Cabral Resources: New Dual Infrastructure Solution

Cabral (CBS:ASX) has pegged an area of 931km2, in close proximity to its existing landholding near the town of Brumado in Bahia, Brazil, containing ground prospective for high-grade DSO hematite. Initial surface samples indicate hematite iron ore mineralisation grades of >65% Fe with very low contaminants. The existing FCA rail line passes inside the tenement holding and provides potential transport to the Port of Aratu.


Strategic, low-cost acquisition adds 931km2
At a cost of US$55k, the area referred to as Sincora Area more than doubles Cabral’s existing landholding in Brazil, which now totals 1,416km2, with ground prospective for high-grade DSO hematite iron ore mineralisation.

High-grade DSO hematite confirmed in assays
Chemical assays of initial surface samples, now from two sites, are very promising and indicate the presence of high-grade (up to 69.7% Fe) hematite iron with very low levels of contaminants. This raises the potential for near-term production and prospects for cash flow given relatively low capital costs associated with sales of DSO hematite.

New dual infrastructure solution
Cabral’s Sincora Area is well situated with regard to the existing and currently operating FCA rail line, which passes directly within the tenement holding en route to Port of Aratu on the coast near Salvador. Sincora is also in close proximity to the FIOL rail development, 30km away, which is scheduled for completion in 2015/16.

Valuation: Focusing on DSO hematite
Cabral’s shares are currently trading at a level (A$0.033) that gives the company an enterprise value of A$1.6m, based on cash of c A$7m as at 30 December 2012. This compares with cash per share of A$0.027 and a net asset value (NAV) per share of A$0.079, based on financials reported for the interim period end December 2012.

Although a JORC-compliant resource has yet to be reported, Cabral is well positioned in terms of proximity to existing and planned infrastructure. Initial surface samples now from two sites on the newly pegged Sincora Area augur well for the potential delineation of a high-grade DSO hematite resource. Using a subgroup of peers focused on DSO hematite generates an average EV/t multiple approaching A$0.20/t, which when applied to our three hypothetical resource scenarios generates an implied share price for Cabral of between A$0.07 and A$0.11.

To Read the Entire Report Please Click on the pdf File Below.