Transforming PepinNini Offers New Potential

This story features POWER MINERALS LIMITED, and other companies. For more info SHARE ANALYSIS: PNN

– PepinNini previously focused on uranium, but the company is now expanding into iron ore
– Sinosteel JV provides funds for exploration
– Intersuisse rates PepinNini a Speculative Buy

By Chris Shaw

Since listing in 2005 PepinNini Minerals ((PNN)) has been regarded by the market as a uranium explorer, and thus the share price rallied in 2007 coinciding with a spike in uranium prices.

Weaker uranium prices have hurt PepinNini's share price over the past couple of years, as it meant the Crocker Well project was declared as not viable at existing uranium prices in December of 2009. This saw some uranium focused investors leave PepinNini's share register. Stockbroker Intersuisse suggests there was little incentive for others to come onto the register given no clear new focus for the company.

Intersuisse suggests this may be about to change as PepinNini is developing some iron ore projects that could become of interest to the market. One is the Robinson Range project in Western Australia, where PepinNini is preparing to commence a drilling program.

Approval to commence drilling at Robinson Range has been delayed by regulatory issues but Intersuisse expects newsflow will improve in coming months as drilling approval should be received in due course. Funds for drilling are available thanks to a $3.1 million share placement in January of 2011.

The goal is to establish a 10Mt initial resource and 100Mt as an exploration target, though Intersuisse points out Robinson Range is not expected to deliver any product before 2016. This is because an extension of an existing rail line and an expansion of port facilities at Okajee is required.

As well, Intersuisse notes drilling is to commence at the Curnamona iron ore prospect in June. Sinosteel will partner PepinNini in exploring the Curnamona project via a joint venture, where Sinosteel has a 60% interest thanks to a Memorandum of Understanding that saw PepinNini receive a payment of $30.5 million.

Sinosteel has also agreed to spend $6 million on exploration for minerals other than uranium, of which there is still $4.6 million available. Earlier this week, PepinNini announced the presence of magnetite outcrops within the Curnamona operations, while Intersuisse notes a previous intersection from two metres below the surface graded 44% Fe to 13 metres below the surface.

Also a positive for Curnamona, according to Intersuisse, is it falls withing the Braemar Iron formation, which is regarded as an emerging iron ore province. A number of other companies operate in the region, including Minotaur Exploration ((MEP)), Havilah Resources ((HAV)) and Royal Resources ((ROY)). 

From a technical perspective there are also reasons to be positive on Curnamona, as Intersuisse points out infrastructure in the region is already largely in place and the ore is soft and upgrades easily.

Given an expectation of improved newsflow in coming months, Intersuisse rates PepinNini as a Speculative Buy. The broker suggests now is the time to buy the stock as stale uranium bulls finish exiting the share register and before PepinNini presents at the South Australia Resources and Energy Investment Conference early in May, and prior to the start of drilling at Curnamona.

At current levels PepinNini has a market capitalisation of around $15 million, the FNArena database showing no coverage of the stock from brokers in the database.

Shares in PepinNini today are unchanged at $0.175, having traded in a range over the past year of $0.13 to $0.365.

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