As a result of a reallocation of resources, we are discontinuing coverage of Lion One Metals Ltd. (was Buy and C$1.90 price target). All our previous estimates should no longer be relied upon.
As we anticipated, the massive liquidity injections and stimulus packages being introduced have started to drive gold and gold equities higher. We believe it is now time for investor to focus on smaller producers and large developers. If you had bought an equal-weighted basket of the larger companies we recommended in our previous note, it would have returned 60% (Top 3), and 68% (Wider Group). Based on history, we believe there are better returns to be made with smaller companies as this bull market matures. We are updating our “Precious Metals Hoarding List” and the junior producers that screened the best based on our criteria (Appendix A) are: Serabi Gold (TSX:SBI, not covered), Argonaut Gold (TSX:AR, not covered) and RNC Minerals (TSX:RNX, BUY, C$1.30 target, Derek Macpherson).
Gold continues to shine, and we expect gold producers to continue to outperform as Q1 operating and financial results are announced in the coming weeks. As we noted in the Building our “Precious Metals Hoarding List” published last month, we believe that we are in a bull market for gold and gold equities. In the upcoming reporting season, we believe producers that report strong Q1 results, along with reasonable outlooks (adjusted for COVID-19), are likely to outperform. Additionally, there are several companies with strong tailwinds for Q2/20 as they are poised to benefit from significantly lower local currencies and decade low energy prices. In this note we are updating our commodity and currency estimates and highlight names from our coverage universe that we believe could outperform when quarterly reporting begins April 22, 2020.
Lion One announced results from a surface sampling campaign at its Navilawa exploration licence on its 100%-owned and fully permitted Tuvatu alkaline gold project in Fiji. The company conducted surface sampling to follow up on strong bulk leach extractable gold (BLEG) stream sediment samples collected in 2019. With ~600m of assays left from its second, deep drill hole and results from two additional holes still to come, we believe the company is well positioned to make a new discovery with its recent confirmatory geophysical work and surface sampling. We maintain our $1.70/sh target; however, we are adjusting our rating to HOLD (was BUY) based on share price appreciation.
Lion One announced that it has discovered a significant structural network beneath its 100%-owned and fully permitted Tuvatu alkaline gold project in Fiji. The company conducted controlled source audio magnetotelluric (CSAMT) surveys at the end of 2019 that revealed deep seated structural controls of the known lode systems and identified several untested targets (Figure 1). With ~600m of assays left from its second, deep drill hole and results from two additional holes still to come, we believe the company is well positioned with this confirmatory geophysical work to potentially make a new discovery. We maintain our target of C$1.70/share.
Lion One Metals released results from the first 400m of drilling from the second diamond drill hole (DDH) at the company’s Tuvatu Alkaline Gold Project (100% owned) in Fiji. The second hole (TUDDH494) focused on targeting the east-west striking Murau 2 lode in addition to the downdip extensions of two mineralized N-S trending structures. With ~600m of assays left in hole two and results from two additional holes still to come, we believe the stock should re-rate towards our fair value estimate of C$1.70/sh with continued drilling success.
Lion One Metals released results from its first deep diamond drill hole (DDH) at its 100%-owned Tuvatu Alkaline Gold Deposit in Fiji. Results from the 2019 drill program targeted downdip extensions at Tuvatu. With assays from three additional holes to come, we believe the stock should re-rate towards our fair value estimate of C$1.70/sh.
Lion One provided an update on its exploration progress on its 100% controlled Navilawa alkaline gold project in Fiji. Deep drilling along with the recently completed sediment sampling and ongoing geophysical work could enable the company to discover significant new gold zones in the Navilawa Caldera.
If it looks like a bull market (technical breakout in gold), smells like a bull market (significant negative yielding debt) and feels like a bull market (funds flowing into gold), it must be a bull market. Our analysis shows that equities in smaller sized companies outperform during a bull market. However, not all junior miners are created equal, and we believe there are three keys to picking them.
Impact: Positive
Lion One has commenced its 2019 drill program and announced results from the first six holes testing high grade structures within the HT Corridor north of its Tuvatu deposit (739Koz at 9.5 g/t Au). We believe that the company’s Tuvatu property sits within an expansive alkaline epithermal gold system. These systems can form some of the largest gold deposits on earth, such as the nearby Vatukoula deposit (7Moz Au). With drilling underway Lion One could be on the cusp of demonstrating the world class potential of its Tuvatu project in Fiji.