Citi not convinced investment in Gossan Valley is best use of new funding
The destination of the big capital raising announced last week by the indebted 29 Metals hasn't convinced investment bank Citi, which has significantly cut its share price target expectation for the base metal miner going forward.Citi believes 29M should be recapitalising its balance sheet with the $180 million raising, rather than allocating more than $110 million to developing the Gossan Valley deposit at the Golden Grove operation in Western Australia.
"While Capricorn Copper is a decent project — 1.8% copper resource — a resolution on tailings storage, future-proofing without material capex and ultimately a restart path seems elusive," Citi said.Still, the bottom line is base metal pricing, with zinc the other key for 29M.On this score, Citi was cautious last week "in part due to anticipated US dollar strength".However, 29M will naturally be hopeful that pricing and the US dollar move in its favour.
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