| | | | Nagambie Resources Limited (ASX:NAG)
Quality Resource unrecognised by the market |
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Research Report – Nagambie Resources Limited
target is A$0.15/sh.
The 12-month target is driven by:
- Our base case valuation of Nagambie at A$0.15/sh assumes a Reserve of1.35Mt (current Resource 539kt) and an antimony selling price of US$25,000/t (current spot US$57,300/t cif USA).
- The November 2024 Resource was based on drilling to January 2024, at a verylow cost of A$1.77M. The neighbouring Costerfield mine has very similar geology. It started production of the same size of resource in 2010 and has since mined over 2Mt of ore.
- Our analysis of the antimony market indicated that very high prices are likelyto persist for another three years and the long-term incentive price to keep non-Chinese production in line with non-Chinese demand is US$25,000/t.
Our A$0.07/sh current valuation is supported by multiple arguments including: - At a price of US$25,000/t and at a 540kt Reserve, our base case valuation which includes a processing plant is A$0.073/sh. This scenario assumes no addition to the Resource (only the conversion of the Resources to a Reserve).
- Alternatively, if Nagambie completed its planned exploration decline and then produced 100ktpa from a Reserve of 270kt (ie 50% of the current Resource) and sold direct shipping ore, it would be worth A$0.08/sh at US$35,000/sh.
- Nagambie’s peers’ share prices have risen 182% to 1328% (ie 2.82x to 14.28x) in the last twelve months to trade at enterprise values of A$150-460/Resource gold equivalent ounce, while Nagambie at 1.8cps is up only 28% and trades at A$53/AuEq oz. If Nagambie’s share price rose to our target of A$0.07/sh, it would be priced at A$183/AuEq oz (i.e. near the lower end of range).
- At 31 December 2024, the company had A$0.84M cash and a A$2M debt
facility (now a $3M facility) drawn to A$1.7M. The company also has A$2.96M
in convertible notes which have traditionally been repaid by share issues.
Drivers of share price appreciation are expected to be:- Value recognition as company marketing increases from a low base
- Additional drilling success
- More focus on the potential for direct shipping ore
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We rateNagambie Resources Limited (ASX:NAG)as a BUY
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BREAKAWAY COMMENTS
- Our valuation of the company today is A$0.07/sh. With additional exploration success and de-risking of the project over the next 12 months, we expect the market will focus on the longer-term project value of A$0.15/sh.
- Hence, Breakaway Research has a BUY recommendation on Nagambie Resources with a 12-month price target of A$0.15/share.
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| COMPANY INFORMATION
ASX Code: NAG Share Price (5th April): A$0.018 Market Cap: A$17.1m Cash (31/12/24): A$0.8m Debt(31/12/24): A$4.7m EV: A$20.9m |
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View Our Investor Research Reports
Breakaway Research reports provide independent research. Our company research reports analyze the current financial and technical information of the company, presenting the findings in an informative, straightforward format, accessible to both current and potential investors.
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