Morning Equity Briefing
Ormonde Mining
(ORM ID)
Big copper partner decides to stay at La Zarza
Job Langbroek
| Closing Price: | 4c | Rating: | Neutral | 30/06/09 |
FACTS: Ormonde Mining has announced that Antofagasta, its partner at the La Zarza polymetallic project in the pyrite belt of southern Spain, has elected to continue to fund the joint venture. In tandem, a non-JORC resource estimate of 61m tonnes grading 0.8% copper, the metal of primary concern to the major copper producer, has been calculated. Four new holes drilled since the start of Antofagasta's involvement intersected alteration and some sulphide but no significant new copper mineralisation. Additional permits have been applied for and will be issued in due course.
ANALYSIS: Antofagasta's global resource estimate points to the presence of significant quantities of copper and importantly, sufficient potential to increase this to maintain its involvement. Under the original agreement, Antofagasta was required to spend $1m in the first year of the joint venture, with an additional $6m to be spent by the end of the three years in order to acquire a 51% stake in the project. Its decision to continue to invest is a positive validation of the project.
DAVY VIEW: Our valuation of Ormonde at present is18p per share. However, this is based only on the tungsten project in the Spanish region of Salamanca with no value assumed for La Zarza. For now, we do not propose to change this as, notwithstanding the scale of the resource, in our opinion it is still not large enough (or alternatively has high enough grade) to ensure that a mining project will ensue. Nonetheless, the involvement of Antofagasta should ensure that any potential at La Zarza is realised and as such the news that it has sufficient reason to remain on-site is good news for shareholders.