The strong performance of a North-West mine tailings reprocessing operation will give the company flexibility to advance gold mining plans at Beaconsfield, a new report says.
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The report from VSA Capital said NQ Minerals' lead and zinc concentrates produced from the remnants of past mining at Hellyer - west of Cradle Mountain - had significant payable gold and silver content.
"This gives NQM highly attractive exposure to precious metals price moves," the report said.
"Silver's inclusion is of particular interest given its propensity to outperform gold during sustained precious metals market rallies.
"Furthermore, NQMI recently announced an upgraded resource at the Beaconsfield Gold Mine ... and we anticipate that the underlying strong performance at Hellyer will give NQMI the flexibility to advance this near production, high grade asset ..."
Gold is traditionally a strong performer in economic downturns, such as that caused by the coronavirus pandemic.
NQ Minerals is acquiring the historic Beaconsfield mine for $2 million.
VSA Capital said it expected NQ Minerals to put in place a program to rapidly restart production at Beaconsfield.
It said that would "further enhance the company's position as a precious metals producer".
"Given NQMI's successful restart at Hellyer, we believe that management have strong credentials for an efficient restart at Beaconsfield.
"Furthermore, NQMI staff have historically worked at Beaconsfield and are extremely well placed from this perspective."
The report said there had been a "major breakout" in precious metals prices in the past six months.
Gold was up by 11 per cent year to date.
It said precious metals pricing would support NQ's margins in the near term.
"However, a broad-based rally of commodity prices as experienced after the GFC would provide strong tailwinds for cashflow generation," it said.
"We expect strong earnings performance over the coming few years, supported in large part by a strengthening backdrop for precious metals."
NQ Minerals is also looking into the potential of resuming underground mining in the Hellyer area.
The current tailings resource is expected to run out at the end of 2028.
VSA Capital said it believed a lack of recent correlation between NQ's share price performance and precious metals pricing was a significant opportunity for investors.
It rated the London-listed stock as a buy.
The report was a marketing communication, rather than independent investment research.
VSA Capital is NQ's corporate broker.
