Research on Halo Minerals PLC (HALO:LON) , Halo Minerals Plc (HALO:LON) from Equity Development
Since listing on AIM in March, Halo has been busy progressing its Playa Verde copper tailings project at Chañaral Bay, on the coast of Chile. The initial plan is to dredge part of the beach tailings and recover copper cathode and copper concentrate which also contains by-product gold. Halo recently increased ore reserves and completed an updated Competent Person’s Report (CPR). In the updated CPR ore reserves rose by 1.74mt or 5.4%, to 33.94mt grading 0.25% Cu and containing 83,626t Cu. The CPR uses increased copper prices (US$6.20/lb vs US$5.30/lb), but lower gold prices (US$3,700/oz vs US$4,300/oz). Halo’s Base Case model for Playa Verde, which is based on ore reserves alone, has an after-tax NPV10 of US$174.3m and IRR of 45.6% while NPV8 comes in at US$195.9m. The RNS notes the potential to increase ore reserves near-term by 25-30%, to save between US$6-10m in capex and to boost NPV by a further US$4.4m through optimising the dredging starting point. Based on our modelling, guided by the recent RNS and the Admission Document CPR, and assuming the extraction of 34.8mt of tailings and an 8% discount rate we calculate a fair value of 47p/share (up from 46p at initiation).
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