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Falcon Minerals (FCN)
Situation Update
Speculative Buy
$0.55
A
Collurabbie Awaits BHP Review
We understand that the next phase of exploration drilling at the high-profile Collurabbie Project in WA will commence once new project operator, BHP, has completed its review of project data. BHP has inherited operatorship of the project following its recent takeover of WMR.

BHP is believed to be conducting a data review on the project over the next 3 weeks. It is reported to have retained all of the WMR technical staff associated with the project. We rate as high the likelihood that it will continue with the joint venture.

If this is confirmed in the coming weeks then it should be a major positive for FCN, as BHP's involvement will reinforce the integrity of the project.

FCN management is likely then to undertake a roadshow and highlight the upcoming drilling program at Collurabbie, which we understand will focus on the Olympia zone. Results from the last round of drilling at Olympia were slightly disappointing, but subsequent interpretation suggests that deeper drilling is required to properly test the target, so a program of deeper holes will be undertaken.

FCN had cash holdings of $2.7m as at the end of the March Quarter.

As a reminder to clients of the history of Collurabbie, FCN announced the discovery of nickel, copper and platinum group anomalism from the first air core drilling program on the FCN-WMR joint venture ground at Collurabbie in October 2003. This followed soon after WMR's discovery of combined nickel, copper and PGE sulphides in their adjacent ground to the north, over a strike length of 7km.

In August 2004, FCN confirmed that nickel, copper and platinum group elements in sulphides were intersected in the initial round of RC and diamond drilling along the Olympia zone in the first deep drilling program on the joint venture ground. The Olympia zone is located about 4-5km south of WMR's wholly-owned Collurabbie project. WMC has likened the Collurabbie Project to the Raglan mine in Northern Quebec where average grades are 2.8% nickel, 0.8% copper and 4gpt PGEs. Mineralisation at Colurabbie is believed to be relatively unique in Australia.

The Collurabbie joint venture ground is located 160km east northeast of the Keith Nickel operation in WA and contains Archean rocks under a thin layer of transported sand that has effectively impeded exploration for nickel sulphides in this area for 3 decades. Colurabbie remains the hottest exploration play in Australia at the present time, due to its potential to host a significant platinum-nickel deposit and we retain our Speculative Buy recommendation.