Canaccord Genuity raises target price on Base Resources

Analysts at Canaccord Genuity raised their target price on mineral sands company Base Resources from 35.0p to 50.0p on Wednesday, citing its exposure to a suite of "underappreciated (but highly attractive) commodities" and a "strong" near-term dividend yield.

Canaccord, which recently initiated coverage on Base Resources, stated the "high quality" nature of its flagship development project in Madagascar, Toliara, had been highlighted earlier in the week when it released "a significant reserve and resource upgrade" to what was already a "world-class" resource.

The Canadian bank, which reiterated its 'buy' rating on the stock, said this upgrade, underpinned by the release of an updated definitive feasibility study for the project, materially expanded the expected scale of peak heavy mineral output, life and ultimate value for the project.

"Following the release of the DFS2 update, we have reviewed our assumptions and estimates for the Toliara project, and our resultant Base Resources target price," said Canaccord.

"Even allowing for the inflation in capital cost estimates within DFS2 (total stage one and stage two capex now total ~US$660.0m (post-FID), up from ~US$511.0m), our standalone asset value (NPV) for Toliara has increased by ~US$300.0m (to US$815.0m); which after allowances for funding-mix (assumed debt/equity 60/40 split, inclusive of a 20% stake sale of the asset) results in a ~43% upgrade to our NPV-based target price (rounded to the nearest 5p/share) to 50.0p."