Company BackgroundAbra Mining Limited is an Australia-based...

Company Background

Abra Mining Limited is an Australia-based company engaged in mineral exploration. The Company’s main focus is the 100%-owned Abra base metals deposit located within the Mulgul Project in Western Australia. The Mulgul Project is part of Abra Mining’s South Bangemall tenement package that also includes the Jillawarra Joint Venture (JJV), where the Company has a right to earn a 70% interest. The JJV contains the Copper Chert prospect.
Investment Summary

Abra Mining’s main focus is to develop the Abra deposit in Western Australia. The area is within the Mulgul project covering approximately 280 square kilometres. In 2006 a resource estimate was completed which showed a JORC compliant resource of 50mt at 5.5% lead (Pb) equivalent and 9.8mt at 0.8% copper (Cu) equivalent. In detail the mineral resource encompasses 50.3mt at 4.0% Pb, 0.2% Zn, 10g/t Ag and 0.1% Cu. The copper mineral resource has 9.8mt at 0.6% Cu, 0.5g/t Au, 0.2% Pb and 2.0g/t Ag. Cutoff grades for the resource statements were 2.5% lead and 0.4% copper, respectively. The mineralisation covers an area of approximately 1000m by 800m and there is 60km of strike length to be tested.

The mineralisation is inferred meaning it is not yet economically viable. To become a potentially cash flow positive mineralisation the deposit needs to be at least 75mt at a grade greater than 4% lead. The economics would then support a 356,000t per annum operation with 6-7mtpa throughput from an underground cave. Concentrate grade is expected to be around 67% with 97% recoverable. Since the inferred JORC resource does not include drilling results from 2006 onwards, there is scope for a resource upgrade. The deposit is still open along strike and in most directions.

Main risks to the project are falling lead prices or if the company is unable to increase its JORC resource to levels considered economic. The project is quite far from the coastline and could also be capital intensive, but the joint venture with Chinese partner HNG will diminish some of this risk.

We rate the stock a speculative buy at current levels as we expect an upgrade to their JORC resource during the year ahead, which should see a positive re-rating. However, it is still early stages for the project and the stock comes with a high risk rating.

NOTE: The stock can be rather illiquid at times and we recommend members to spread out buying over a few days/weeks rather than overpay.