poasted by jaybird 666 on stockhouse
Winspear Resources STEVEN BUTLER
> (WSP - VSE) (416) 359-6199 > December 23, 1999 Toronto, Ontario
> Snap Lake Project Update; > Timely Receipt of Class B Water License
> Current Price (12/22) 52-Week Range Mkt Cap Rating
> $2.19 $5.30-$2.08 $102.8mm S4
> EVENT: Winspear Resources announced that it received a Class B Water License
> for the Snap Lake project on December 17. In addition, resource drilling this fall has
> further extended the kimberlite resource toward the northeast.
> IMPACT: The timely receipt of the water licence is good news as it allows the company to
> conduct an advanced exploration program in 2000, including the underground extraction and
> processing of kimberlite at a maximum rate of 100 tonnes per day.
> SUMMARY AND CONCLUSION: Winspear's shares have traded down to a 52-week low
> during the course of the tax loss selling season. There had been little in the way of significant news until
> yesterday's announcement. A pre-feasibility study on Snap Lake is expected to be completed in
> Q1/00 and the advanced exploration program should commence by February. This
> program is expected to verify the results of the surface bulk sample program of 1999
> which yielded an undiluted grade of 1.78 carats per tonne and a valuation of US$105 per
> carat. Winspear's shares are trading at a deep discount to our 0% NAV ($8.06 per share) and a
> considerable discount to a more conservative 10% NAV ($3.37 per share). We continue to rate Winspear's
> shares an S4 (speculative).
> DETAILS: The Class B Water License permits water usage in the extraction and
> processing of material at a maximum rate of 100 tonnes per day. In addition, other land
> use and quarrying permits were issued by the Department of Indian Affairs and Northern
> Development. This paves the way for Winspear's advanced exploration program next year.
> The 4,253-metre drill program this fall, consisting of eight diamond drill holes, was successful in
> extending the kimberlite mineralization a further 600 metres to the northeast. The average
> kimberlite thickness was three metres, slightly thicker than the average (2.8 metres) of the
> indicated resource area. The scoping study is only based on the indicated
> resource area which contains 7.96 million tonnes (diluted to 8.225 million tonnes).
> The program for next year is highlighted by underground test mining of 20,000 tonnes of
> kimberlite and the processing of 6,000 tonnes of kimberlite to confirm the grade and carat values at
> depth. The same amount of material was collected at surface on the NW peninsula of Snap Lake.
> The consistency in microdiamond counts, microdiamond morphology and lithology point to the
> NW dyke as being one phase of kimberlite which should be consistent in grade and carat
> valuations. The microdiamond analysis points to a modestly higher grade in a northeasterly
> direction within the dyke. In addition to the underground work and kimberlite processing, a 75-
> person camp, 900-metre airstrip and a containment area will be built.
> The company has extended the expiry on three classes of warrants from December 22 to December
> 31. There is the potential for two sets of warrants to be exercised which would yield proceeds of
> $3.45 million; however the third class, priced at $2.44 per share, will likely not be exercised.
> # of Strike Proceeds
> warrants Price $mm
> 214,700 $2.15 $0.46
> 1,363,500 $2.19 $2.99
> 3,070,000 $2.44 $7.49
> Following the recent financing priced at $2.55 per share, Winspear has
> approximately $14.6 million in working capital. The company has a total of 11.9 million options
> and warrants outstanding at an average price of $2.53 per share which would add $30.1
> million to the treasury.
> VALUATION: Our NAV for Winspear Resources is outlined below: It is based on
> the scoping study parameters defined by consulting firm MRDI, including the diluted
> mineable resource of 8.225 million tonnes with a diluted value of $250 per tonne (1.61 ct/tonne
> @US$105/ct times 1.48 C$/US$). The estimates below conservatively assume an additional equity
> issue of five million shares at current prices for approximately $10 million in additional
> financing.
> As indicated in the sensitivity analysis below, the project is more sensitive to changes in the ore
> value (grade or carat value) than changes in capital or operating costs. The 30% range for costs is
> indicated because this is the confidence interval assigned by MRDI in the scoping study.
> Net Asset Value Summary ($ 000s)
> Discount Rate 0% 3% 6% 10%
> Snap Lake Project 411,869 305,778 227,842 154,185
> Working Capital 14,563 14,563 14,563 14,563
> Working Capital
> Additions 5,854 5,854 5,854 5,854
> Assumed Financing 10,293 10,293 10,293 10,293
> LT Debt - - - -Net
> Asset Value (NAV) 442,579 336,488 258,552 184,895
> FD ITM Shares
> O/S (000s) 54,894 54,894 54,894 54,894
> NAV per Share
> ($/share) $8.06 $6.13 $4.71 $3.37
> Share Price ($/share) $2.19 $2.19 $2.19 $2.19
> Share Price > Prem/(Disc.) to NAV -73% -64% -54% -35%
>
> NAV Sensitivity ($/share)
> Discount Rate 0% 3% 6% 10%
> NAV Base Case $8.06 $6.13 $4.71 $3.37
> Incremental Impact of:
> Diluted Ore Value " 10% $1.34 $1.04 $0.82 $0.61
> Capital Costs " 30% ($0.48) ($0.46) ($0.45) ($0.42)
> Optg Costs "30% ($1.21) ($0.94) ($0.74) ($0.55)
>
Thought you would find this recent analysis of interest. Note the date. The report is an
update from Nesbitt Burns research. |
