RFC Ambrian Base Resources put in another strong operating...

RFC Ambrian

Base Resources put in another strong operating performance at Kwale in Kenya during the December quarter, with production of all products on track to meet or exceed guidance for FY18. The outlook is positive, with stable production and a strong pricing environment, particularly for zircon and rutile. Also, we believe that the acquisition of the Toliara Sands Development Project in Madagascar is accretive and represents a sound strategic fit for the company.
Maintaining our Buy rating and raising target price to A$0.62. We have increased our target price from A$0.54 after including a risked value for the Toliara acquisition and allowing for the recent share issue. The valuation of the Kwale operation is based on long-term commodity price assumptions of US$180/t for ilmenite, US$1,050/t for rutile and US$1,150/t for zircon. We estimate the net NPV10 value of Toliara at US$390m, to which we have applied a risk multiple of 0.5x to allow for the potential dilution associated with the financing and delivery of the project.

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