ASX minnow Boab Metals says optimisation work on last year’s definitive feasibility study on its proposed Sorby Hills lead-zinc-silver project in Western Australia’s north has produced a significant increase in forecast early pre-tax cash flows.
A new front-end engineering and design (FEED) study captured an inflationary rise in pre-production capital expenditure from A$245 million to $264 million, compared with the earlier DFS, but projected a $150 million improvement in pre-tax cash flows over the first five years of operation on the back of higher metal recoveries and a more substantial contribution to production from the primary Norton deposit at Sorby Hills.
Boab owns 75% of Sorby Hills in a joint venture with China’s Henan Yuguang.
The Australian company, which has a current market value of circa-$25 million, describes Sorby Hills as “Australia’s largest undeveloped, near surface lead-silver deposit with granted mining leases [and] EPA [Environmental Protection Authority] approval”.
On current spot prices for lead (US$2344/t) and silver (US$32/oz), exchange rates and treatment charges, Sorby Hills generates an NPV (8% discount rate) of A$596 million, pre-tax IRR of 47% and average annual EBITDA of $160 million.
“We believe Boab has a great opportunity to source part or all of its debt funding from Commonwealth Government financiers,” Perth stockbroker Shaw and Partners said in a research note.
“Commonwealth lenders such as the Northern Australian Infrastructure Facility can provide concessional loans for the development of infrastructure projects in northern Australia.
“We expect the Sorby Hills lead/silver concentrate to be highly sought after by global smelters.
“Boab Metal’s Chinese partner Henan Yuguang will take its 25% share, and Boab Metals is finalising the binding offtake agreements for the remaining 75% and some of the offers come with financing options.
“We do not believe offtake is a significant risk but an announcement that Sorby Hills is fully sold is likely to be a positive catalyst.”
Boab is funded to a final investment decision with about $7.4 million cash in the bank.
