Yovich & Co. Weekly Update - 22 July 2013
Jul 22, 2013 | Commentary
This Week's Themes
• Australasian markets took a breather after a 3 week recovery.
• The local market pared recent gains with consumer confidence easing slightly from recent highs due to rising petrol prices and expectations of higher interest rates in the next year.
• The All Ordinaries across the Tasman edged a slight gain after trading above the significant 5,000 level earlier in the week. The market was buoyed by the results from BHP and RIO after a long run of negative sentiment.
• Slowing economic growth weighed on the Chinese market.
• The S&P 500 hit new highs with the results season in full swing and posted a fourth week of gains. Ben Bernanke reiterated earlier comments that any slow down in stimulus was not predetermined and he was concerned about rising bonds yields.
• European markets were pushed higher by the European Central Bank mentioning that they would loosen collateral rules to boost credit for small businesses.
• The NZD continues to strengthen as risk aptitude returns
Sheffield Resources Ltd (SFX.asx) – General Update & Large Potash Deposit:
The following is extracted from a Hartley's Research Paper.
Sheffield Resources Ltd has confirmed a major unconventional potash discovery in WA. The deposit, named the "Oxley Project" is shallow with good grade and widths, but the mineralisation is contained within a hard rock source, and therefore requires unconventional processing. Potash is mostly used in fertilisers as a source of potassium. Based on highly speculative assumptions, Oxley could have considerable un-risked value (in the order of $50-400m), but given the very early stage, the unconventional nature, and especially due to the lack of metallurgy work, Hartley's stress that they believe the appropriate risked valuation of the project today is minimal. The next steps for SFX include preliminary metallurgy test work to determine if extraction is viable.
Separately, SFX recently released early results for the three electro magnetic conductors it has drilled for nickel at the Red Bull project (Fraser Range). Tests are yet to be completed, but at this stage none of the three conductors are likely to host nickel sulphide mineralisation. As per the original program, air-core drilling is continuing at Red Bull and expectations are that SFX will generate new targets for subsequent reverse circulation/diamond drilling later this year or early 2014.
The Thunderbird Mineral Sands project remains the main game and source of less uncertainty given the testing work that has been completed. The scoping study is progressing and the Company is currently in the early stages of testing the product marketing. Additionally, drilling at Thunderbird (and Argo) is continuing ahead of an expected resource upgrade in Q4. Hartley's continues to rate SFX as a Speculative Buy, with a preliminary valuation for Thunderbird of $1.33 and a twelve monthly price target of $1.60. The current share price for SFX is sitting around 30 cents.
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