Shaw and Partners sees significant share price upside in QMines
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Shaw and Partners predicts QMines will be trading at 69c in the next 12 months after initiating coverage on the Queensland copper explorer and labelling it a “Buy”.
QMines (ASX:QML) ticks all the boxes for Shaw and Partners, with the investment firm basing its bullish outlook on the company’s EV/Resource proposition compared to its copper peers.
A company’s EV is calculated by adding the market cap and the debt together and then subtracting the cash on hand. The EV is then divided by the total resources contained in the ground.
Shaw and Partners is banking on QMines increasing the copper inventory at its flagship high-grade Mount Chalmers copper-gold project in Queensland to 120,000 tonnes.
“On an EV/t of copper resource basis QMines is trading at $420/t, which is a 33% discount to the peer comparables,” Shaw and Partners head of research Andrew Hines and analyst Michael Clark said in a recent research report.
“We have set our price target and valuation of QMines at A$0.69ps, which is based on the
company successfully increasing its resource to 120kt in the current exploration program
and trading at A$560/t, which is a 10% discount to its peer group average of A$622/t.”
Mount Chalmers – which contains copper, gold, zinc, lead and silver mineralisation – is already recognised as being one of the highest-grade gold volcanic-hosted massive sulphide (VHMS) systems in the world.
And it is on track to host a potentially much bigger resource after drilling uncovered new mineralisation outside of the current inferred resource of 3.9 million tonnes at 1.15% copper, 0.81 grams per tonne (g/t) gold and 8.4g/t silver.
“These deposits are typically characterised by multiple deposits within a cluster,” Hines and Clark said.
“QMines’ technical team believe there is strong potential of finding further VHMS mineralisation around the existing mine site.”
Mount Chalmers was mined sporadically between 1898 and 1982, producing 1.24 million tonnes at 2% copper, 3.6g/t gold and 19g/t silver.
No mining has been undertaken since 1982, but there’s still plenty of exploration upside.
Mount Chalmers is located in the same region as significant mines including Heritage Minerals Mount Morgan’s historic mine, which produced over 8 million ounces of gold and 400,000 tonnes of copper, Aeris Resources’ (ASX:AIS) Cracow gold mine, which has produced 1.4 million ounces of high-margin gold since 2004, and Evolution Mining’s (ASX:EVN) Mt Rawdon mine, which has produced nearly 2 million ounces of gold since it started production in 2001.
Since hitting the ASX boards in May, QMines has made several game-changing advances at its Mount Chalmers project, including a new bonanza grade lead and zinc discovery.
More recently, the company completed a six-month program of digitising a large historic regional soil sample dataset, which proved extremely successful and indicated it could have several big repeats of the previously operating, high-grade Mount Chalmers mine.
This treasure trove of historic data also saved QMines significant time and expense.
“QMines has reworked and digitised historical soil sampling in the region and has identified four strong exploration leads at Striker, and at three locations to the west of Mount Chalmers (T1, T2 and T3),” Hines and Clark noted.
QMines is one of only a handful of listed copper companies on the ASX with a brownfield copper asset in a Tier 1 jurisdiction such as Australia.
The company’s goal is to rapidly expand and upgrade the existing Mount Chalmers resource to around 200,000 tonnes of copper equivalent over the next two years through a large 30,000m drilling program, and return the mine to production.
“The copper price is currently trading at US$9,463/t and so the IPO of QMines appears well timed,” Hines and Clark noted.
“There are very few ways for investors on the ASX to gain exposure to copper outside of the major diversified miners and larger companies such OZ Minerals and Sandfire.”
Shaw and Partners expects that once the resource has increased to a “reasonable size”, somewhere in the vicinity of 150,000-200,000 tonnes, QMines will move to scoping and pre-feasibility studies in late 2022 and into 2023.
This article was developed in collaboration with QMines, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.