Analyst Report Highlights Boab Metals' Potential with Offtake Agreement, Project Acquisition

Description

Euroz Hartleys has reinforced its confidence in Boab Metals (ASX:BML) following significant progress at the Sorby Hills lead-silver project in Western Australia. In its report, dated December 20, 2024, the firm maintains a "speculative buy" recommendation, revising its valuation to AU$0.50 per share (down from AU$0.62) and adjusting the price target to AU$0.55, reflecting updated timelines and funding requirements.

Financially, Sorby Hills is poised to deliver strong returns, with projected net cash flows of AU$778 million over its life and an average annual EBITDA of AU$126 million. The upfront capital expenditure is estimated at AU$264 million, reflecting an increase of 8 percent from the definitive feasibility study, but this is offset by improved operating cost efficiencies.

Location of Sorby Hills resources

Boab Metals anticipates making a final investment decision in the second half of 2025, with construction commencing later that year and production targeted for 2027. The company is in advanced discussions with potential financiers, including the Northern Australia Infrastructure Facility, Export Finance Australia, and commercial banks, to secure funding for the project.

Key highlights of the report:

• Offtake Agreement Secured: A key milestone for Boab Metals is the binding offtake agreement secured with Trafigura Asia Trading. This agreement covers 75 percent of the lead-silver concentrate production from Sorby Hills, totaling 531,000 tonnes over seven years. In addition, Trafigura will provide a US$30 million prepayment facility with competitive terms, including an interest rate of SOFR plus 5 percent per annum. The facility is structured for long-term repayment, with an 18-month interest-only period followed by equal monthly installments over 42 months.
• Strategic Acquisitions: In a move to solidify its position, Boab Metals has agreed to acquire the remaining 25 percent interest in Sorby Hills from its joint venture partner, Henan Yuguang, China's largest lead smelting company. The acquisition, valued at AU$23 million, will be paid in installments tied to project milestones, including the final investment decision and initial concentrate sales. With this deal, Boab gains full ownership of the project, maximizing its exposure to its economic potential.
• Project Development: The recently completed front-end engineering and design study highlights the significant production potential of Sorby Hills. The study envisions a large-scale open-pit operation processing 2.3 million tonnes of ore annually. Average lead production is expected to exceed 64,000 tonnes per year, with peak production reaching 80,000 tonnes. The project also benefits from competitive C1 costs, estimated at US$0.36 per pound, and silver credits further enhancing its economics.

For the full analyst report, click here.

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