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By Steven Ralston, CFA A mere five days after being awarded the Borba exploration license, Colt Resources (GTP.V) announced the signing of a Memorandum Of Understanding (MOU) with Star Mining Limited which outlines the key terms for a formal definitive agreement that is expected to be executed within the next two months. The proposed terms outlined in the MOU should jump start the exploration and advancement of Borba. Located in the North Alentejo portion of the Ossa-Morena Zone, the Borba exploration concession extends over parts of both the Alter do Chão-Elvas Belt and the Sousel-Barrancos Belt. Borba encompasses 636 km² in an area previously mined for copper and explored for gold. The area was mined for copper at Miguel Vacas between 1925 and 1991 when at least 1,650 tonnes of copper were produced. Also the old copper mines of Bugalho and Zambujeira lie within the concession. Since 1986, the region has been explored for gold, most recently by Rio Narcea and Kernow Resources. Prior drilling results confirm the presence of both gold and copper mineralization. According to the MOU’s anticipated course of action, Colt Resources and Star Mining plan on jointly exploring the Borba concession. After a definitive agreement is signed, Star Mining can earn a 25% interest in Borba upon expending at least $350,000 in the completion of a work program over a period of 12 months. Thereafter, Star Mining can earn an incremental 35% interest by completing another work program with expenditures of at least $750,000 over an additional 24 months. Another 20% interest can be attained by expending $1,000,000 towards technical, commercial and environmental programs required for completing a NI 43-101-compliant resource estimate. Then Star Mining will have the right to purchase full ownership of the Borba exploration license for $5.0 million within 18 months or $10.0 during the subsequent 42 months. We reaffirm our Outperform rating and price target of $1.70, which is based on an estimated share value of attributable resources indicated by Colt’s NI 43-101 compliant mineral resource estimates and certain non-compliant historical resource estimates. We consider our valuation model to be conservative in that it also includes prospective developmental costs at Boa Fé and Tabuaço.
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