CHEAP STOCK #5
Base Resources (BSE:AIM) 19.75p An improvement in the price of mineral sands since 2016 has helped miner Base Resources to generate a large amount of cash and dramatically reduce its debt. Some analysts think it could be completely debt free by the end of 2018.
The company owns 100% of the Kwale minerals sands operation in Kenya. It has been producing from a high-grade section since December 2013 and plans to move to a lowergrade section in 2020.
Approximately 80% of the value of its production comes from ilmenite and rutile with zircon accounting for the rest. They are used to help make paint, plastics and ceramic tiles among other applications.
Base’s shares are incredibly cheap, trading on a mere 3.1 times EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation). That’s at least half the level at which we’d expect someone to pay for a miner of its calibre in a takeover situation.
Broker RFC Ambrian has a A$0.54 price target which equates to 31p at current exchange rates. In comparison, stockbroker Numis has a 30p price target. Both imply you could make at least 50% return in 12 months. (DC)