Hartley´s Research: Birimian buy with price target 0.60 AUD
Large spodumene potential in Mali
Birimian Ltd is developing the Bougouni spodumene (lithium) project in Mali. The project is pre-resource, but drilling to date is very encouraging, and there had already been metallurgical bulk test work completed by CSA Global consultants in 2007. The project comprises a large license area spanning some 250km2, and hosts the high-grade, potential bulk-tonnage Goulamina lithium deposit. Drilling at the Main Zone has now defined mineralisation over ~700m of strike, with the West Zone appearing to be at least equal potential.
A maiden JORC-compliant resource is expected in October. We see potential for a very large deposit at good grades (1.6-1.8% Li2O), on the limited drilling to date. If the deposit is as anticipated, there is potential it could be developed into a 285-430ktpa (40-60ktpa LCE) operation over time, subject to lithium demand growing enough such that it could be absorbed into the market (the earliest we see potential for Bougouni product sales is CY19).
Located in Mali, but infrastructure okay
The project is located in Southern Mali, and hence access and political risk is lower (there are other operating Western gold miners in the area). Spodumene is a reasonably low volume bulk production (i.e. a large operation would be ~250ktpa of product). Consequently, logistics chains are relatively simple. With current high margins for spodumene, we believe logistics costs will not be an impediment to project development. This is particularly true given that it appears the project could have a good strip ratio and head grade.
Current exploration program: resource is expected in October
Drill results to date have a weighted average head grade of ~1.7% Li2O, with average widths of 20 metres (up to 57 metres). The deposit is close to surface, with hole GMRC040 reporting 56m at 1.91% Li2O from 14 meters, including 8m @ 2.35 % Li2O and 10m @ 2.19 % Li2O. The “Main Zone” deposit is over approximately 700 metres of strike, suggesting there could be ~20Mt. The “West Zone” (125m west of Main Zone) appears to be of a similar size, suggesting Bougouni could be a very significant spodumene deposit.
Potential for gold divestments
BGS has been operating in Mali for several years. It has a resource exploration target for 8Mt @ 1.5g/t for 0.4Moz gold at the Massigui Gold project. The project is ~25km from Randgold’s underutilised Morila 4Mtpa gold mine and processing plant. We believe that a sale or toll-treatment is a distinct possibility, and hence attribute meaningful value (US$30m) despite it still being at resource definition stage.
Initiate with high risk Speculative Buy
BGS is still at the early phase of development, however, it appears it could have a substantial project. The location in Mali may require some discount (versus the West Australian deposits), but the grade and size suggest it is still an enviable project. We initiate with a Speculative Buy. We have a twelve month price target of 60cps, which is part way between cash backing (~5cps) and our speculative and highly diluted preliminary valuation (70cps). BGS is high risk, but for those that have bullish view on the next several years for spodumene demand, it could have significant upside.