Canaccord lifts target price for Capricorn to 22c following CAPEX reduction

11th May 2018
Resources Rising Stars

Gold developer Capricorn Metals (ASX: CMM) is rapidly approaching a development decision for its Karlawinda gold project in WA with the announcement of a fixed price, turnkey contract delivering a “material” CAPEX saving, according to global broker Canaccord Genuity.

In an updated note, Canaccord’s Perth-based analyst Tim McCormack says the appointment of GR Engineering as preferred contractor for the design and construction of the 3Mtpa plant has resulted in a 23 per cent reduction in CAPEX compared with the company’s 2017 Feasibility Study.

“Impressively, the updated CAPEX also incorporates a number of modifications, the most notable being the installation of a combined SAG-Ball mill grinding circuit from project commencement,” McCormack said, which he notes will increase production flexibility and efficiency.

Canaccord also note that GR Engineering is a leading WA-based engineering firm, “with an excellent reputation for timely project delivery on budget”, having recently completed the delivery of Dacian Gold’s Mt Morgans processing facility and on track to complete a similar scale facility for Gascoyne Resources.

McCormack says a Reserve update to be delivered in May will be the next catalyst for the stock, building on the initial 6.5-year mine life outlined in the original study.

The broker says it expects the pending Reserve update to underpin a longer production scenario, and assumes an ~8-year life in its modelling, which implies only a modest increase in the reserve from 713,000oz to ~850,000oz.

“With CMM ticking off a number of key project catalysts in the June quarter, we expect the company to make a development decision in the 1HFY19,” McCormack says.

“Our 22c per share price target has increased on incorporating lower CAPEX, improved funding and updated forward curve gold price assumptions.”

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