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MINQUEST LIMITED
Research Note
MULTI-DIMENSIONAL JUNIOR COPPER PLAY
Investment Highlights



Minquest Ltd (MNQ) has all the hallmarks of a stock to watch in the
junior resources space. It has a focus on assets with potential to
become copper production centres, with defined Mineral Resources
at each of its two projects in the Yukon Territory, Canada, and a
highly leveraged exploration play in the Gawler Craton, South
Australia, where a high-impact drill program has just commenced. We
rate MNQ as a Speculative Buy.
Whilst MNQ has made significant exploration expenditure commitments to
enable it to secure the projects it has, the optionality in its asset portfolio is
impressive. Based on its small Balance Sheet, we anticipate that the
Company will be swift with its decision making but it seems to us that MNQ
has many opportunities to add significant value by “spending in-theground”.
MNQ recently announced that a drill rig has been mobilised to drill test the
Cyclops Iron Oxide Copper Gold target, located at the north-western end of
the richly endowed Olympic Dam Iron Oxide Copper-Gold (IOCG) Province
in the Gawler Craton, South Australia. Cyclops has been geologically
modelled, based on gravity and magnetic data, as a magnetite-rich body of
800m x 250m starting at a depth of c.100m. Around 1,200m of drilling is
planned to be completed over the next 4 to 6 weeks, with any success
likely to boost the share price substantially. This drilling will be sufficient to
meet MNQ’s $0.5m minimum expenditure commitment, potentially on its
way to acquiring 100% of the 1,165km2 project area for a spend of $4.0m
by July 2018.

The Fyre Lake Project hosts a robust Mineral Resource on the Kona
deposit with potential for further incremental growth, most probably along
strike and laterally, rather than at depth. There are several known volcanic
massive sulphide (VMS) deposits in close proximity, one of which is the
700ktpa Wolverine mine and processing plant that is on care and
maintenance and apparently “for sale”. Wolverine could potentially be an
opportunity for MNQ to enhance the commercial value of Fyre Lake as the
zinc-copper-lead processing facility could potentially be refurbished to treat
the copper-gold ore feed from the Kona deposit.

The Marg Project hosts an outcropping polymetallic Mineral Resource with
around US$2.5bn of in-situ metal value comprising copper, zinc, gold, silver
and lead. The Resource is based on a dataset of some 33.8km of drilling in
113 holes and 34% of it is in the JORC Indicated category. Unlike Fyre
Lake, there are no nearby mining operations to share infrastructure with,
but there is accessible grid power only 35km away and good winter access
roads to the Project area. MNQ plan to focus its expenditure on
metallurgical and scoping studies on the existing Resource, as it is
expected that the commercial value of the Project will be most sensitive to
the cost and efficiency of mineral separation.

We believe that MNQ has an experienced Board of Directors and
management team capable of delivering on its current strategy. The team
has a track record of progressing resource project development
opportunities to commercial outcomes, being involved with other ASX-listed
entities such as Discovery Metals, Meridian Minerals and Avalon Minerals.

Whilst MNQ has minimum amounts of cash at present, we expect that
success will lead to opportunities to fund its activities. Shareholders
essentially have exposure to three rolls of the dice, any of which can set
MNQ on the path to a new copper mining operation.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
26 May 2015
12mth Rating
Price
SPECULATIVE BUY
A$
RIC: MNQ.AX
0.03
BBG: MNQ AU
Shares o/s
Free Float
Market Cap.
Net Debt (Cash)
Net Debt/Equity
m
%
A$m
A$m
%
130.1
100
3.9
(0.1)
na
3m Av. D. T’over
52wk High/Low
A$m
A$
0.03
0.051/0.015
Analyst:
Phone:
Email:
Rob Brierley
+61 8 9263 1611
[email protected]
Disclosure: Patersons Securities Limited acted as
Lead Manager and Underwriter to a 2 for 3
Entitlement Issue that raised $0.66 million at 3.0
cents per Minquest Share in September 2014. It
was paid a fee for this service. Mr Adam Davey, an
employee of Patersons Securities limited, is a Non
Executive Director of Minquest Limited. Mr Davey
has had no input, or influence, on the content of
this report.
An investment in this company should be
considered speculative and note assumptions
employed are contingent on broader market
conditions remaining buoyant. These can change
at short notice. Recommendations are current at
the time of publication.
12 Month Share Price Performance
1
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
COMPANY PROFILE
MinQuest Limited (ASX:MNQ) is a mineral exploration and project development company formerly known as
Merah Resources Ltd. Its objective is to create wealth for shareholders through the acquisition of preproduction copper, copper-gold and multi-commodity base metal projects, completing exploration, scoping and
feasibility studies and then capturing value for shareholders.
The focus of MNQ management is predominantly on exploration and project assessment activities on preproduction copper and copper-gold projects, which contain defined JORC compliant Mineral Resources.
Since mid-2014 MNQ has focused its activities in the Yukon Territory in Canada and in Australia, looking to
capitalise on project opportunities in poorly explored geological terranes in these low sovereign risk countries.
Management have used a similar model to secure all its current projects, being a multi-stage process of
acquiring a majority interest in the asset through project expenditure commitments.
FYRE LAKE PROJECT (TWO-STAGE OPTION TO ACQUIRE UP TO 80%)
The Fyre Lake property is situated immediately east of Fire Lake, known as Tsa K’on Mena by the local Dena
Community. It is located in the Finlayson Lake area of the Watson Lake Mining District, south-eastern Yukon
Territory, Canada (Figure 1). The primary objective of the Company is to increase the Mineral Resource at
Fyre Lake to support a stand-alone mining and processing operation with a Net Present Value (NPV) in
excess of US$150m. We envisage that commercialisation of Fyre Lake could be enhanced by the potential
acquisition of the near-by Wolverine Project, which is currently in care and maintenance and under Canadian
law bankruptcy protection (the “CCAA” process”).
Figure 1: Fyre Lake Location Map
Source: Minquest Limited
The Fyre Lake Project consists of the Kona Deposit, a Volcanic Hosted Massive Sulphide (VHMS) deposit of
late Devonian age. The Kona Deposit has been drill tested by 115 holes totalling 22,663m of diamond drilling.
Most of this drilling was conducted along a 1,500-metre section from near its surface exposure in Kona Creek
towards the southeast at depth. The drill-tested mineralization occurs within an area approximately 1,500m
long by 250m wide. The deposit itself consists of two, parallel zones of mineralization known as Kona East
and Kona West, separated by an inferred and apparent normal sense growth fault.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
2
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
The most recent Kona Mineral Resource was completed in January 2015. It has been reported at a 1.0% Cu
cut-off:
Figure 2: Kona 2014 Resource estimate at 1% Cu cut-off
Classification
Mt
Cu %
Co %
Au g/t
CuEq %
Indicated
3.53
1.55
0.10
0.63
2.25
Inferred
9.05
1.56
0.09
0.63
2.22
12.57
1.56
0.09
0.63
2.22
Total
Source: Minquest Limited
The key terms of the Fyre Lake Agreement whereby MNQ are acquiring up to an 80% interest in the Project,
are set out below:
First Option
To acquire an initial 51% interest in the Fyre Lake Property, MNQ will be required to:
(i)
on execution of the Fyre Lake Agreement (“Effective Date”), pay to Pacific Ridge CDN$50,000. This
payment has been made;
(ii) upon the Company obtaining all necessary shareholder, regulatory and third party approvals or waivers to
allow the Company to lawfully complete the matters set out in the Fyre Lake Agreement, issue and deliver
to Pacific Ridge, MNQ Shares to a Value of CDN$50,000. These shares have been issued;
(iii) on the first anniversary of the Effective Date (July 2015), pay CDN$100,000 and issue and deliver of
MNQ Shares to a Value of CDN$100,000 to Pacific Ridge;
(iv) on the second anniversary of the Effective Date (July 2016), pay CDN$200,000 and issue and deliver
MNQ Shares to a Value of CDN $200,000 to Pacific Ridge;
(v) on the third anniversary of the Effective Date (July 2017), pay CDN$300,000 and issue and deliver MNQ
Shares to a Value of CDN$300,000 to Pacific Ridge; and
(vi) prior to July 2015, MNQ must incur not less than an aggregate CDN$500,000 in exploration expenditures
on the Property (which has already been achieved), and prior to July 2017, MNQ must incur not less than
an aggregate CDN$3,500,000 in exploration expenditures on the Property.
Second Option
Upon earning a 51% interest in the Property, MNQ can elect to earn an additional 19% interest by incurring a
further CDN$3,000,000 in exploration expenditures on the Property prior to July 2018.
Upon MNQ earning an aggregate 70% interest in the Property, Pacific Ridge has the right and option, in its
sole discretion, to reduce its interest in the Property from 30% to 20%, in consideration for MNQ sole funding
exploration expenditures on the Property through to delivery of a Feasibility Study in respect of the Property
(thereby increasing MNQ’s interest in the Property to 80%).
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
3
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
MARG PROJECT (THREE-STAGE OPTION TO ACQUIRE 75%)
The Marg project is located in the central Yukon, approximately 40km east of Keno City. The property consists
of 402 quartz mining claims covering over 8,400 hectares adjacent to the Category A land of the Na-cho Nyak
Dun First Nation (Figure 3).
Figure 3: Marg Project Location Map
Source: Minquest Limited
The Marg project consists of the main Marg deposit, a volcanogenic hosted massive sulphide (VHMS) deposit
hosted in the metasedimentary and metavolcanic rocks of the Devono-Mississipian Earn Group. The project
also contains an additional 15km long belt of the same felsic metavolcanic and metasedimentary rocks that
host the Marg Deposit. Within this belt, soil geochemical sampling has outlined several very promising
anomalies that have yet to be properly drill tested.
The Marg deposit consists of three continuous units that contain the majority of the total defined Mineral
Resource. The deposit is strongly attenuated and contains an additional eight smaller stacked sulphide
lenses. The deposit can be traced in the sub-surface for over 1400m along strike. The deposit is open in both
directions along strike and at depth. The main economic mineral species are chalcopyrite, sphalerite and
galena associated with pyrite occurring as massive to semi-massive lenses up to 20m thick (averaging 3m to
4m).
A simple evaluation of the deposit in terms of the mining potential shows that the higher grade resource is
associated with the thicker zones and tends to be clustered in the central area of the deposit, plunging to the
east. Of the 11.7Mt (at a 0.5% Cu cut-off), approximately 8.0Mt are thicker than 3.5m true thickness at grades
greater than 2.0% CuEq. The deposit also dips from 45 degree to 70 degrees. These factors present a very
positive scenario for the development of mining activities in the future.
A historic mineral resource was completed in 2013 by A.A. Burgoyne, P.Eng, M.Sc and G.W. Giroux.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
4
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
Figure 4: Marg Resource estimate at 1% Cu cut-off
Classification
Tonnes (Mt)
Cu (%)
Pb (%)
Zn (%)
Ag (g/t)
Au (g/t)
CuEq (%)
Indicated
3.96
1.57
1.92
3.90
49.40
0.79
4.45
Inferred
7.78
1.12
1.36
2.89
34.88
0.52
3.18
11.74
1.27
1.55
3.23
39.78
0.61
3.61
Total
Source: Minquest Limited
The key terms of the Marg Project Agreement whereby MNQ are acquiring up to a 75% interest in the Project,
are set out below.
First Option
To acquire an initial 25% interest in the Marg Project, MNQ will be required to:
(i)
pay to Golden Predator CDN$50,000 prior to 20 March 2015 (completed);
(ii) no later than 30 November 2015 issue and deliver to Golden Predator, MNQ Shares to a Value of
CDN$50,000 (completed);
(iii) on the first anniversary of the Effective Date, pay CDN$50,000 and issue and deliver to Golden Predator
MNQ Shares to a Value of CDN$50,000;
(iv) prior to March 2016, MNQ must incur not less than an aggregate CDN$500,000 in exploration
expenditures on the Project;
(v) prior to March 2017, MNQ must incur not less than an addition CDN$1,900,000 (or aggregate
CDN$2,400,000) in exploration expenditures on the Property.
Second Option
Upon earning a 25% interest in the Project, MNQ can, within 30 days of earning the 25% interest, elect to
proceed with the second option to earn an additional 26% interest in the Project, for an aggregate 51%
interest, by:
(i)
on the second anniversary of the Effective Date (March 2017), pay CDN$100,000 and issue and deliver
of MNQ Shares to a Value of CDN$100,000 to Golden Predator;
(ii) prior to March 2018, MNQ must incur not less than an addition CDN$1,700,000 (or aggregate
CDN$4,100,000) in exploration expenditures on the Project.
Third Option
Upon earning a 51% interest in the Project, MNQ can, within 30 days of earning the 51% interest, elect to
proceed with the third option to earn an additional 24% interest in the Project, for an aggregate 75% interest in
the Project, by, prior to March 2019, incurring not less than an additional CDN$4,000,000 (or aggregate
CDN$8,100,000) in exploration expenditures on the Project.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
5
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
COOBER PEDY PROJECT (OPTION TO ACQUIRE 100%)
The Coober Pedy project consists of three tenements located near the town of Coober Pedy, South Australia.
The focus of exploration has been the Cyclops target, located at the border between EL4891 and EL4892,
approximately 150km South-West of Coober Pedy.
Figure 5: Coober Pedy Project Location Map
Source: Minquest Limited
The Cyclops Target was generated from a series of geophysical anomalies within the Gawler Craton, South
Australia. Similar to Prominent Hill, the Cyclops Target consists of a magnetic anomaly offset slightly from a
density anomaly. This geophysical signature sits on a deep seated, Craton tapping major structure, the Karari
Shear. The main target at Cyclops will be the gravity anomaly looking for a Prominent Hill style hematite
breccia complex with Cu +/- Au.
The Cyclops Target is thought to be:
a)
An IOCG deposit equivalent in size to Prominent Hill emplaced at time of Hiltaba Event (~1595-1575 Ma).
b)
Structurally controlled, older re-activated faults in Achaean basement or splays/break-back thrusting of
the Karari Shear Zone (active ~1580-1540 Ma, but possibly as early as 1680 Ma).
c)
Related to a dynamic environment at the paleo-continental margin, with variable stress regimes and
variable fluid sources (mixing).
d)
Associated with important ENE and NW-NNW structures linked to IOCG formation in the Gawler Craton.
MNQ can earn up to a 100% interest (subject to a 2% Net Smelter Royalty retained by Teck) in the Coober
Pedy tenements currently owned by Teck.
The Company is required to complete a minimum of $500,000 of exploration expenditure (including 1,200m of
which 600m will be core drilling at 200m per hole) on the Coober Pedy Project by 31 July 2015 (Initial
Program), which it is currently in the process of completing with drilling recently initiated.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
6
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
Following completion of the Initial Program and delivery of the results and expenditure information to Teck,
MNQ can elect to either terminate the Agreement or proceed with a sole, exclusive and irrevocable right and
option (Option) to earn a 100% interest in the Coober Pedy Project by incurring a further $3,500,000 of
exploration expenditure on the Project by 31 July 2018 and maintaining the minimum statutory expenditure on
each tenement comprising the Project and maintaining those tenements in good standing.
Teck will have the a right to earn back a 65% interest in the Coober Pedy Project at any time during the Option
or prior to MNQ incurring $7,500,000 in expenditures on the Project (Back-in Right). If Teck elects to exercise
its Back-in Right, it can earn back a 65% interest in the Project by either:
(i)
making a cash payment of $10,000,000 to MinQuest within 60 days of exercise of its Back-in Right or;
(ii) sole funding the next $20,000,000 of expenditures on the Project within the period of time equivalent to
the period of time from the date of the Agreement to the date of exercise of the Back-in Right.
Teck also reserves a 2% Net Smelter Royalty (NSR) on the Project following MinQuest earning a 100%
interest in the Coober Pedy Project. However, if the Back-in Right is exercised, the Teck’s right to the NSR will
be extinguished.
BOARD OF DIRECTORS & MANAGEMENT
MNQ has a solid Board of Directors and management team with the requisite blend of skills and experience to
deliver on its strategic plan.
David Deloub
Non-Executive Chairman - B.Ec (Hons), BA, Grad. Dip. Bus, Grad. Dip. FINSIA
Mr Deloub has 22 years of experience in the finance and corporate sectors and holds a degree in economics
and post graduate qualifications in banking and finance. Prior to joining MinQuest, Mr Deloub was the Chief
Financial Officer at the ASX listed Neptune Marine Services Limited. He was also a director of Patersons
Capital Partners, a boutique advisory firm focused on providing strategic and financial advice to ASX listed
small cap companies. Mr Deloub also has considerable finance and business development experience both in
Australia and abroad where he has held senior finance positions at Alinta Limited domestically and at Alcoa
Inc, based in New York.
Jeremy Read
Managing Director - B.Sc (Hons), MAusIMM
Jeremy was the founding Managing Director of Discovery Metals Limited (Discovery) from its incorporation in
May 2003, until his appointment as a non-executive director on 1 February 2008. Mr Read secured the Boseto
Copper Project for Discovery and was responsible for all Discovery's fund raising activities and for listing
Discovery on the Australia Stock Exchange, Botswana Stock Exchange and the Alternative Investment Market
in London. Mr Read was also the founding Managing Director of Meridian Minerals Limited, obtained the
Lennard Shelf Zn-Pb Project for Meridian and led the company until its takeover by the Chinese mining
company NWME. Mr Read's experience and expertise are seen as valuable assets to the MinQuest Board
and signal a change in the Company's strategy to a more aggressive path of project acquisition, project
development and value capture for shareholders.
Adam Davey
Non-Executive Director
Mr Davey's expertise spans over 25 years and includes capital raising (both private and public), mergers and
acquisition, ASX listings, asset sales and purchases, transaction due diligence and director duties. Mr Davey
has been involved in significantly growing businesses in both the industrial and mining sector. This has been
achieved through holding various roles within different organisations, including chairman, managing director,
non-executive director, major shareholder and corporate advisor to the board.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
7
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
Mr Paul Niardone
Non Executive Director - MBA
Mr Paul Niardone was the Executive Director and founder of Professional Public Relations (WA), the largest
PR and communications firm in Western Australia. He was the founding Chairman of Bellevue Resources
Limited and has experience in marketing, investor relations and strategic planning in both the Government and
private sectors. He has been a member of the Australian Marketing Institute, the Institute of Management
Consultants and the Institute of Company Directors. Currently Mr Niardone is the CEO of the Ausnet Group, a
real estate and financial services group of companies with A$2 billion of property sales and a A$1 billion loan
book. Mr Niardone is also a Non-Executive Director of Avalon Minerals Limited.
Chris Doornbos
Exploration Manager - B.Sc (Hons), P.Geo, MAusIMM
Chris has a sound understanding of a variety of geological terrains and ore systems with a focus on structural
and 3D interpretation, primarily with copper, gold and lead/zinc deposits (VMS, IOCG and MVT). Specialises
in delineating and delivering large scale drill programs in remote and residential locations. Chris has extensive
experiencing working internationally including Canada, Australia and Northern Sweden. He has a successful
discovery track record including recently leading the Avalon Minerals on-site exploration team to more than
doubling the D Zone resource. He has operation excellence in developing and managing large-scale projects
from scoping (PEA) through to feasibility (and EIA/EIS) applications and approval phases. Chris has a sound
resource definition and estimation skill set and proven experience safely managing small to large scale
engineering and environmental projects with a solid understanding of operations and logistics in remote
environments. Chris has extensive experience in developing positive and long lasting relationships with
stakeholders and first nations groups across the globe.
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
8
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.
26 May 2015
Minquest Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED
9
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any
account whatsoever on the part of this firm or any member or employee thereof.