Walkabout Resources Ltd (ASX: WKT)

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Walkabout Resources Ltd (“Walkabout” or “the Company”), has recently completed a positive,
robust updated Definitive Feasibility Study (“DFS”) on its 100% owned, fully permitted Lindi
Jumbo Graphite Project (“Lindi” or “the Project”) in Southern Tanzania. This is one of a number
of the major advances made on the Project since our 2017 report on the Company, however
with material progress being delayed for ~12 months from mid-2017 due to the much publicised
(and at the time decried) changes to the Mining Law that caught in-country operators by
surprise. Things have now settled down, with licences again being granted.
The updated DFS has included updated Reserves, which resulted from a late 2018 drilling
programme and which returned a Mineral Resource Estimate (“MRE”) of 41.2 Mt, some
41% larger than the previous estimate of 29.6 Mt, with grades being very similar. The Ore
Reserve was upgraded from 5.0 Mt @ 16.1% TGC to 5.5 Mt @ 17.9% TGC, sufficient to supply
the planned 24 year compared to 20 years for the previous studies, 40,000 tpa high quality
concentrate operation - Reserve grades are the highest in Africa, and amongst the highest
globally.
One of the key points of the Project are the expected low costs (both opex and capex), by
virtue of the high grade - Lindi has the second lowest operating costs and third lowest capital
intensity of its African peers; the low expected capex of US$28.7 million and expected FOB
operating costs of US$347/tonne concentrate resulting in a robust operation, with a post-tax
NPV10 of US$197 million, and an IIR of 119% - these figures are supported by the results of
our modelling.
The Company is looking to finalise offtake and financing over the next three to six months,
followed by a nine to 12 month construction period, with production commencing in 2020.
Walkabout also holds a number of highly prospective, yet under-explored properties in Namibia
and the UK, with these being prospective for a number of metals, including lithium, base and
precious metals and platinum group elements (“PGE”). Although the focus is on Lindi, the
Company is undertaking some work on these, with drilling planned for the VMS prospective
Tyrone County Project in Northern Ireland.
KEY POINTS
High grade resource: With a Reserve grade of 17.9% TGC, and able to support a 24 year,
40,000 tpa concentrate operation, Lindi is one of the highest grade advanced graphite projects
globally.
Robust numbers: The updated DFS has returned strong numbers, indicating a low cost robust
operation that will be able to withstand adverse movements in any of the inputs.
Expansion potential: Mineralisation at Lindi is open along strike and down dip, highlighting
the expansion potential.
Fully permitted: Short of offtake and financing the Project has the two key pieces of paper -
the Mining Licence (“ML”) and the approved Resettlement Action Plan (“RAP”) - required to
be able to commence site operations. The Company was the first to get an ML granted under
the amended regulations in Tanzania.
Prospective other projects: The Company’s projects in Namibia and the UK are highly
prospective for the minerals sought, and provide a pipeline of early stage exploration projects
to back up the Lindi operation and provide some exploration “sizzle” in Walkabout.
Experienced and Committed Personnel: Company personnel, including consultants, have
extensive industry experience in varied regions and commodities, and also hold ~8.3% of the
Company, thus aligning their aims with those of share holders.
Steady News Flow: We expect to see ongoing news flow, largely with regards to offtake,
financing and permitting – in addition exploration at the other prospects will also be ongoing.
VALUATION - $0.64/SHARE
We updated our valuation for Walkabout, using a geared, after tax NPV10 technical valuation for
Lindi risked at 67.5% for Ore Reserve confidence and project stage. This results in a Company
technical valuation of A$238 million. Using a diluted share base of 371.4 million shares from
our conceptual 70:30 debt:equity funding model results in a current base case value of $0.64/
share. We would expect that share price drivers will be finalisation of offtake and financing agreements.