Potential?
EPM Mining expected to see "slight price increase" in the short term, says Industrial Alliance
12th Apr 2013, 11:13 am by Deborah Bacal
EPM is focused on the development of the Sevier Lake sulphate of potash (SOP) project in southwestern Utah, and is currently working on a preliminary feasibility study, with production targeted for 2017. Industrial Alliance Securities analyst Kiril Mugerman took a closer look Friday at the stock of EPM Mining Ventures () after unusually high volume on the company's shares in the previous session as well as a pre-feasibility update.
EPM is focused on the development of the Sevier Lake sulphate of potash (SOP) project in southwestern Utah, and is currently working on a preliminary feasibility study, with production targeted for 2017.
On Thursday, more than 400,000 shares of the company traded versus its 90-day average of 3,490.
"Based on discussions with management, we believe a position of over 500,000 shares has been putting significant pressure on the stock since late 2012 and has been fully liquidated over the last few weeks," notes Mugerman in his research report on Friday.
"This should remove pressure from the stock as the company is gearing towards the completion of its PFS. In addition, we believe this significant move could help increase liquidity on the stock, which was one of our main risks concerning EPM Mining," he says, adding that Industrial Alliance expects a slight price increase in the short term to reflect the potential of the Sevier Lake deposit, and a re-rating when the pre-feasibility study is released in the middle of this year.
With regards to the pre-feasibility study, EPM has completed 18 sonic drill holes to upgrade existing resources to reserves, and 9 hydrology wells for modeling and geotechnical drilling. The company is looking at potential optimizations and improvements to the project through bench scale evaporation testing, process alternatives and trade-off studies for capital expenditures, the analyst takes note.
One of the main goals for the company, he says, is to potentially allow for an earlier plant commissioning date than the one presented in the preliminary economic assessment.
EPM, which is supported by strategic equity partner Tata Chemicals, is also focused on obtaining all the necessary permits to start ground development in 2014.
"EPM is working with the Parthenon Group LLC which is completing an extensive analysis of the Sulphate of Potash (SOP) market. This is of high importance as EPM will need to develop its own marketing strategy and possibly need to obtain an offtake agreement in order to secure project financing down the road," Mugerman highlights.
With significant pressure off the stock and major catalysts coming up in the following months, the analyst re-iterates his speculative buy rating, and 12-month price target of $1.30. Shares of the company are trading Friday at 32 cents