- Orelia resource - 15.9Mt at 2.1g/t for 1.1Moz Au (previously 5.6Mt at 1.9g/t for 349koz);
- 90% of the resource is in the Indicated category;
- Remains open at depth and along strike with further drilling currently underway; and
- Global Resource increases to 1.7Moz Au.
Echo also owns the 2Mtpa Bronzewing processing facility and associated infrastructure. This infrastructure will allow for a significant reduction in capital expenditure when a decision to commence production is made in the future.
Analyst Comment: This was an excellent achievement for Echo as the resource upgrade surpassed our expectations. What makes this all the more impressive is that Echo only took ownership of the Orelia deposit less than one year ago.
Importantly, not only did the resource nearly triple in size (previously 349koz Au at 1.9g/t Au), but the grade also increased to 2.1g/t Au. This is important as Echo's strategy is to only target open pittable ore that exceeds 2g/t Au when production commences in the future.
And whilst the company has stated they will not fall into the trap of commencing production without a sufficient mine life to support an on-going and sustainable operation (TSI estimate - 8Mt of ore / 4yrs reserves minimum), given Orelia will provide the base load feed for the Bronzewing facility, this resource upgrade indicates that production is likely to commence much sooner than we have previously estimated (TSI estimate - 2020 first gold production).
Catalysts - Work on the reserve estimate for Orelia is underway, which we expect to be released in the near term (TSI estimate - 4th qtr). Whilst additional resource and reserve upgrades on the company's other deposits are likely before the end of the year. We believe this should see the global resource soon exceed 2Moz Au.
Valuation: We have increased our valuation for Echo to $0.44 / share (previously $0.34/ share). The major driver for this was increasing our mine life assumption at the Orelia deposit (Current - 310koz at 2.1g/t Au vs. previous - 147koz Au at 1.8g/t Au).
However we note our mine life and grade assumptions are relatively conservative given that nearly 1Moz of the Orelia resource is classified in the indicated category. We will reassess our mine life assumption post the reserve announcement for Orelia.
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About Echo Resources Limited
Echo Resources is an ASX-listed gold exploration business with a large and highly prospective ground position in the Eastern Goldfields of Western Australia. We are focused on applying modern exploration methods to establish a high grade gold resource and reserve base at our 100% owned Yandal Gold Project.
About The Sophisticated Investor
The Sophisticated Investor is a new equity investment tool which seeks to assist investors in becoming more informed in their investment decision making. We show and tell investors about a company in a series of short, informative videos. We possess specialist equity analyst skills and are complemented by video professionals. We conduct site visits and interview management, in a way most investors simply aren’t able to access. We promote long term value creation for investors by employing detailed financial analysis and intrinsic value calculations.
Adam Kiley trading as The Sophisticated Investor ('TSI'), (AR No. 458224), is an authorised representative of Intelligent Financial Markets Pty Ltd (AFSL No. 426359). The information contained in this communication is intended as general advice only. Your personal objectives, financial situation and needs have not been taken into consideration. Accordingly, you should consider how appropriate the advice is (or is not) to your objectives, financial situation and needs before acting on the advice. The information in this communication should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
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TSI does and seeks to do business with companies featured in its articles and videos. As a result, investors should be aware that TSI may have a conflict of interest that could affect the objectivity of some articles or videos. Investors should consider TSI articles and videos as only a single factor in making any investment decision. The publishers also wish to disclose that they may hold stock in some companies featured in their articles and videos, and that any decision you make to purchase the stock of a company TSI profiles should be made only after you have initiated your own enquiries as to the validity of any information contained in those
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