Small Caps | Apr 01 2011
– Syndicated Metals has extensive tenements in North Queensland
– Exploration likely to lift resource at Barbara project at Mt Remarkable
– Intersuisse initiates with Speculative Buy rating
By Chris Shaw
Syndicated Metals ((SMD)) is a Queensland-based copper explorer, with four main tenements. The most advanced is the Mt Remarkable project in the Mt Isa Cloncurry region, where Syndicated has 1,152 square kilometres under exploration permit.
Stockbroker Intersuisse, which has initiated coverage on Syndicated Metals with a Speculative Buy rating, notes the Barbara project at Mt Remarkable currently offers Syndicated Metals a resource of 76,000 tonnes of copper equivalent based on its share of the project.
A drilling campaign is underway to increase this, with a share of more than 100,000 tonnes seen as likely and potential for an increase to as much as 150,000 tonnes. Given the potential of the area and surrounding tenements, Intersuisse is confident of success from further drilling programs.
Assuming a reserve increase to 118,000 tonnes, Intersuisse estimates the Barbara project has a net present value for Syndicated of $125 million. This assumes a 12% real discount rate, no value for any franking credits, first mining in 2014 and metal prices staying around current levels.
Factoring in an equity raising for funds needed to develop the project, Intersuisse estimates a per share value on the above assumptions of around 33c, rising to 49c if the discount rate is removed. Applying lower copper prices in coming years would see this value fall to around 25c per share. This alone offers solid upside from current levels.
But Barbara is not the only prospect offering upside for Syndicated Metals, as Intersuisse notes the company's permits cover a total of more than 3,700 square kilometres in North-West Queensland.
An additional project is Syndicated's 49% interest in the Kalman South deposit. The deposit currently has a JORC resource equal to 124,000 tonnes of copper. Given little recent work there is no value for this prospect included in Intersuisse's model.
As well, Syndicated Metals is well positioned in that its projects are located near to operations in the area controlled by the likes of Xstrata, Ivanhoe Australia ((IVA)) and Cudeco ((CDU)). All of these companies may look at expanding assets in the area, notes Intersuisse, which offers some scope for corporate activity involving Syndicated Metals.
At present, Syndicated Metals has a market capitalisation of less than $20 million, this small size meaning no coverage by brokers in the FNArena database. Shares in Syndicated Metals today are unchanged at $0.20. Over the past year the stock has traded in a range of $0.091 to $0.22.
