Colt Resources Secures Site for Infrastructure Needed to Support Mining at Tabuaço

Yesterday, Colt Resources announced the signing of a binding letter of intent for the option to purchase roughly 247 acres (equivalent to 1.0 km² aka 100 hectares), on which the company plans to construct the necessary surface mining infrastructure for the Tabuaço tungsten project in northern Portugal. The parcel of property, known as Passa Frio, would serve as the site for the processing plant (including jaw crushers, mill and concentrator), warehouses, dams and tailings impoundment facility needed to bring the mine into production. The property is situated away from residential areas and already is zoned to permit the construction of the off-site processing infrastructure. Over the next months, Colt Resources will have the property surveyed to verify legal title. Thereafter, for a payment of €100,000, Colt Resources may enter into three-year option enabling the purchase Passa Frio for €350,000.

The Tabuaço tungsten project is comprised of a scheelite (tungsten) deposit with a NI 43-10-compliant indicated resource estimate of 815,000 MTU WO₃ (1,495,000 tonnes grading 0.55% WO₃) and an inferred resource estimate of 720,000 MTU WO₃ (1,230,000 tonnes grading 0.59% WO₃). A portion of the deposit underlies a port wine vineyard on the western terraced slope of the Távora River valley. In August 2011, Colt Resources acquired 140 hectares of surface rights, which includes the Senhora do Convento vineyard and operational winery that produces port and red table wines. By securing the land over most of the São Pedro das Águias deposit, the company has unencumbered access to a large part of the project area, including the site which is most suitable for the entrance to the planned underground mine.

As demonstrated by this and preceding announcements, management is fast tracking the development of the Tabuaço tungsten project. The Experimental Mining License (EML) for Tabuaço was granted by the DGEG in February, and work on a preliminary economic assessment (PEA) continues. Management anticipates the PEA to be completed during the second quarter. Thereafter, management plans to conduct a pilot mill test on approximately 20 metric tons of scheelite ore. Also, the potential production of fluorite concentrate as by-product will be examined

Management continues to be engaged in discussions with undisclosed potential partners to bring the mine to production at Tabuaço within two or three years. We would expect that the development of Tabuaço would be structured in a manner similar to the Penedono joint venture with the partner providing capital and further developing the project in order to earn a substantial stake in the concession. In this manner, Colt Resources would be able to focus its capital resources on the development of the Boa Fé gold project in southern Portugal. Nonetheless, management plans on bring the Tabuaço scheelite mine to production in 2015.

We reaffirm our Outperform rating and recently raised price target of $2.15, which is based on an estimated share value of attributable resources indicated by Colt’s NI 43-101-compliant mineral 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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