By Steven Ralston, CFA
Colt Resources (TSXV:GTP.V) announced that an updated resource estimate has been completed for its 100%-owned Tabuaço tungsten project in northern Portugal. An infill drilling program at the São Pedro das Águias deposit has not only increased the geological confidence level, but also expanded the size of the indicated resource estimate of contained metal by 85.2% from 440,000 to 815,000 MTU WO3. Expansion of the entire resource, as well as upgrading the quality of a portion of the resource from the inferred to the indicated category, contributed to the incremental 375,000 MTU WO3 rise in the indicated resource estimate.
Though the updated resource includes, for the first time, an inferred resource estimate for the mineralization at Aveleira, the inferred resource estimate declined 5.3% indicating that the overall enhancement in quality of the São Pedro das Águias deposit is truly meaningful. Located approximately 700 meters north of the São Pedro das Águias, the Aveleira deposit, however, increased the geographical scope of tungsten resource. Since it appears that the inferred estimate at Aveleira is based on only five drill holes, a focus in the next phase of infill drilling will be not only to expand, but also to upgrade the quality of the Aveleira deposit.
The October 2012 resource estimate is based on 62 drill holes versus 31 drill holes used for the estimate announced in November 2011. Since 46 drill holes representing approximately 4,500 meters of drilling have been completed since the last resource estimate, we infer that 15 drill holes were scout holes intended to expand the extent of the tungsten-mineralized skarn that appears to be ubiquitous along the western side of the valley. Management plans to continue to explore the gap between Tabuaço and Aveleira, as well as other areas in the concession, during the remainder of 2012 and in 2013.
Management intends to develop the Tabuaço tungsten project and is proceeding with the preparation of a Preliminary Economic Assessment (PEA), which is scheduled for the first quarter of 2013. The company is engaged in discussions with several undisclosed potential partners to bring a mine to production within two or three years. We would expect that the development of Tabuaço would be structured in a manner similar to the Penedono joint venture with the partner providing capital and further developing the project in order to earn a substantial stake in the concession. In this manner, Colt Resources would be able to focus its capital resources on the development of the Boa Fé gold project in southern Portugal.
We raise our price target to $1.70 and reaffirm our Outperform rating. The price target is based on an estimated share value of attributable resources, which was augmented by the higher resource estimate of the Tabuaço tungsten deposit.
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