further extracts … Cannacord Significant FY25E/26E FCF yields of...

further extracts … Cannacord

Significant FY25E/26E FCF yields of 13%/32%.

Based on our forecasts, OBM is set to emerge in FY25/26 with exceptional FCF yields among the intermediate producers, second only to African-based producer RSG (see Figure 12).

We expect the company's cash balance to grow to ~A$330m by the end of FY26, which should afford the company an increased exploration budget (CGe A$20m p.a. from FY25), as well as potentially funding expansions to the existing processing facility or bringing online additional underground mines (pending exploration success).Spoilt for exploration targets once FCF starts rolling in. We see considerable exploration across the landholding, most of which has never been tested for underground potential.

It's impressive that in less than two years, OBM has established one underground mine and a second could be contributing meaningfully in less than 12 months.
We expect the exploration effort in FY25 will focus on infill and extensional drilling at Sand King and extensions to Riverina, which in our view, given its strike length, has the potential for a second independent underground mine to be established in the medium term.

Into FY26 and beyond, we expect OBM to test a number of targets across its 110km combined strike of defined mineralised trends.
Depending on the medium-term exploration outcomes, if further economic underground mines can be defined, it will likely drive a decision to expand the mill, which could result in a production profile well in excess of our base case.

Potential catalysts• Late JunQ'24 — Resource and Reserve update, potential FID on developing the Sand King underground.• Mid 2024 — FY25 guidance and potential multi-year outlook.• FY25E — meaningful FCF generation.• Ongoing — exploration updates.

Valuation and recommendationWe initiate coverage with a $0.50 price target (1.0x forward curve NPV5%) and a SPECULATIVE BUY rating.