QMines Ltd (ASX:QML) received a price target of $0.74 from Shaw and Partners based on an EV/resource multiple compared to a range of copper exploration peers.

Shaw maintained its buy recommendation and believes QMines will successfully increase its resources to 130,000 tonnes of contained copper.

The following is an excerpt from Shaw’s research update:

Event

QMines has released the results of some early metallurgical testing at its Mount Chalmers copper/gold project in Queensland. The results are very encouraging, but not unexpected given the historical production of this asset. Drilling activity is increasing and assay results from 11 diamond drill holes are pending. Another resource update is expected in 2Q22.

Strong points

• QMines holds a 100% interest in the Mount Chalmers project, located approximately 17 km northeast of Rockhampton in Queensland. It is a historic copper/gold mine that was mined sporadically between 1898 and 1982. Historic production totaled 1.24 Mt @2.0% Cu, 3.6 g/t Au and 19 g/ t Ag. The mine had both underground and open pit operations, with 810 kt produced from the open pit and 430 kt from underground operations.
• Mount Chalmers resources increased by 38% at the end of 2021 to 5.8 Mt at 1.04% Cu and 0.63 g/t Au, from 3.9 Mt at 1.15% Cu and 0. 81 g/t Au. Copper equivalent contained resources increased from 73kt to 101kt. We are planning another resource upgrade in 2Q22.
• It is important to note that the quality and trust in the resource has improved significantly with the latest upgrade. 78% of the resource is now in the measured and indicated category, whereas previously the resource was 100% inferred. This will allow Qmines to advance development studies alongside ongoing drilling activities. Qmines could go straight to a pre-feasibility study (PFS) in 2022.
• Drilling resumed in February 2022 with the completion of an eight-hole, 1,000m diamond drill program. This is in addition to three diamond drill holes that were completed on December 21. Assay results from all 11 holes are pending.
• A 10,000m RC drilling program has now begun. This program will continue to focus on infill drilling at Mt Chalmers and will also target the Woods Shaft exploration target with the aim of converting the exploration target into resources.
• QMines has also published the results of initial metallurgical testing of stringer and massive sulphide mineralization at Mt Chalmers.
• A composite of stringer mineralization with a head grade of 1.22% Cu, 0.2% Pb, 0.02% Zn and 1.05 g/t Au was subjected to two preliminary open circuit flotation tests . Sequential flotation was successful in producing a coarse copper concentrate. The copper recovery was 97.1%. The lead and zinc content of this composite was low and therefore a copper-only circuit diagram can be considered for this type of mineralization.
• A composite of massive sulphides (exhalite of copper, lead and zinc) with a head grade of 1.28% Cu, 1.42% Pb, 3.51% Zn and 4.31 g/t Au was submitted ten preliminary open circuit flotation tests. Sequential flotation was successful in producing coarser concentrates of copper/lead and zinc. The recoveries of 88.8% copper, 76.6% lead and 83.6% zinc are very encouraging for these first tests.
• Mt Chalmers is a Volcanic Hosted Massive Sulphide (VHMS) deposit. These deposits are generally characterized by several deposits within a cluster. The QMines technical team believe there is strong potential for the discovery of additional VHMS mineralization around the existing mine site.

Recommendation

We maintain our buy recommendation and our price target of 74cps. Our price target is set based on an EV/resource multiple compared to a range of copper exploration peers. We assume that QMines successfully increases the resource to 130 kt of contained copper and we use a multiple of A$558/t which is in line with the peer average.