CMR 0.00% 15.0¢ compass resources limited

huntleys small companies guide

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    Here's CMR from Huntleys Small Companies Guide issued YESTERDAY and will hopefully have a positive influence on Monday:

    From Huntleys SCG dated 15/1/05

    Fresh cash and resources lifted

    CMR has reported a number of developments in its quest to become a significant base metals producer. Approximately A$3.5m of new capital was raised prior to Christmas via a share purchase plan and associated placement at 30cps. A total of 12.1m new shares were allotted increasing the issued capital by 22% to 66.2m. The raising has removed one of our near term concerns, ie funding through to the completion of the Browns Oxide feasibility work by mid 2005.

    Equally pleasing was the new resource estimate for its 90% Browns project. We had flagged this in our November report although we did not expect a huge jump in tonnes or grade. Contrary to this expectation, grades for the Browns resource did increase quite considerably. The lead grade increased by 29% to 4.5%Pb, the copper grade increased by 17% to 0.5%Cu and cobalt and nickel grades increased by 3% to 0.12%Co and 0.10%Ni respectively. The Browns resource tonnage increased from 38.9Mt to 40.0Mt. CMR's other defined resources in the Batchelor area were not re-estimated and remain at 30.5Mt for Browns East and 12.4Mt for the Area 55 deposit.

    (Resource table excluded)

    Of the now 84.2mt of global resources in CMR's 90% Batchelor leases, approximately 8% or 6.7mt is oxide which will underpin the Oxide Project. This is a 16% increase from the 5.8mt quoted in our last report and results, as with the sulphide ore increase, from the inclusion of a number of new Browns drill holes with improved intersections.

    The increase in grade and tonnes for both oxide and sulphide should improve the economics of both projects. Further, there are positive mine scheduling implications which should also increase returns. Prior to the current resource upgrade, we had derived an NPV of A$124m for the Oxide project, and CMR had reported an NPV of over A$200m for the Sulphide project. There remains upside in our numbers. CMR has lodged a "Notice of Intent" for the Browns Oxide Project with the NT Government. A small drill program to provide additional material from Area 55 and Mt Fitch for leach variability tests on the deposits has been completed. The oxide project development plan is continuing and is scheduled for completion in mid 2005.

    Iron ore a potential add-on

    As an aside CMR has cut a deal covering the potential to mine iron ore on part of its Browns project. Territory Iron Pty Ltd (TIPL) will carry out exploration, test work and any future development within a 2.5km by 1.5km area of the tenements. TIPL will have the right to purchase iron ore from CMR for A$1 per tonne plus or minus an adjustment if iron ore grades are more or less than 60%Fe. TIPL has also made a non-refundable advance payment of A$150,000 and will make annual advance payments until mine development or its withdrawal.

    Iron ore was first delineated by Thiess Exploration in 1970. They reported the potential for 10.5M long tons in a grade range 40 to 60% iron. CMR has indicated potential to double this resource and more could be outside the TIPL area. The deal could be worth +A$10m to CMR if the deposits are eventually exploited.

    Wyoming royalty chances boosted

    CMR has a royalty interest in the majority of Alkane Exploration's (ALK) ~500koz Wyoming project in NSW. The royalty comprises 75 cents per dry tonne for the first 500,000 tonnes, followed by 3% of gold and other minerals recovered until 150,000oz, and 5% of gold and other minerals thereafter. ALK has recently announced further deep high grade drill intercepts at Wyoming One. These include 18.4m @ 5.74g/t from 292.8m, 50m below the previous deepest intercept, including 7.20m @ 11.06g/t from 292.8m. In addition a second hole has intersected hanging wall zone (HWZ), 120m below the previous deepest intersection, adding 200m to the vertical extent of the HWZ. Assays have only been received for part of the mineralised zone and include 10m @ 5.39g/t from 521m. The balance of assays is to be released early this month. The holes add significant potential to the total resources at Wyoming One.


    We continue to rate CMR a "Speculative Buy". The company has no cash flow as yet, is speculative and is not for conservative investors. That said CMR could represent one of the highest leverage plays to any extended China driven resources boom.
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