Kasbah Resources: Broker retains BUY rating, sets price target of $0.44

Kasbah Resources (ASX: KAS) has been the subject of a broker research note that has placed a price target of $0.44 per share on the company, nearly three times the current price of $0.16.

Below is an extract of the note.

Company data

Share Price: $0.165
Price Target: $0.44
Issued Capital: 364.3 million
- fully diluted: 408.0 million
Market Cap: $60.1 million
 - fully diluted: $67.3 million
Cash: est $20.7 million

Gap Zone Continues to Prove Up

Kasbah Resources continues to  report good-grade tin mineralisation from ongoing infill and extensional  drilling of the "Gap Zone" at the Achmmach Project in Morocco.

The Gap  Zone represents a poorly-tested exploration target with a strike length of  ~350 metres,  which has the potential to connect resource blocks in the west (Meknes Zone) to resource blocks in the east (Eastern Zone).

The company  has been actively drilling this target with the aim of  adding new significant  tonnes to the Company's existing resources. Kasbah expects to release an  updated resource estimate for Achmmach in early CY2012.

The latest drill results continue to validate (prove up) the predicted position  of the Fez and Meknes Zones along strike within the Gap exploration target, with the tin mineralisation continuing to be of good grade (high grade tin  zones within a broad mineralised envelope).

Mineralisation remains open at  depth, which bodes well for future resource upgrades. Recent drilling has  also intersected a new  broad (drill intercept ~45m)  zone of mineralisation  (respectable grade of 0.64% Sn)  above the Meknes  system, hosted within moderately altered  sediments.

More work is required to determine the  context of this zone, but offers early encouragement for a new structural  position for tin mineralisation and offers additional targets to test.

Improved drill production now being realised

Kasbah currently has 5 diamond drill rigs onsite,  with the  increased rig  capacity improving drilling  productivity, with ~3,000m of drilling now being  completed per month (~7 holes per month at the current drilling depths).

Sample assay turnaround is also expected to improve with onsite sample  preparation and analyses in Europe providing a turnaround time of 2-3  weeks. With improved assay turnaround we expect an increase in news flow going forward.

This accelerated drilling will enable an updated resource estimate as part of  the Achmmach Pre-Feasibility Study (PFS); targeted for release in the first quarter CY2012.

The PFS will include an updated estimate on capital and operating  costs, which were scoped to be US$85m for capital costs and C3 operating  costs of US$12,683/t of tin in concentrate. The pay-back period is expected to be just over 2 years but will depend on tin prices at the time.

100% project assignment de-risks operations; Retain Buy

In August,  Kasbah  received approval for the early assignment of  100%  project ownership of Achmmach, which de-risks the operations.

Tin is currently trading just over US$20,000/t due to continued concerns  over the global economic outlook (Eurozone debt  issues, weakening US  economy etc). In response to softening prices, some producers have reduced exports to improve prices,  which are forecast  (Bloomberg consensus) to recover to US$23,000 – US$25,000/t in the short to medium  term.

Longer term tin price fundamentals remain unchanged with expected  strong demand and continued fragile supply (depletion of mineable  resources, with little new sustainable supply).

Achmmach remains a quality pure-tin project, with the  ongoing results  reinforcing the grade advantage over many competitors. We continue to rate  Kasbah as a Buy with a Price Target of 44cps.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/22769/kasbah-resources-broker-retains-buy-rating-sets-price-target-of-044-22769.html