Company Overview - Sirius Resources NL is an Australia-based mineral exploration company. The Company’s tenement portfolio lies in Western Australia, covering over 8,500 square kilometers, making the Company a gold, nickel and base metal explorer. The Company’s projects are located in gold and nickel districts and in emerging gold, nickel and base metal provinces.  The Company is prospective for komatiite style nickel sulphide deposits, intrusive style nickel deposits, volcanogenic massive sulphide, copper-zinc deposits, lode gold-style deposits and porphyry-style molybdenum-copper-gold deposits. The Company focuses on its 100 percent owned Nova Nickel project situated east of Norseman, where it made a nickel-copper sulphide discovery known as the Nova-Bollinger deposit and Polar Bear project for gold and nickel.


Analysis - With recent updates such as progress on Nova nickel mine, Sirius Resources (SIR) has got all attention. On 27 January 2015, the Company announced for mining commencement at Nova on the Australia Day. The reduction of project capital costs by A$30 million from the Definitive Feasibility Study (DFS) estimate of A$473 million to a revised A$443 million owing to savings from construction contracts and tenders to date, has been a highpoint. From work-standpoint, excavation of the box-cut for the underground portal at Nova has commenced post receiving requisite mining permits. SIR also updated that the construction of interim accommodation village has started with aerodrome and access road construction beginning now. The permanent accommodation is expected to be completed by August 2015 at a cost of A$23 million. The Company has also received tenders for the processing plant construction contract (announcement of preferred tenderer expected in March 2015). For this entire effort, the key point entails commencement of construction activities immediately after receiving the requite approvals. This was supported by having pre-positioned key contractors on site in anticipation of the approvals. Overall, SIR looks well-positioned to deliver first ore by mid-2016 as planned and expected.


Start of Mining at Nova – Box-cut site on Australia Day, 26^th January 2014 (Source – Company Reports)

SIR conveyed that about three months’ time is anticipated for the completion of the initial mining of the box-cut. Mining of the underground decline will commence subsequent to the initial mining. Mining contractor Barminco under a three year contract valued at A$129 million has been finalized for said job. In December 2014, SIR had announced for the completion of the Project finance facility of up to A$440 million for Nova with four tier one banks. Australia and New Zealand Banking Group Limited, BNP Paribas, The Hongkong and Shanghai Banking Corporation Limited and Westpac Banking Corporation will participate equally in the Facility. The funding has materially de-risked the project. In September 2014 quarterly updates, the Company already mentioned about a major capital raising of A$189 million which was completed to enable the Company have a strong balance sheet ahead of the debt funding for the Nova project.



Location Plan Showing Taipan and Taipan North Nickel Prospect (Source – Company Reports)

Another recent announcement entailed the kicking-off of the 2015 nickel exploration program with drilling at Crux and Polar Bear. Primarily, extensive drilling program has been undertaken for a variety of targets on SIR’s 100% owned Polar Bear and Fraser Range ground and on its 70% owned Fraser Range JV. The Company reported that diamond drilling has been started at Crux nickel prospect to follow up EM and geochemical anomalies in Nova-style intrusion. This will be followed by diamond drilling at Centauri nickel prospect. Other updates included systematic drilling of untested EM conductors at Polar Bear and Fraser Range and EM surveys on three new soil anomalies at Fraser Range. Further, SIR has planned for a number of diamond drill-holes to access the untested basal contact in coming weeks. Moreover, drilling is planned to follow up nickel-copper anomalies identified in the broad spaced reconnaissance aircore drilling program undertaken on the salt lake at Polar Bear in late 2014. RC drilling is also planned at the Taipan North prospect at Polar Bear where drilling undertaken late in 2014 intersected further disseminated nickel mineralisation along the Taipan – Halls Knoll trend. The Company would soon provide the details of the planned drilling program and targets in its December 2014 Quarterly Activities report.


Cross section of Baloo Gold Prospect (Source – Company Reports)

Yet another highlight is with regards to the recent gold discovery at Baloo prospect in Polar Bear. SIR findings included first wide spaced reconnaissance drilling at Baloo prospect intersecting thick, high grade, near surface gold zone in bedrock, including 33m @ 3.81 g/t Au from 24 metres to the end of hole. In fact, SIR reported that 500 metre strike length has been defined so far and eight drillholes end in gold mineralisation with three grading 4-8g/t gold. It has been also found that gold is associated with thick zone of quartz veins, arsenopyrite alteration and tellurium anomalism. The key intersections include 49m @ 2.69 g/t Au from 8 metres to EOH (end of the drillhole), including 33m @ 3.81 g/t Au from 24 metres to EOH, including 4m @ 7.51 g/t Au from 28 metres and 4m @ 8.48 g/t Au from 48 metres in SPBA2121; 68m @ 1.13 g/t Au from 4 metres to EOH, including 4m @ 8.13 g/t Au from 4 metres, and 4m @ 6.10 g/t Au from 68 metres to EOH in SPBA2122; 10m @ 1.29 g/t Au from 16 metres to EOH, including 1m @ 8.8 g/t Au from 25 metres to EOH in SPBA2114; 38m @ 0.69 g/t Au from 16 metres to EOH, including 4m @ 4.27 g/t Au from 40 metres in SPBA2131; 6m @ 3.59 g/t Au from 68 metres to EOH in SPBA2157; and 12m @ 1.04 g/t Au from 16 metres in SPBA2138. It has been further reported that a wide spaced (100 x 40 metre) reconnaissance aircore drilling undertaken in December 2014 on a gold target at the northern end of the Polar Bear project has identified significant gold mineralisation at the Baloo prospect, 10 kilometres from the Higginsville gold mine, where past gold production and current gold resources total approximately 3 million ounces.


Polar Bear – Nanook and Bindy Prospects with Maximum Downhole Gold Contours (Source – Company Reports)

We do note that few factors have the potential to affect SIR’s performance. These include fluctuations in commodity prices (nickel and copper prices for Nova), success/failure at extending current reserve/mine life, operational risks, and so forth.

Nonetheless, assets such as Polar Bear which looks prospective for gold and nickel mineralisation in view of the recent nickel discovery at Taipan and currently gold discovery at Baloo, are found to have an immense potential. The strategies to maximise the value of the Nova Nickel Project while exploration potential within the Fraser Range and Polar Bear landholdings is unveiled, have been working well for the Company. In other words, exploration activities, progress at Nova, and grades of gold as high as 8.68 per tonne beneath a salt lake speak leaps and bounds for SIR’s future potential. While a share price softness is observed by other nickel miners, SIR seems to be doing pretty well recently. The Baloo prospect flashed a 14% upsurge in shares when first discovered some months back. The strength in the gold price coupled with the good grades announced from some intersections, may give a favorable spin. 


Fraser Range Project Exploration Areas (Source – Company Reports)

Restructuring of the Board has also been an important step for SIR. The Company also reported that its market capitalization increased from $400 million to $1.5 billion in the 12 months to the end of June 2014.


SIR Daily Chart (Source - Thomson Reuters)

Based on the foregoing, we put a BUY recommendation for this stock at the current price of  $2.76.

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