the australian, page-5

Botswana resource fires up copper miner Blackthorn

by: Criterion
From: The Australian
August 09, 2013 12:00AM

Criterion

Source: TheAustralian


TO put Blackthorn's 25c, 108 per cent share surge in context, the small-caps resources index is lower than at the worst point of the GFC -- and the African copper explorer has been victim of the market's harsh judgment.

Blackthorn (BTR, 48c) shares yesterday surged 25c (108 per cent) after the company reported "best ever" grades at its Kitumba deposit, part of its Mumbwa project in Botswana. The best intercept measured an average 5 per cent copper, across a 243-metre interval.

The results come as Blackthorn prepares to release a pre-feasibility study, based on an underground operation to tap the richer grades. An earlier open-cut option was scoped as a 50,000-80,000- tonne venture, but the subterranean option (based on producing copper metal rather than concentrate) would be smaller and cheaper.

Mumbwa boasts an unusual history, in that Blackthorn farmed in to what was then BHP Billiton's tenement in 2008, for a 60 per cent stake. After spending $40 million on the site, BHP in 2011 handed its stake back to Blackthorn, in return for a 2 per cent royalty.

While confident of a commercial project, Blackthorn chief Scott Lowe says ideally the current inferred resource -- 87 million tonnes inferred at an average 1.17 per cent grade, including 30mt at 2 per cent -- would be 200mt-plus.

"We don't yet have a world-class resource, but we have a good resource," he says.

Blackthorn also holds an interest in the $US300m ($331m) Perkoa zinc project in Burkina Faso, with partner Glencore paying $US80m of further development expenses. Wisely, Blackthorn opted to reduce its Perkoa stake to 27.3 per cent, from 39.9 per cent, rather than launch a dilutive capital raising for its $US35m share of costs.

Blackthorn's $78m market cap is now $10m higher than that of Discovery Metals (DML, 14c), which mines copper and silver at its Botswana project. It produced 5034 tonnes of copper and 213,482 ounces of silver for the June quarter.

Cathay Fortune bid $870m for the company, only to walk away in February. After a thwarted refinancing attempt, Discovery is up for sale and "continues to be in discussions with interested parties". Blackthorn is a hold pending today's inevitable profit-taking, but otherwise a spec buy when the froth settles. Given Discovery's high debt load we'll avoid.