Research Note - Osino Resources Corp (OSI:TSXV,$0.75|BUY $3.40 TARGET) Resource Update Surpasses Expectations - Upcoming PFS
This morning, OSI reported a significant increase to its mineral resource at the Twin Hills Gold Project in Namibia, which will be used in the upcoming Pre-Feasibility Study (PFS). The total resource grew from 2.73 Moz at 1.0 g/t Au to 3.08 Moz at 1.1 g/t Au. More importantly, the measured and indicated resource grew by ~700 Koz from 2.10 Moz Au to 2.83 Moz Au. We would also like to highlight that there is a higher-grade portion of this orebody by which if a 0.9 g/t cut-off is used, the measured an indicated resource is 1.46 g/t Au for 2.00 Moz. This is important as it provides a hedge against rising costs and the possible requirement to increase the cut-off grade. We view this result as highly positive for OSI and eagerly await the PFS which is expected in the next 3-5 weeks. We are maintaining our BUY rating and our 12-month target price of $3.40/share for OSI.
The resource is reported within a conceptual pit shell using a gold price of US$1,800/oz and a cut-off grade of 0.3 g/t Au, which is a fair cut-off based on the economics of mining in Namibia. This resource update included all the additional drilling completed since the prior mineral resource update.
This resource update sets OSI up to achieve the many targets it has set out over the next six months. This includes, the PFS coming early September, followed by the mine permitting, construction financing, and the Feasibility Study expected in early Q1/23. Finally, there remains additional upside from the recently acquired Ondundu Project where we expect a maiden resource to come in late Q3 or early Q4 of this year.
Upcoming Pre-Feasibility Study:
In our recent research note (July 5th), we went ahead in estimating the value of Twin Hills that will be depicted in the upcoming PFS. As a result, our model now values Twin Hills C$493M using an 8% discount rate. We see this valuation on the low end of what the PFS will report as we modelled 150 Koz/yr average annual production but can see the report producing closer to 200 Koz/yr. Additionally, there exists further upside which we expect to see in the upcoming study with the grade and recovery increasing by as much as 10% while the strip ratio could decrease slightly.