On BML’s website now.
Valuation $0.50 and 12 month target $0.55:
Euroz Hartleys:
PROJECT UPDATE | PUBLISHED ON 20 DECEMBER 2024Offtake pre-payment secured for US$30mBML.ASX | BOAB METALS LIMITED | MATERIALS | OTHERPRICEA$0.15/shTARGET PRICEA$0.55/sh(FROM A$0.70/sh)RECOMMENDATIONSPECULATIVE BUY(UNCHANGED)
EventBoab Metals (BML) has executed a binding offtake agreement for its lead-silver concentrate produced from its Sorby Hills Lead-Silver Project (development) in the Kimberley Region of WA. BML also has an option agreement in place to acquire the remaining 25% project interest from its existing JV partner. We update our numbers for the change in potential ownership, offtake and latest construction timing forecast.ImpactBinding offtake includes US$30m pre-payment facilityThe offtake agreement with metal trader Trafigura provides BML with a US$30m pre-payment facility (interest charge 5% + SOFR) 5-year term from first draw-down. In turn, Trafigura receives 75% of the lead-silver concentrate (min 531kt) over ~7 years (as per the FEED production schedule), benchmarked on the LME cash settlement price averaged over the quotational period. At this stage, 25% of the project Pb-Ag concentrates are unencumbered, providing opportunities for further deals and/or exposure to spot concentrate sales.
Move to 100% project ownershipThe lead-silver project is currently 75%-owned by BML, but BML has reached an agreement with its JV partner, Henan Yuguang (China’s largest lead smelting company) to acquire the remaining 25%. Under the terms of the option agreement: BML will pay A$12.5m on FID, A$5.5m within 12 months of first concentrate and a further A$5m within 18 months of first concentrate sales (total acquisition price of A$23m). The deal will simplify the project ownership for full exposure to the project economics.
We adjust our modelling to the 100% interest.Sorby Hills FEED study (June’24) highlighted the following outcomes:Large-scale open pit operation (2.3Mtpa), ave lead production +64ktpa (with silver credits) over +9 years mine life – peak production 80kt lead. Slightly higher upfront capex A$264m (+8% on DFS) but improved C1 Costs (net of credits) US$0.36 (-8%) - slightly better than expected.Improved net cash flows A$778m (+10%) and forecast EBITDA A$126m pa (+5%) for higher NPV and IRR (on BML financial estimates). BML continues to progress discussions for project financing for a FID in H2CY25.BML remains in discussions with NAIF and EFA (Federal government agencies) to provide debt financing for the project development. Advanced discussion also ongoing with commercial banks for additional debt funding.Assuming successful funding outcomes construction to commence in late CY25 for first production potentially in CY27 - we update to the latest timelines.We update our modelling to better align to the DFS/FEED outputs, adjusted production levels and costs. Our latest valuation (NPV10) is $0.50/sh (down from $0.62/sh) which remains risked weighted due to the funding requirement. The project is highly sensitive to lead price/exchange rates, and at current spot prices our BML NAV is 91cps.
ActionSpeculative Buy retained, with key risks around project funding. Our latest valuation $0.50/sh (P/NAV 0.3x), and Price Target 55cps (down from 70cps). AnalystMike
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