target that will be tested soon. Mineralisation at Bollinger may also
extend north to Conductor 5 further enhancing exploration potential.
Importantly, mineralisation remains open in all directions and exploration
has been accelerated, with 6 rigs now actively drilling.
Bollinger is Potentially Larger than Nova
Sirius already has the one of most significant undeveloped nickel deposits in
Australia (if not the world), in Nova, with Bollinger now adding a new
dimension to the project. Not only has exploration upside been substantially
enhanced, with large gravity and EM anomalies yet to be tested, we suspect
the scale of the future operation has been significantly increased.
Our updated modelling now assumes a mining inventory of ~15Mt (which is
potentially very conservative) and we have increased mine production to
1.5Mtpa (from 1.0Mtpa), allowing for an initial mine life of 10 years. Our
estimate for pre-production capital costs have increased to $520m (on a
100% basis or $360m for SIR’s 70% component). We maintain high
recoveries for both the nickel and copper and good payabilities for average
nickel production of ~23Ktpa (16Ktpa attr. Ni SIR) and average copper
production of ~13Ktpa (9Kpta Cu attr. SIR). Our updated project valuation for
Nova-Bollinger is now $3.56/s (up from $2.87/s), with our sum of parts
valuation improving to $4.11/s (up from $2.97/s).
We maintain our Speculative Buy recommendation, with an updated Price
Target of $4.83/s (up from $3.56/s). Key risks include resource/ore reserve
definition and progressing development studies towards construction of
Nova-Bollinger (and the other targets). We expect the project to be feasible,
but significant funding will be required, which adds more risk to the potential
development.