Company: Impact Minerals Limited
ASX Code: IPT
Market Cap: $25.2m
Share Price: $0.27
Recommendation: ‘Spec Buy’
We’ve heard it all before. Uranium was the next ‘big thing’… The need for cleaner power surely meant that demand for yellowcake would never die and stock prices soared accordingly on the back of investor belief.
The talk was of China and Russia (amongst others) building a raft of nuclear power plants, fuelling industrial growth for decades. Uranium would be at the heart of these plans, accommodating the burgeoning wealth of these aspiring countries. ‘Yellowcake fever’ was a theme to emerge simultaneously with the wider resources boom but like many others before it, the flame was snuffed out all too quickly for most. Reaching a high of US$136/lb at its most glamourous point in late 2007, uranium fell back to below US$50/lb by March 2009. Currently consolidating below the US$60/lb mark, stabilisation in the spot price and wider economy is again seeing juniors and producers ignite.
In every stock market bubble an ‘element of truth’ does exist, and in the case of uranium, it’s true that this radioactive resource should play an integral part in global power needs for generations to come. Increased awareness on the effects of global warming has ensured mankind’s genuine search for fossil fuel alternatives and uranium is a reliable source. It was this same reasoning that drove the initial fever, however, similar to the dotcom boom, when investors realised that company earnings had no chance of keeping up with rocketing share prices, the added effects of the economic downturn saw uranium hopefuls punished.
Nevertheless, there is a big difference between being hopeful and hopeless… and although Impact Minerals could not insulate itself from the bursting of both the uranium bubble and the severity of the economic downturn, recent stgelopments have seen the share price spring back to life.
Impact is a rapid up-and-coming junior explorer with a hold on key uranium tenements in east Botswana, Africa. The company has managed to secure the largest uranium portfolio in Botswana, and tenements are directly north and south of A-Cap Resources (ACB) large Letlhakane Project – which is in the process of a bankable feasibility study. The world class potential of Impact’s 27,000sq km exploration portfolio is best highlighted by some significant shareholder backing from major resource investment companies – Polo Resources (20%) and China Growth Minerals (12.68%). Polo has essentially provided funding ($3m) for the drill program that is expected to commence in the 4th quarter 2009. So far 400km of targets have been identified but no drilling has been conducted. 5 high priority targets are currently undergoing soil geochemistry tests. The drilling program (anticipated to begin by the end of 2009) is expected to be a key share price driver should favourable results emerge.
On top of the company’s Botswana uranium interests, Impact owns 40% of the Nowthanna uranium deposit in Western Australia. It is estimated that the deposit attributable to Impact is 3.92mt at an average grade of 0.45kg/t for a contained 1,800t of uranium oxide. Further work at the Nowthanna uranium deposit is likely to include a scoping study to determine the potential for the deposit to be economic, and if warranted, further drilling will commence to increase the size of the deposit and the confidence in the resource estimates.
With exploration programs in both Africa and WA on the cards, Impact is in a privileged position and has access to adequate funding. The company currently has $3.02m cash in the bank with a further $1.21m to be received from the 2nd tranche of the share placement with Polo Resources. This equates to a total of $4.23m cash at last report and no debt. Exploration expenditure across all projects for FY09 was $731k however this figure is expected to accelerate with the imminent drilling. Net assets increased by $311k during the year to $7.93m, almost a third of Impact’s current market cap.
As if the company’s uranium interests were not enough, Impact has also entered into a strategic alliance to explore for and stgelop nickel and platinum group metals in South Africa. The alliance is with Impala Platinum – the world’s second largest platinum producer and one of the top ten companies in South Africa (by size). Under the venture, which will operate for a minimum of two years, Impala will fund project generation work by Impact up to $400,000 per year and in return will have the first right to earn equity in any projects identified. Impala Platinum’s recognition of Impact’s technical skills in both project generation and exploration is a rewarding endorsement and an integral part of the company’s strategy in Africa (including uranium). In light of Impact’s broadening interests and key milestones due in the near future, we have a ‘spec buy’ on the stock noting the usual risks of a promising junior engaging in a busy exploration program.
Tim Morris is an analyst at wise-owl.com. Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
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