https://stocksdownunder.com/top-picks/BUY Market capitalisation:...

https://stocksdownunder.com/top-picks/

BUY Market capitalisation: $206m
Share price: $0.26552-week range: A$0.147 / A$0.425
Risk Level: Medium
Gold mining in WA Ora Banda Mining (ASX: OBM) is Australia’s newest gold producer. The gold price seems to be stabilising and the company’s Davyhurst Gold Project in Western Australia is now up and running. Going forward, we’re bullish on the price of gold.Why are we adding Ora Banda Mining to our Top Pick list?Davyhurst is small, at only around 80,000 ounces a year, but the cost of production is under A$1,600 an ounce. And there is significant potential to expand the resource. The shares have been consolidating for the last 3 months and now seem ready for an upward move.

Australia’s newest gold miner Ora Banda Mining recently started production at its Davyhurst Gold Project in Western Australia, with the first gold being poured on 7 February 2021. Davyhurst is located in WA’s Eastern Goldfields around 120 km northwest of Kalgoorlie. Davyhurst is only a small project, with the initial production profile only averaging 81,000 ounces a year over five years. However, Davyhurst covers a 2.2 million ounce resource and Ora Banda has 1,350 sq km of exploration ground in the district. The Davyhurst project is fully-funded, with Ora Banda holding $32.6m in cash and no debt as at December 2020. A $15m debt facility has been negotiated with CBA. OBM Chairman Peter Mansell was an on-market buyer of Ora Banda stock in early April 2021.Ora Banda’s project has favourable economicsOra Banda published its Definitive Feasibility Study for Davyhurst in June 2020. At a gold price of A$2,550 an ounce, the post-tax NPV of Davyhurst, at a 6% discount rate, is A$237.8m. All-In Sustaining Costs will be around A$1,566-1,578 an ounce. Davyhurst’s economics are assisted by Ora Banda’s A$281m in carry-forward tax losses as at June 2020. The capital costs of this project were only A$45m and the programme was completed within budget.A mixture of open pit and underground minesOra Banda will source ore from six deposits – Riverina, Sand King, Missouri, Waihi, Callion and Golden Eagle – all located around 50 km from the Davyhurst plant. The initial mines will be the Riverina open pit and the Golden Eagle underground. The plant is a conventional CIL processing facility. There is considerable room to increase the current 460,000 ounce mining reserve, with the six deposits having a collective 1.2 million ounce resource.Key risks:The US dollar gold price resuming the downward trend that started in mid-2020Operational problems at the Davyhurst plant Technical AnalysisThe daily price chart for Ora Banda shares showed signs of price bottoming out at 24 cents during the month of March and early April. This period of consolidation was preceded by a down trend in the price which made the first bottom at 23 cents and then the consolidation period, which formed the second bottom at 24 cents in the form of a triangle, together forming a double bottom platform pattern. There are reasons to believe that this consolidation was an accumulation phase as the price bounced off the bottom at 24 cents very quickly every time it touched it.Furthermore, we see declining volume and range, which shows more balance between buyers and seller as we get closer to the tip of the triangle.
This sets the scene for a potential breakout. Using the depth of the pattern the first and second targets for the price are 30 and 35 cents, respectively.