Strategy First Recommendation 20/01/2008 Share Price $0.18 12 mth Price Target $0.37 Suggested Stop Loss $0.09 Recommendation Spec Buy Risk Rating High Market Information Sector Mining Index
Market Cap $26 million How Many Shares do I buy? Trade = Amount ($) you're prepared to risk Size Market Price - $0.089 Note. Amount ($) you are prepared to risk is typically 2-3% of the TOTAL amount you have to invest
Recommendation Summary
Company Background Kalgoorlie Boulder Resources (KAR) is a gold and nickel exploration company whose main focus is currently on the Norseman Gold Project in Western Australia. The Company also owns the Clinker Hill Nickel project in Western Australia along with numerous others. Investment Summary In 2007, KAL had interests in gold, nickel, uranium and, oil and gas. The management team realised that this was not the best way forward for the company as the share price hovered around the six cent mark in September 2007. After selling off its non-core assets, KAL acquired the Norseman Gold project which has so far, proved to be a turning point for the company. Norseman is considered to be a highly prospective project in a region with a rich history of exploration success. When the project was acquired, it came with a confirmed JORC compliant inferred gold resource of more than 1m ounces at the Mt Henry, Selene, North Scotia and Abbotshall prospects. The project was also close to major infrastructure such as roads, gas and water pipelines, and offers easy access to the airport and railway from Esperance Port. KAL recently upgraded the resource base at Norseman after promising drill results at the Selene deposit. At Selene, indicated and inferred resources increased by 53% to 720,000oz of gold compared to the previous figure of 470,000 oz. The Norseman Project now has indicated and inferred resources of 25.8m tonnes at 1.7g/t for a total of 1.4m ounces of gold. Mt Henry, which is part of the Norseman project, currently has a resource of 10.6m tonnes 1.9 g/t for 630,000 oz The other main project that KAL is focusing on is the Clinker Hill nickel project, which lies 40km from the rich Kambalda nickel district. Initial results have identified a number of promising prospects for KAL to follow up and build upon. KAL will perform more rounds of testing before looking at a number of opportunities such as joint ventures for the project. Even in such volatile market conditions, the potential of KAL’s assets are hard to ignore. High metal prices, especially for gold, provide icing on the cake for this junior explorer, which is why we recommend it as a ‘spec buy’. However the stock carries a high risk rating and could be subject to volatility along with the broader market.
KAL Project Map Source: KAL wise-owl Checklist • Strong management team who have been involved in the resources industry for over 20 years. • The sale of its uranium assets to Burey Gold has left KAL in a healthy cash position of $1.2m. • With a pre-feasibility study to commence in March, there will be a good number of announcements flowing into the market. Positive announcements from the company together with completion of its feasibility study by December 2008 could lead to a re-rating of the company. • Institutional Shareholders include RASL AU LLC (31.08%). • After building a long term base, the stock is now beginning to trade in an upward trend.
Fundamental & Quantitative Analysis Management Michael Atkins – Chairman Since 1987, Michael has acted as Executive Director and been involved in the executive management of several publicly listed resource companies with operations in Australia, USA, South East Asia and Africa. Trevor Matthews - Managing Director Trevor had previously been appointed Company Secretary on 11 November 2004 and resigned on 11 February 2005. He has worked in the resources industry for 20 years and held executive positions with North Limited, WMC Resources Limited and other listed entities in both operational and corporate roles. Trevor has significant experience in corporate governance, project development and finance.
Financial Performance The Company completed the sale of its uranium assets to Burey Gold Limited in September. The total consideration payable by Burey Gold was $1.75m in cash and 2 million Burey Gold shares. The Company received the cash payment from Burey Gold in the June quarter. The proceeds received from the sale of the uranium assets, together with the gold produced from the Jackpot stockpiled ore will be used to fund KAL's exploration and development efforts at Norseman and the Clinker Hill nickel project. In the most recent quarter to September 2007, KAL spent $157,000 on exploration, and cash on hand stood at $1.2m. Growth Story It is going to be a critical year for KAL in light of its active drilling and exploration program. The company will be accelerating its regional exploration efforts using the V-TEM geophysical technique, which, as demonstrated in Canada, is highly suited to finding gold in Banded Iron Formations. KAL have commenced talks with various geophysical survey providers regarding utilisation of this technology, and an agreement expected in January or February 2007. KAL is currently updating its Mt Henry resource to incorporate recent drilling and is well advanced towards the completion of a scoping study by the first quarter of 2008. This resource upgrade will allow for the scoping study to be further developed, along with the process test work scheduled for the early part of 2007. At Norseman, KAL is currently undertaking a scoping study to evaluate its economic potential which includes the freshly updated resources at both Selene and Mt Henry. The Scoping study is due to be completed in the first Quarter of 2008 with the pre-feasibility to commence in March 2008. If it all goes well, a feasibility study will take place in June 2008, with completion targeted for December 2008. Revenue & Profitability KAL vs. Sector Average (historical) FY2007 FY2006 FY2005 (rolling) KAL SectorAverage PE Ratio (x) NA NA NA PE Ratio (x) NA 30.05 Revenue per Share ($) 0.02 NA NA Revenue per Share ($) 0.02 0.26 Earnings per Share ($) -0.05 -0.02 NA Earnings per Share ($) -0.05 -0.02 Dividend Yield (%) 0.00 NA NA Dividend Yield (%) 0.00 0.14 Profit Margin (%) -261.05 NA NA Profit Margin (%) -261.05 -272.87 Return on Assets (%) NA NA NA Return on Assets (%) NA -15.25 Return on Equity NA NA NA Return on Equity NA -18.12
Technical Analysis Trend Horizon Trend Daily Weekly Monthly Technical Overview KAL is a relatively new addition to the market. After inception at around 10 cents the stock traded in a downtrend for the first year reaching a low of 4.5 cents. The stock then moved into a channel forming its first resistance at $0.125. A fall to the $0.05 level caused a bullish pennant break which caused a rapid rise to a new high of $0.155. The stock attempted a 2nd break outside the channel but failed again at the $0.155 level. This double top caused a steady grind back around the $0.05 level and a formation of a triangle. A break of this triangle in November last year was very bullish and caused a sharp rally out of the channel and to a new all-time high of $0.26. This is now the major resistance level with near support at $0.15.
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KAL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
