Avonlea Minerals Ltd (AVZ.ASX, $0.18/share) ? DTR test work shows good results. Stock grossly undervalued. SPEC BUY (PT: $0.49/share)
Recently, the company released the results of DTR test showing recoveries up to 62% (admittedly, from only one borehole). But generally speaking, the results have been quite positive with several holes showing +30% recoveries. Further testing is being conducted on a 75 micros grind size, which is far coarser than Australian magnetite averages, meaning energy costs at the finished project will be substantially lower than Australian peers.
The company has been able to increase its resource exploration target to nearly 3.5bt. A JORC compliant resource exists at the Onjou Prospect of over 0.5bt. Drilling here is continuing, while a drill program at three other prospects is due to begin shortly. We expect much in the way of newsflow over the coming 6 to 9 months, including resources expansion at Onjou as well as maiden JORC resources at 3 other prospects.
Our $0.49/share price target is extremely conservative and is based on a current EV/resource multiple of $0.023/t, as ascribed to the company by the market. We assume that a ~1.5bt resource will eventuate over the coming months, lifting the stock price to $0.49/share on this multiple. However, nearly all other iron ore juniors are trading at multiples far above this and thus the potential for AVZ to rerate upward remains high. Given this fact, we consider Avolea to be a BUY and wait on positive newsflow from current drilling activities.
Be the first to comment