Oak Securities has set a 0.58p price target for ECR Minerals (ECR ), as the company moves into production at its Raglan gold project in Queensland.
“We have developed a theoretical model that suggests the potential for an operation at Raglan to produce approximately 300 ounces of gold per year for four years,” said Oak.
“This model assumes the mine generates around A$1 million in operating profit per year.”
The broker also highlighted the potential of the Blue Mountain gold project, located 95 kilometres southwest of the port of Gladstone in Central Queensland.
Blue Mountain “is reported to have the potential to contain 100,000 ounces of gold within four metres of surface,” said Oak.
ECR is advancing its Environmental Impact Assessment at Blue Mountain. The EIA will form a key component of the mining licence application for the project.
“Blue Mountain is anticipated to become ECR’s second source of revenue before the end of the year,” continued Oak.
“Once at full production, ECR expects to be producing an additional 500 ounces per year. Once at full production, we estimate that Blue Mountain could generate around A$2 million in free cash flow per year. The production of gold from Raglan transforms ECR into a revenue generating producer from cash consuming explorer.”
Oak also highlighted that these developments are just the first stages in the company’s evolution.
“ECR has also been pushing ahead with the administrative work required to secure its mining licence at its Blue Mountain project. Blue Mountain represents a step change in ECR’s production levels and is a much longer-lived operation that can support the advancement of the company’s exploration projects over the next decade.”
The broker also drew attention to the A$75 million Australian tax loss that sits within ECR.
“This will ensure that the company significantly benefits from production at Raglan and Blue Mountain for some time to come, enhancing the profitability of these operations. These exploration projects include the Lolworth gold-silver project, where maiden drilling completed last year defined significant intervals of near-surface gold-silver mineralisation. Outcrop mapping and sampling, completed alongside the drilling appears to indicate a larger mineralising system than previously anticipated.”
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ECR’s shares are currently trading at 0.37p, so there’s significant upside still on the table, according to Oak. The coming months should be a period of meaningful newsflow for ECR, and with the gold price riding high, there’s never been a better time to be going into production.