March quarter bulletin for Boab Metals (ASX:BML)

Highlights

• Boab Metals has released its report for the last quarter ending 31 March 2023.
• During the quarter, BML progressed towards reaching a Decision to Mine at its Sorby Hills Project.
• BML inked ESA with GR Engineering Services to begin Front-End Engineering & Design (FEED) for the Sorby Hills process plant.
• BML received highly encouraging Phase VI Assay results demonstrating strong potential to upscale future Resource estimates and cause better Resource classification.

ASX-listed exploration and development player Boab Metals Limited (ASX: BML) has released its activities report for the quarter ending 31 March, 2023. During the quarter, BML made progress towards a Decision to Mine at Sorby Hills on the back of the Definitive Feasibility Study (DFS).

The Company considers it to be a major milestone as it led to the beginning of Front-End Engineering & Design for the Process Plant and allowed the ramp up of construction readiness workstreams.

BML concluded the quarter with a consolidated cash balance of AU$6.1 million.

An insight into the strong results of the DFS

The Definitive Feasibility Study at Sorby Hills results highlighted that ~75% of the pre-production capital expense and direct mining costs are underpinned by current tendered pricing, thus cutting down the risk of substantial cost hikes as has been the case in other mining projects.

Over the initial 8.5-year processing period contemplated by the DFS, 18.3Mt of ore underpinned 83% Ore Reserves will be mined and processed using a simple crush-mill-flotation circuit at an initial rate of 1.5Mtpa expanding to 2.25Mtpa after 1 year of production.

Concentrate will be produced at an average 103ktpa, containing 64ktpa of payable Lead and 2Mozpa of payable Silver and transported ~150km by road in sealed half-height containers to Wyndham Port from where it will be shipped to market.

As per the DFS, the Project has potential to generate AU$2.5 billion in revenue, AU$1.0 billion in Operating Cashflow and AU$705 million of pre-tax free cash flow over the Life of Mine, and an average annualised EBITDA of AU$119 million per annum during operations.

Pre-production capital expenditure is estimated at AU$245 million and net C1 Cash Costs have been calculated to be US$0.39/lb payable Lead. The Project generates a pre-tax NPV8 of AU$370 million and an IRR of 35% (from the start of construction) with a payback period of 2.5 years (from the start of operations).

Moreover, an updated Ore Reserve for the Sorby Hills Project was announced by the company during the quarter. The data has been shared by independent mining consultants Entech Pty Ltd as per the JORC Code 2012. The 15.2Mt Ore Reserve is a subset of the 18.3Mt DFS Production Target and marks a 12% surge over the previous 13.6Mt Ore Reserve estimate for the Project.

Breakdown of DFS Production Target by Resource Classification

Opportunities arising from the DFS

According to the company, the DFS stands as the starting point for the future of its lead-silver operations in the East Kimberley region. Through a mix of ongoing and planned exploration and resource extension drilling programs, there lies a myriad of opportunities to extend mine life.

Sorby Hills Mineral Resource and Production Target Development - Potential to improve Mineral Resource Estimate and production target on back of the final Phase V drilling results and the Phase VI drilling that have not yet been incorporated into the Mineral Resource model.

Norton Deposit Metallurgy - Potential to improve metal recoveries at Norton with additional testwork across the deposit.

Backup Power Review - Potential to reduce the size of the backup diesel power station to further reduce the cost of power supply.  Discussions have commenced with Horizon Power.

Improved Mining Costs - Investigate opportunities that have come to light late in the process of the DFS to improve the mining costs by adopting a bespoke pricing methodology.

Further Review of Tendered Pricing - Contracts formally tendered during the DFS were done so at a time considered to be at the height of the inflation curve in the West Australian mining and construction industry. The Company considers there to be a lot of upsides to be gained on the prices already received through workshops and strategy sessions with key proponents.

Road Haulage - The base case for haulage of concentrate in the DFS is non-concessional loading. Investigations are underway to determine if approval for concessional loading can be obtained, meaning an increased payload in each container.

Front-End Engineering & Design (FEED)
An Engineering Services Agreement was executed by the Company during the quarter with GR Engineering Services to conduct FEED for the Sorby Hills 2.25Mpta process plant and related infrastructure.

As per BML, the ESA work is expected to complete in the third quarter of 2023. Upon completion of the ESA work, the two parties will sign an EPC contract and begin a detailed design.

EPA approval has been granted for on-site earthworks related to footprint preparations for the Sorby Hills process plant and associated infrastructure. It is likely to be completed ahead of the 2023 wet season.

Phase VI final Assay Results

• SHRC_157 (Beta): 7m @ 19.17% PbEq, (16.23% Pb & 82g/t Ag) from 72m including 3m @ 41.38% PbEq, (35.26% Pb & 174g/t Ag) from 72m.
• SHRC_136 (Beta): 20m @ 7.39% PbEq, (5.58% Pb & 52g/t Ag) from 65m including 8m@ 13.86% PbEq, (10.49% Pb & 96g/t Ag) from 77m.
• SHRC_151 (Beta): 5m @ 5.13% PbEq, (3.70% Pb & 41g/t Ag) from 45m
• SHRC_163 (Beta): 13m @ 2.90% PbEq, (2.26% Pb & 18g/t Ag) from 49m
• SHRC_149 (Norton N): 2m @ 16.64% PbEq, (10.92% Pb & 163g/t Ag) from 103m (hole terminated in mineralisation).
• SHRC_147 (Norton N): 11m @ 5.74% PbEq, (3.84% Pb & 54g/t Ag) from 86m.
• SHRC_143 (Norton N): 13m @ 4.06% PbEq, (2.82% Pb & 35g/t Ag) from 95m including 5m @ 5.35% PbEq, (3.91% Pb & 41g/t Ag) from 95m.

The Company is now planning to conduct diamond drilling during the upcoming field season.

Prospects for the coming quarter

Post the announcement of the DFS results, discussions with project financiers ramped up over the quarter. Also, the Company is taking forward the independent technical and market due diligence reports as needed by financiers.  

Also, BML is in talks with a select group of Tier 1 traders and smelters regarding the offtake for Boab’s share of the Sorby Hills Pb-Ag concentrate and associated financing. BML is confident of concluding both workstreams ahead of the conclusion of the ongoing FEED work and a targeted Final Investment Decision in the third quarter of 2023.

BML stock performance

The company’s share price registered major leverage to changes in the silver price. An increase of about 20% in the price of silver triggered more than a 30% hike in the BML stock price in the past month.

The stock was spotted trading at AU$0.24 on 04 May 2023, with market capitalisation of AU$41.87 million.

Correlation between Silver price and the Boab Share Price over the past 3 years
Data source: Company update