Company Overview: Kidman Resources Limited explores and develops precious and base metals deposits in New South Wales (NSW), Western Australia and Northern Territory. Its other principal activities include development of its Burbanks Gold Project located in Western Australia; acquisition of the Mt Holland asset located in Western Australia, and carrying out all requirements in relation to the acquisition of the Mt Holland Project. It operates in the exploration for base metal and rare earths industry within Australia. The Mt Holland Gold & Lithium project consists of both exploration and resource drilling. The Burbanks Gold Project is situated near Coolgardie, Western Australia. The Browns Reef Project is located close to the township of Lake Cargelligo in central NSW. The Crowl Creek Project is made up of eight exploration licenses located near the township of Condobolin in Central NSW. The Esmeralda Prospect is situated 58 kilometers southeast of the productive Croydon Goldfield in North Queensland.


KDR Details

Up 8.9% on March 14, 2018 in terms of stock price, Kidman Resources Ltd (ASX: KDR) is expected to benefit from the direct exposure to the electric vehicle (EV) industry trends with Lithium demand forecasted to grow at a 14% CAGR through 2025.With Tier-1 globally significant hard-rock deposit and significant resource growth expected via recently completed drilling program, KDR is set to leverage from its Fully Integrated Refined Lithium Manufacturing Capability (Stage 1 Nameplate: 44ktpa Lithium Hydroxide or 38ktpa Lithium Carbonate Equivalent).
 

Integrated Project Flow (Source: Company Reports)
 
Strategic JV with SQM: Kidman finished their strategic JV with SQM during the December quarter to go for the construction and vertically-integrated, sustainable production of Mt Holland Lithium Project. Chilean-based Sociedad Quimica y Minera de Chile (SQM) is the world’s largest lithium producer. The WA Government has granted ‘Lead Agency Service’ status to the Mt Holland Project that would assist with the streamlining of project development activities, including the assessment of each strategic industrial site for the refinery, and advancing the Feasibility Study and approvals for the mining and concentrator operation. Further, the Scoping Study, and the new drill program results are announced for the Earl Grey Project within the Mt Holland lithium tenements. Earl Grey Project Mineral Resource estimate is due in March quarter 2018. The exceptional results generated from expansion and infill drilling at Earl Grey have continued to increase the confidence in the Mineral Resource while confirming grade continuity. The program is identifying multiple new pegmatite intercepts that require follow-up. The Maiden Combined Inferred and Indicated Mineral Resource at the Earl Grey deposit was reported at 128Mt @ 1.44% Li₂O for 1.84Mt lithium oxide (4.54Mt Lithium Carbonate Equivalent).
 

Major Lithium Hard-Rock Projects (Source: Company Reports)
 
Bounty highlights: The exploration at the Bounty Prospect within the Mt Holland tenements showed geological and mineralization continuity. The group reported that the first-pass of its exploration program at the Bounty prospect, 3.5 kms south-east of the world-class Earl Grey lithium deposit, had intersected multiple pegmatites enriched in lithium and tantalum. There is a considerable number of untested targets within the Mt Holland tenements, so Bounty already has the genuine potential to be an important additional source of material for the Mt Holland Integrated Lithium Project on the basis that the program in 2018 shows the same type of early results achieved from this first-pass program.

Other operational developments in the December quarter: As part of the group’s ongoing program to divest non-core assets, they finished the sale of the share capital of fully-owned subsidiary Coolgardie Mining Company Pty Ltd to Barra Resources Limited, covering Mining License M15-161 and the Burbanks gold mine, for an upfront fee of $121,000 and a royalty of $20/oz for the first 55,000 ozs sold from the Burbanks mine. Moreover, during the December quarter, KDR had continued to review all projects in NT and NSW with the aim of considering alternatives to potentially divest these assets. The company has conducted no field work on these projects during the December quarter.

Exercise of KDRO (New Options): KDR in April 2016, as part of its rights issue, distributed free options over ordinary shares with an exercise price of $0.15 (New Options). The New Options are only exercisable by the holders of the New Options between 9.00 am and 5.00 pm on 30^th April 2018. This has been a way of rewarding the shareholders given the potential the group has.

Ongoing Strategy: KDR is focusing on JV and project Management and aims to deliver project safely, on time and on budget. They are maintaining their current strong relationship with SQM and continuing their program of actively divesting non-core assets. Moreover, KDR is preserving the right to market and sell pro rata share of JV output (50%) and preserve strategic position as only fully integrated ASX-listed manufacturer of lithium hydroxide. The company also maintains independence from Chinese conversion market. On the other side, the future inclusion of a refinery would support the group’s aim to differentiate through downstream participation in a long-term sustainable business. Kidman believes this vision will extract maximum shareholder benefit, with KDR planning to become a very significant participant in a burgeoning global lithium market for carbonate and hydroxide which is currently dominated by a handful of incumbent producers who still account for over 80% of the global lithium market. While there is a lot of discussion about Lithium demand recently, the scenario is still indicative of an upside in the medium term. Further, KDR is enhancing the relationships with global EV and battery industry leaders to benefit from the emerging landscape.
 

Medium-and long- term Catalysts (Source: Company Reports)
 
Funding Scenario: KDR’s initial mine development and concentrator capital requirements are fully funded. The company’s additional capital requirements are to be funded on a 50/50 pro rata basis. For this, KDR is assessing financing options to participate in refinery investment. On the other side, the group reported for cash of $5.4 million as at 31^st December 2017.
 

Illustrative JV Funding (Source: Company Reports)
 
Key Appointments: KDR has appointed two new Directors, including the appointment of resources industry leader John Pizzey as Non-Executive Chairman. Moreover, the company has announced a range of senior management appointments within Western Australia Lithium Pty Ltd (WAL), the Company’s joint venture vehicle with Sociedad Quimica y Minera de Chile (SQM). Mark Fones, previously SQM Finance Vice President, has been appointed as CEO of WAL. David English has joined WAL as its Project Director, who is responsible for overseeing the development of the proposed lithium mine, concentrator and refinery in conjunction with the Company and SQM. Additionally, the company has entered into a new employment contract with its Managing Director and Chief Executive Officer, Martin Donohue.

Competitive cost position: The group is in the first Quartile of Spodumene Cost Curve with average C1 Concentrate Cash Cost of over US$205/t1. They have a low strip ratio which reduced from 2.3 to 1.911. The Concentrator Output is over 6.0% Li₂O₄ while Concentrator Yield is over 60% - 85%.The group is also benefitting from the current infrastructure and government support wherein the Brownfield mine site is 400km from Perth with electricity, water, rail and road infrastructure.
 

Illustrative Global Lithium Cost Curve (Source: Company Reports)
 
Stock performance: The share of KDR has risen 26.4% in the last three months and rose over 132.4% in the past six months with a magnificent run-up of over 390.2% in the last one year (as on March 13, 2018). As per the March 2018 Quarterly rebalance of the S&P/ASX Indices, KDR stock is being added in S&P/ASX 300 Index, effective from March 19, 2018. Meanwhile, the Mt Holland Project has the world-class Earl Grey lithium deposit as well as the promising Bounty lithium prospect, with considerable potential across the Mt Holland tenements for additional discovery. Kidman has sole marketing rights within the Mt Holland Project to its 50% share of lithium production, providing optionality for refinery funding beyond the current-funded program to build an on-site lithium concentrator. The Mt Holland Project also contains a significant gold endowment, to which KDR has all the rights. The company is continuing with their program to divest non-core assets as planned. We believe that there is room for further momentum in the stock given the developments and accordingly, we put a “Buy” recommendation on the stock at the current price of $2.19
 

KDR Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.