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Cardinal Resources Ltd (CDV)
Gold
: E
xp
lore
r/D
eve
loper
CDV.asxSpeculative Buy
Share Price
Valuation $0.86
Price Target (12 month) $0.95
Brief Business Description:
Hartleys Brief Investment Conclusion
Directors
Top Shareholders
Gold Fields (AUS) 11.2%
Bank of Nova Scotia (Dynamic Fund) 8.6%
Van Eck Associates Corp (USA) 7.5%
Royal Bank of Canada (CAN) 7.1%
Sprott Asset Management (CAN) 5.0%
Company Address
Issued Capital
- fully diluted (ITM options)
Market Cap
- fully diluted (ITM options)
Cash (est)
Debt (est)
EV
EV/Resource oz A$21/oz
EV/Reserve oz A$30/oz
Prelim. (A$m) FY21e FY22e FY23e
Prod (Koz Au) - proj 0 172 347
Prod (Koz Au) - attr 0 155 312
Op Cash Flw -13 114 204
Norm NPAT -25 54 153
CF/Share (cps) -1.7 12.2 21.9
EPS (cps) 8.3 17.9 13.0
P/E -7.4 4.2 2.0
Resources (Moz) - 100% 7.0
Reserves (Moz) - 100% 4.8
Mike Millikan
Resources Analyst
Ph: +61 8 9268 2805
382.5m
499.2m
A$133.9m
A$174.7m
A$144.2m
A$34.8m
A$24.5m
Hartleys has been engaged by Cardinal Resources in
connection w ith arranging the early exercise of the CDVOA
listed options w ith an expiry date of 30 September 2019.
Hartleys may earn a fee for the value of proceeds raised
through the early exercise of options by clients of Hartleys.
The analyst has a beneficial interest in CDV shares.
27 Mar 2019
$0.350
Archie Koimtsidis (MD & CEO)
Suite 1, 28 Ord Street,
West Perth, WA, 6005
New signif icant gold discovery (Namdini) in northern
Ghana. Favourable economics. PFS delivered and BFS due
Q3 CY19. Strong regional exploration potential.
Kevin Tomlinson (Non-Exec Chairman)
West African gold explorer and developer
CARDINAL RESOURCES LTD (CDV)
Namdini BFS on track for early Q3 CY19 Cardinal Resources (CDV) remains focused on the delivery of a Bankable
Feasibility Study (BFS) into the development of the large Namdini Gold
Project in northern Ghana. The BFS is targeted for release in early Q3 CY19
for a final investment decision in Q4 CY19 and, subject to financing, has
targeted first production in H1 CY22.
The Pre-Feasibility Study (PFS) for Namdini was released in Nov’18, with the
study highlighting a strong investment case from a single open pit operation
with a low LOM strip ratio of 1.4:1 (waste to ore) and impressive maiden
reserve of ~4.8Moz (grading 1.14g/t Au). The large-scale operation
(+9.5Mpta) is expected to translate to high annual gold production at low
operating costs. The initial starter pit is expected to provide a low strip (0.5:1)
open pit producing +360kozpa at an AISC of <US$600/oz over the first 2.5
years, and over the life of mine (LOM) offers an average +290kozpa at an
AISC of <US$770/oz for +14 years. Mineralisation at Namdini spans +1.1km
in strike and is up to 350m wide, with the gold system still open at depth.
Construction costs are estimated to ~US$414M, and include a 15%
contingency. Assuming favourable gold prices (US$1,250/oz) once in
production, capital is expected to be repaid in under 2 years.
Optimisation of metallurgical recoveries is ongoing, and forms part of a key
input for the BFS, along with the refinement of the mine plan, with reserves
expected to be upgraded prior to the BFS release. Permitting approvals are
also ongoing, with the key environmental licence (EIA) due in Q3 CY19.
Regional exploration could add some high-grade ounces Ongoing regional exploration has the potential to add higher grade (but still
shallow) ounces to the Namdini project development. Further encouraging
results have been received from the Ndongo East prospect, which is located
~24km north of the Namdini. Gold mineralisation has been defined over some
1.2km of strike at the prospect, and is located along a prospective shear that
extends at least 7km (still largely untested).
Latest drill highlights includes 8.3m @ 11.3 g/t Au from 76m, 14m @ 7.0 g/t
Au from 69m (incl. 2m @ 42.2g/t Au from 80m), confirming mineralised
continuity around previously reported 9m @ 23.3g/t Au. The shallow gold
mineralisation at Ndongo East remains open along strike and at depth, with
delineation drilling ongoing. In addition, infill auger geochem drilling is
proposed along strike within the highly-prospective trend (adding targets).
Attractive metrics and we maintain our Speculative Buy
Our latest CDV NAV is $0.86/s (up from $0.80/s) and spot NAV is $0.96/s.
Our updated NAV adjusts for first production timing (H2 CY21 to H1 CY22),
and has improved through slightly adjusted gold prices (up 4.5% on long-run).
CDV remains undervalued our NPV estimates and on many peer metrics, in
particular EV/Reserve oz which highlights ASX-listed West African peers are
currently trading ~A$130-170 per reserve oz, with CDV trading ~A$30/oz.
We maintain our Speculative Buy recommendation with an unchanged
A$0.95/s 12-month price target (upside potential of 171%). The Company
was recently recognised for its 2014 discovery of the Namdini gold deposit,
winning the prestigious PDAC 2019 Thayer Lindsley Award, a fantastic
accolade for the CDV team and reflects the quality of the discovery.
Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000
Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys
website www.hartleys.com.au
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
.
.5
1.
1.5
2.
2.5
Mar-19Nov-18Aug-18Apr-18
Volume - RHS
CDV Shareprice - LHS
Sector (S&P/ASX SMALL RESOURCES) - LHS
A$ M
Cardinal Reso Ltd
Source: IRESS
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 2 of 10
SUMMARY MODEL
Cardinal Reso Ltd Share Price
CDV $0.350 Speculative Buy
Key Market Information Directors Company Information Share Price $0.350 Kevin Tomlinson (Non-Exec Chairman) Suite 1, 28 Ord Street,Market Capitalisation - ordinary A$133.9m Archie Koimtsidis (MD & CEO) West Perth, WA, 6005Net Cash (debt) -$10.3m Malik Easah (Exec Director)Market Capitalisation - fully diluted A$175m Dr Kenneth Thomas (Non-Exec Director) Phone: +61 8 6558 0573
EV - ordinary A$144m Trevor Schultz (Non-Exec Director)Issued Capital 382.5m Michele Muscillo (Non-Exec Director)Options (ITM) 116.7m www.cardinalresources.com.auIssued Capital (fully diluted inc. all options) 499.2m Bruce Lilford (Project Manager) Alec Rowlands (IR/Corp Dev)
Issued Capital (fully diluted inc. all options and new capital) 942.4m Richard Bray (Principal Geologist)
EV - fully diluted A$153m
Top Shareholders - est m shares %Valuation $0.86 Gold Fields (AUS) 42.7 11.2%
12month price target $0.95 Bank of Nova Scotia (Dynamic Fund) 33.0 8.6%Van Eck Associates Corp (USA) 28.7 7.5%
P&L Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 Royal Bank of Canada (CAN) 27.1 7.1%
Net Revenue A$m 0.0 0.0 0.0 0.0 248.2 Sprott Asset Management (CAN) 19.0 5.0%
Total Costs A$m -37.1 -28.4 -19.8 -12.0 -123.1 Commonwealth Bank Australia (AUS) 18.2 4.8%EBITDA A$m -37.1 -28.4 -19.8 -12.0 125.2 Directors 16.3 4.3% - margin - - - - 50%Depreciation/Amort A$m -0.2 -0.1 -0.5 -23.3 -48.4 Reserves & Resources Mt g/t Au Moz Au LCEBIT A$m -37.4 -28.4 -20.3 -35.3 76.8 Resources - Namdini Mar-18
Net Interest A$m 0.2 0.1 0.1 0.1 0.1 Measured 0 0.0 0.0 0.5g/t Au
Norm. Pre-Tax Profit A$m -37.2 -28.3 -20.2 -35.2 76.9 Indicated 180 1.1 6.5 0.5g/t AuReported Tax Expense A$m 0.0 0.0 0.0 0.0 0.0 Inferred 13 1.2 0.5 0.5g/t Au
Normalised NPAT A$m -26.0 -19.8 -14.1 -24.6 53.8 Total 193 1.1 7.0 0.5g/t AuAbnormal Items A$m -11.2 -8.5 -6.1 -10.6 23.1Reported Profit A$m -37.2 -28.3 -20.2 -35.2 76.9 Reserve - Namdini Sep-18 129 1.1 4.8 0.5g/t AuMinority A$m 0.0 0.0 0.0 0.0 0.0
Profit Attrib A$m -37.2 -28.3 -20.2 -35.2 76.9 Production Summary Unit Jun 20 Jun 21 Jun 22 Jun 23Mill Throughput Mt 0.0 0.0 4.8 9.5
Balance Sheet Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 Strip ratio (W:O) x 0.0 0.0 0.5 0.5
Cash A$m 7.3 11.6 43.4 11.6 82.9 Recovered grade g/t 0.0 0.0 1.1 1.1
Other Current Assets A$m 2.4 1.5 1.4 1.4 22.1 Combined Recovery & Payability % 0.0% 86.0% 86.0% 86.0%
Total Current Assets A$m 9.7 13.1 44.8 13.0 105.1 Gold - proj 100% koz 0.0 0.0 172.0 346.7
Property, Plant & Equip. A$m 0.6 0.5 0.0 531.8 490.7 Gold - attr. CDV koz 0.0 0.0 154.8 312.1
Exploration A$m 0.0 0.0 8.0 16.0 21.0 M&I Resource Conversion % 0% -17% -14% -12%
Investments/other A$m 0.0 0.0 0.0 0.0 0.0 Mine Life yr 14 14 14 13
Tot Non-Curr. Assets A$m 0.6 0.5 8.0 547.8 511.7Total Assets A$m 10.2 13.6 52.8 560.8 616.8 Costs Unit Jun 20 Jun 21 Jun 22 Jun 23
Cost per milled tonne $A/t - - 22.7 22.7
Short Term Borrowings A$m - - - - - EBITDA / tonne milled ore $A/t - - 26.3 28.3
Other A$m 4.8 2.4 1.7 1.0 10.2
Total Curr. Liabilities A$m 4.8 2.4 1.7 1.0 10.2 C1: Operating Cash Cost = (a) $A/oz - - 564 559
Long Term Borrowings A$m - 34.1 34.1 392.6 362.6 (a) + Royalty = (b) $A/oz - - 644 639
Other A$m - - - - - C2: (a) + depreciation & amortisation = (c) $A/oz - - 845 701
Total Non-Curr. Liabil. A$m - 34.1 34.1 392.6 362.6 (a) + actual cash for development = (d) $A/oz - - 636 596
Total Liabilities A$m 4.8 36.5 35.7 393.7 372.8 C3: (c) + Royalty $A/oz - - 925 782
Net Assets A$m 5.5 -22.9 17.1 167.1 244.0 (d) + Royalty $A/oz - - 716 676Net Debt A$m -7.3 22.5 -9.3 381.0 279.7 All In Sustaining Cost (AISC) $A/oz - - 869 825
All In Sustaining Cost (AISC) $US/oz - - 661 627
Cashflow Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22Operating Cashflow A$m -32.9 -29.9 -20.5 -12.6 113.6 Price Assumptions Unit Jun 20 Jun 21 Jun 22 Jun 23Income Tax Paid A$m 0.0 0.0 0.0 0.0 0.0 AUDUSD A$/US$ 0.73 0.75 0.76 0.76Interest & Other A$m 0.2 0.1 0.1 0.1 0.1 Gold US$/oz 1321 1338 1345 1360
Operating Activities A$m -32.7 -29.8 -20.4 -12.5 113.7 Gold A$/oz 1822 1795 1770 1789
Property, Plant & Equip. A$m -0.3 0.0 0.0 -555.1 -7.3 Hedging Jun 20 Jun 21 Jun 22 Jun 23Exploration and Devel. A$m 0.0 0.0 -8.0 -8.0 -5.0 Hedges maturing? No No No NoOther A$m 0.0 0.0 0.0 0.0 0.0
Investment Activities A$m -0.3 0.0 -8.0 -563.1 -12.3 Sensitivity Analysis
Net Borrowings A$m 0.0 34.1 0.0 358.6 -30.0 Base CaseEquity or "tbc capital" A$m 12.1 0.0 60.2 185.2 0.0 Spot PricesDividends Paid A$m 0.0 0.0 0.0 0.0 0.0 Spot USD/AUD 0.71, Gold $1317/oz.
Financing Activities A$m 12.1 34.1 60.2 543.8 -30.0 AUDUSD +/--10% 0.80 / 0.94 (-7.2% / 8.7%)Gold +/--10% 1.01 / 0.71 (16.7% / -17.1%)
Net Cashflow A$m -20.9 4.3 31.8 -31.8 71.4 Production +/--10% 0.86 / 0.86 (0.0% / 0.0%)Operating Costs +/--10% 0.78 / 0.94 (-9.0% / 8.9%)
Shares Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22Ordinary Shares - End m 373.6 382.5 553.0 931.3 931.3 Unpaid CapitalOrdinary Shares - Weighted m 339.7 378.0 462.2 742.2 931.3 Year Expires No. (m) $m Avg price % ordDiluted Shares - Weighted m 339.2 377.6 403.4 625.0 814.2 30-Jun-20 116.7 17.9 0.154 30%
30-Jun-21 1.9 1.9 1.000 0%
Ratio Analysis Unit Jun 18 Jun 19 Jun 20 Jun 21 Jun 22 30-Jun-22 18.5 9.3 0.500 5%Cashflow Per Share A$ cps -9.6 -7.9 -4.4 -1.7 12.2 30-Jun-23 3.0 2.7 0.894 1%Cashflow Multiple x 0.0 0.0 0.0 0.0 0.0 TOTAL 140.0 31.7 0.227 37%Earnings Per Share A$ cps -10.9 -7.5 -4.4 -4.7 8.3Price to Earnings Ratio x -3.2 -4.7 -8.0 -7.4 4.2 Share Price Valuation (NAV) Risked Est. A$m Est. A$/shareDividends Per Share AUD - - - - - 90% Namdini 9.5Mtpa (pre-tax NAV at disc. rate of 12%) 991.9 1.05Dividend Yield % 0% 0% 0% 0% 0% Exploration upside, other assets 60.0 0.06Net Debt / Net Debt + Equity % 399% -5687% -120% 70% 53% Forwards 0.0 0.00Interest Cover X 214.3 270.4 192.9 335.6 na Corporate Overheads -69.2 -0.07Return on Equity % na 0.9 na na 0.2 Net Cash (Debt) -10.3 -0.01
Tax (NPV future liability) -170.7 -0.18Options, Other Equity & Listed Investments 10.0 0.01Hedging 0.0 0.00Total 811.7 0.86
Analyst: Mike Millikan
+61 8 9268 3045
"tbc capital" could be equity or debt. Our valuation is risk-adjusted for how this may be obtained.
Sources: IRESS, Company Information, Hartleys Research
Last Updated: 27/03/2019
FY22 NPAT76.9
76.9 / 76.9 (0.0% / 0.0%)67.2 / 86.6 (-12.6% / 12.6%)
0.96 (11.9%)0.86
Valuation
100.3 / 53.4 (30.5% / -30.5%)
79.6 (3.6%)
64.4 / 92.1 (-16.3% / 19.9%)
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 3 of 10
NAMDINI GOLD PROJECT, GHANA
LARGE-SCALE, LONG-LIFE, EXPLORATION UPSIDE
The Namdini project area is located in the northern parts of Ghana, West Africa. In
mid-July 2017, CDV, through its 100%-owned Ghanaian subsidiary (Cardinal Mining
Services) was assigned a large-scale mining licence (ML) at Namdini. The granted
ML is larger than the original Namdini EL and as well as covering Namdini gold
deposit, spans more of the mineralised trend (major and parallel structures).
Namdini is located within a Paleoproterozoic (Birimian-aged) Greenstone Belt
comprising metavolcanics, granitoids, volcaniclastics and metasediments located to
the east of a major regional shear zone (~30km NS), with associated faults and to
the east of the Nangodi Fold Belt.
The Namdini deposit is a structurally controlled orogenic gold deposit with the gold
not constrained to any discrete mineralised shear zone(s), but largely disseminated
throughout a wide zone of altered metavolcanics, granitoids, diorite and
metasediments.
The current Namdini resource estimate is 193Mt grading 1.1g/t Au for 7.0Moz (at
a 0.5g/t Au lower cut). Importantly, ~93% of resources are Indicated (180Mt grading
1.13g/t Au for 6.5Moz), with the higher category tonnes from surface to ~400m
vertical depths.
Fig. 1: Project Tenement Location - Ghana
Source: Cardinal Resources Limited
Located in the
northern par ts of
Ghana, West Afr ica
Location
Source: CDV
The nor thern parts of
Ghana are considered
highly prospect ive but
are considered under
explored when
compared to Southern
Ghana
Namdini has good
local infrastructure
with grid power
(hydro) located ~30km
from the project, year -
round water from the
White Volta River
(only 7kms away) and
within 25kms of
sealed national
highway
Namdini has a granted
ML – 15 years
renewable
CDV has the f irst
mover advantage and
a dominant land
posi t ion cover ing
numerous promising
but early-stage
targets, we bel ieve
CDV is well placed to
unlock addit ional
explorat ion value
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 4 of 10
PFS RELEASED LATE CY18, BFS DUE Q3 CY19
The Namdini PFS highlighted a strong investment case to progress through to the
completion of the BFS, which is currently targeted for release in Q3 CY19.
The PFS has delivered an impressive maiden reserve of 129.6Mt grading 1.14g/t
Au for 4.76Moz, from a large-scale, single open pit, which has a life of mine (LOM)
strip ratio of only 1.4:1 (waste to ore), a very good outcome.
The PFS uses conventional crush (primary), grind (SAG/Ball mill), float
(concentrate), regrind, and CIL flowsheet. The preferred production scale of
9.5Mtpa, delivers the optimal project economics, and translates to high annual gold
production at low operating costs (AISC) over a long mine life (14 years).
Construction costs have improved on the PEA estimates, and are now US$414M
(down from US$426M).
Optimisation of metallurgical recoveries is ongoing. Assuming the project can be
successfully funded through construction, first production is targeted for H1 CY22.
The figure (Fig.2) below summarises the PFS outcome compared to the PEA.
Fig. 2: Namdini – PEA vs PFS- Key Outcomes
Source: Cardinal Resources Limited: Note the different gold prices used in the financial metric comparison above, at US$1,300/oz the
PFS Post Tax NPV@ 5% is US$672 (better than the PEA), and provides an IRR of 42%.
The central part of the deposit may also provide a higher grade “starter pit” which
would largely be hosted within the metavolcanic and granite units. This starter area
has a grade profile of +1.3g/t Au and provides a very low strip ratio of ~0.5:1 (W:O)
for the initial open pit. The early processing of this ore could increase capital payback
for the large scale (9.5Mtpa) operation.
PEA
Units 9.5Mtpa - LOM 9.5Mtpa - Starter 9.5Mtpa - LOM
Mining Method Type Open Pit
Resource Mt 204.7Mt @ 1.1g/t Au for 7.4Moz
Mining Inventory or Reserve Mt 113Mt @ 1.1g/t Au for 4.1Moz (MI) 24Mt @ 1.31g/t Au for 1.06Moz 129Mt @ 1.14g/t Au for 4.76Moz
LOM Strip Ratio W:O 1.2:1 0.5:1 1.4:1
Head Grade g/t Au 1.13 1.31 1.14
Mine Scale Mtpa 9.5 9.5 9.5
Mine Life Years 14 2.5 14
Total Recovery % 86% 86% 84%
Production -100% Kozpa 333 361 294
AISC US/oz 701 599 769
Capex pre-prod US$M 426
LOM sus capex US$M 154
Gold Price (used) US$/oz 1300
CDV Pre‐Tax NPV@ 5% US$M 1036
CDV Post‐Tax NPV@ 5% US$M 649
Pre-Tax IRR % 62
Post-Tax IRR % 44
Project pay-back Years 3.3
38
1.8
170
1250
927
586
Assumptions
PFS
Open Pit
193Mt @ 1.1g/t Au for 7.0Moz
414
49
The PFS has improved
on the PEA, and wil l
now progress to
Maiden reserve of
129.6Mt grading
1.14g/t Au for
4.76Moz
The potent ial starter
pit is expected to
provide higher grade
ores at a low str ip
rat io
Ear ly processing of
higher grade ore
should increase
capi tal payback
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 5 of 10
Fig. 3: Namdini– Processing Flowsheet
Source: Cardinal Resources Limited
Fig. 4: Namdini –Long Section (Grade Distribution)
Source: Cardinal Resources Limited
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 6 of 10
NDONGO EAST TAKING SHAPE
The Ndongo East prospect is located ~24km north of the Namdini. The prospect is
situated within NE-SW trending Birimian metavolcanics and metasediments, with
gold mineralisation defined over some 1.2km of strike, along a prospective shear
that extends at least 7km (but remains largely untested). CDV continues to delineate
mineralisation with some of the more significant drill intercepts including:
9m @ 23.3 g/t Au from 60m in NDRC248;
14m @ 7.0 g/t Au from 69m (incl. 2m @ 42.2g/t from 80m) in NDDD046;
8.3m @ 11.3 g/t Au from 76m in NDDD059;
3m @ 29.3 g/t Au from 45m in NDDD036; and
6m @ 12.6 g/t Au from 2m in NDRC275.
Mineralisation encountered thus far appears to be developed at, or near, the diorite-
granodiorite contacts, with mineralised horizons containing variable chlorite-silica-
carbonate-sericite alteration with sulphides (mainly pyrite with very minor
arsenopyrite). The mineralised system is open along a northeast-southwest strike
and at depth. Delineation drilling is ongoing.
CDV also plans to complete infill auger drilling and geophysical surveys along the
mineralised trend (~7km), with the work expected to commence in April.
Fig. 5: Ndongo Area Geology/Geochem (RHS); Ndongo East Geology and Drill ing (RHS)
Source: Cardinal Resources Limited
The Ndongo East
prospect is located
~24km north of the
Namdini
Ongoing regional
explorat ion has the
potentia l to add higher
grade (but st i l l
shal low) ounces to the
Namdini project
development
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 7 of 10
Fig. 6: Ndongo East – Section E1 (LHS) and Section E-1 (RHS)
Source: Cardinal Resources Limited
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 8 of 10
VALUATION AND PRICE TARGET
METHODOLOGY – UPDATE
Our CDV valuation (sum of parts) and price target is largely based on the PFS (which
includes a maiden reserve for Namdini). Metallurgical testwork is ongoing to
optimise recoveries. Latest metallurgical updates provide a good level of comfort
that total recoveries of 84-86% can be achieved, with the processing flowsheet now
determined and being fine-tuned.
We now model a ~4.8Moz mining inventory (same as the reserve) mined via open
pit, using estimated opex and capex based on the PFS estimates. We stress our
model inputs remain subject to change and we assume the project can be
successfully funded into production. We use a discount rate of 12% during
developments with the rate to be lowered upon reaching production. Our model is
fully funded (60:40 Debt to Equity ratio) and fully diluted.
Fig. 7: Hartleys CDV NAV
Source: Hartleys Estimate
Our 12-month price target is A$0.95/s (unchanged), derived from both a discounted
cashflow analysis of a successful gold operation at Namdini, cash and future cash
value and our perception of exploration value in the search of other gold deposits.
Fig. 8: Hartleys CDV Price Target
Source: Hartleys Estimates
Share Price Valuation (NAV) Risked Est. A$m Est. A$/share
90% Namdini 9.5Mtpa (pre-tax NAV at disc. rate of 12%) 991.9 1.05
Exploration upside, other assets 60.0 0.06
Forw ards 0.0 0.00
Corporate Overheads -69.2 -0.07
Net Cash (Debt) -10.3 -0.01Tax (NPV future liability) -170.7 -0.18Options, Other Equity & Listed Investments 10.0 0.01Hedging 0.0 0.00Total 811.7 0.86
Price Target Methodology Weighting 27/03/2019 12 Month
50% $0.86 $0.95
20% $0.96 $1.07
10% $1.26 $1.33
5% $1.48 $1.56
Exploration value no development 10% $0.39 $0.47
5% $0.00 $0.00
Risk weighted composite $0.86
12 Months Price Target $0.95
Shareprice - Last $0.350
12 mth total return (% to 12mth target + dividend) 171%
90% Namdini (NPV@12) - Open Pit 9.5Mtpa 15 yr- Hartleys
90% Namdini (NPV@12) - Open Pit 9.5Mtpa 15 yr- Spot
Base Case (9.5Mtpa) using 5% discount rate - Spot
Current Cash Backing
Base Case (9.5Mtpa) using 5% discount rate - Hartleys
Our CDV valuation
and pr ice target are
largely unchanged
The Company’s
current cash posit ion
provides funding for
ongoing explorat ion
and development
studies
Our latest CDV spot
NAV is A$0.96/s
We assume f irst
production in H1 2022
Our 12-month pr ice
target remains
unchanged at $0.95/s
Hartleys Limited Cardinal Resources Ltd (CDV) 27 March 2019
Page 9 of 10
RISKS Key risks for Cardinal include metallurgy, improving resources which can be
converted to reserves, development studies and funding (both for ongoing
exploration activities and any potential future development).
Fig. 9: Key assumptions and risks for valuation
Assumption Risk of not realising
assumption
Downside risk to share price if assumption is
incorrect Comment
Project ownership can be maintained
Low Meaningful We assume CDV project tenure agreements are enforceable and the Company will retain full mineral ownership and exploitation rights. We assume NSR payments will be made to
Savannah. The granted ML has been assigned to CDV.
Debt can be serviced and repaid
Low-Med Meaningful CDV now has fully drawn debt of US$25M (~A$34M), and needs cover interest
repayments and ultimately repay the facility. It has a 30 month term, and will likely be repaid at time of project financing, or rolled into an updated facility. Debt introduces additional
financial risks, which need to be considered.
Sovereign risk Low Meaningful We assume Ghana remains a stable country with favourable laws for foreign investment and
the repatriation of potential future earnings.
Model parameters for our preliminary CDV valuation and price target
Med Meaningful We have made a number of assumptions in our CDV valuation, based on information largely supplied in the PFS. CDV has no production history. Any changes to our
assumptions have both upside and downside risks.
Metallurgy outcome ultimately viable
Med Extreme The metallurgical testwork provided recoveries, which are now 84-86% from the processing flowsheet of crush-grind-float-regrind-CIL
(preferred route at this stage). Further optimisation is continuing.
Favourable commodity prices
Low Meaningful CDV remains sensitive to changes in commodity prices (particularly gold), exchange rates and market sentiment. Though with no
current operations, direct impact from commodity prices is limited. With exploration
tenure offshore, US$, AUD and local Ghanaian Cedi exchange rates are a risk.
Upside from exploration Med Moderate CDV is currently funded for planned
exploration activities (~A$25M in estimated funding). The Company also has in the money options which could provide additional future
funding. We consider the Company’s ground to be highly prospective and under-explored, and a significant gold discovery has already been
made at Namdini. However, the lack of exploration success would have a negative
impact on the Company.
Conclusion At this stage we consider the assumptions have a low to medium risk of not being achieved.
Source: Hartleys Research
Page 10 of 10
HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Head of Research +61 8 9268 3052
Mike Millikan Resources Analyst +61 8 9268 2805
John Macdonald Resources Analyst +61 8 9268 3020
Paul Howard Resources Analyst +61 8 9268 3045
Aiden Bradley Research Analyst +61 8 9268 2876
Oliver Stevens Research Analyst +61 8 9268 2879
Michael Scantlebury Junior Analyst +61 8 9268 2837
Janine Bell Research Assistant +61 8 9268 2831
Corporate Finance Dale Bryan Director & Head of
Corp Fin.
+61 8 9268 2829
Richard Simpson Director +61 8 9268 2824
Ben Crossing Director +61 8 9268 3047
Ben Wale Director +61 8 9268 3055
Stephen Kite Director +61 8 9268 3050
Scott Weir Director +61 8 9268 2821
Scott Stephens Associate Director +61 8 9268 2819
Rhys Simpson Associate Director +61 8 9268 2851
Michael Brown Executive +61 8 9268 2822
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Note: personal email addresses of company employees are structured
in the following manner: [email protected]
Hartleys Recommendation Categories
Buy Share price appreciation anticipated.
Accumulate Share price appreciation anticipated but the risk/reward is
not as attractive as a “Buy”. Alternatively, for the share
price to rise it may be contingent on the outcome of an
uncertain or distant event. Analyst will often indicate a
price level at which it may become a “Buy”.
Neutral Take no action. Upside & downside risk/reward is evenly
balanced.
Reduce /
Take profits
It is anticipated to be unlikely that there will be gains over
the investment time horizon but there is a possibility of
some price weakness over that period.
Sell Significant price depreciation anticipated.
No Rating No recommendation.
Speculative
Buy
Share price could be volatile. While it is anticipated that,
on a risk/reward basis, an investment is attractive, there
is at least one identifiable risk that has a meaningful
possibility of occurring, which, if it did occur, could lead to
significant share price reduction. Consequently, the
investment is considered high risk.
Institutional Sales Carrick Ryan +61 8 9268 2864
Justin Stewart +61 8 9268 3062
Simon van den Berg +61 8 9268 2867
Digby Gilmour +61 8 9268 2814
Jayme Walsh +61 8 9268 2828
Veronika Tkacova +61 8 9268 3053
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Bradley Booth +61 8 9268 2873
Adrian Brant +61 8 9268 3065
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Sven Burrell +61 8 9268 2847
Simon Casey +61 8 9268 2875
Tony Chien +61 8 9268 2850
Tim Cottee +61 8 9268 3064
David Cross +61 8 9268 2860
Nicholas Draper +61 8 9268 2883
John Featherby +61 8 9268 2811
Ben Fleay +61 8 9268 2844
James Gatti +61 8 9268 3025
John Goodlad +61 8 9268 2890
Andrew Gribble +61 8 9268 2842
David Hainsworth +61 8 9268 3040
Murray Jacob +61 8 9268 2892
Gavin Lehmann +61 8 9268 2895
Shane Lehmann +61 8 9268 2897
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Scott Metcalf +61 8 9268 2807
David Michael +61 8 9268 2835
Jamie Moullin +61 8 9268 2856
Chris Munro +61 8 9268 2858
Michael Munro +61 8 9268 2820
Ian Parker +61 8 9268 2810
Matthew Parker +61 8 9268 2826
Charlie Ransom
(CEO)
+61 8 9268 2868
Heath Ryan +61 8 9268 3053
David Smyth +61 8 9268 2839
Greg Soudure +61 8 9268 2834
Sonya Soudure +61 8 9268 2865
Dirk Vanderstruyf +61 8 9268 2855
Samuel Williams +61 8 9268 3041
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shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities.
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mentioned in publications to clients.
Hartleys has been engaged by Cardinal Resources Limited ("Cardinal") in connection with arranging the early exercise of the CDVOA listed
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