Kidman offers lithium and gold with brokers expecting share price upside
http://www.marketwire.com.au/market...ld-with-brokers-expecting-share-price-upside/
Shares in diversified mining group, Kidman Resources, could receive a boost after management announced on Thursday morning that strong lithium oxide assays had been delineated at its Mount Holland gold project near Southern Cross in Western Australia.
The company described the lithium oxide assays, which featured 54.2 metres at 1.53% lithium oxide from 37.8 metres and 33.5 metres at 1.39% lithium oxide from 294 metres, as some of the best seen in Western Australia.
Kidman has primarily been undertaking gold exploration at Mount Holland where there is already a combined measured, indicated and inferred resource of more than one million ounces. Management said assays from this drilling are expected shortly, and this could be a further share price catalyst.
The company is conducting a review of the Mount Holland lithium potential following several approaches from third parties interested in securing the lithium rights.
With lithium identified as a mineral of the future, the share prices of many companies only in the early exploration stages have soared in recent months.
Expect this to continue after Rio Tinto just announced that progressing a lithium deposit in Serbia was an important part of its investment strategy, primarily based on emerging high demand driven by the metals applications in batteries that power electric cars.
Kidman’s shares have traded in a range between 7 cents and 16 cents in the last 12 months. In the last two months they spiked 50% under high volumes before retracing recently from 12 cents to yesterday’s closing price of 9.6 cents, seemingly because of weakness in the gold price.
This may provide investors who are looking to hedge their bets between lithium and gold with a useful entry point.
Analysts at PAC Partners value the group’s assets in a range between 17 cents and 58 cents. As an emerging gold producer the broker is of the view that the company has flown under the radar by virtue of the perception that it remains a copper story.
In their view the market has missed that they are now a gold producer with near-term expansion possibilities. PAC Partners is forecasting Kidman to generate a net profit of $6.9 million from revenues of $40 million in fiscal 2017, representing earnings per share of 2.5 cents.
This implies a PE multiple of less than four relative to yesterday’s closing price. If the broker is on the mark in forecasting earnings per share to more than double between fiscal 2017 and fiscal 2019 Kidman could come under the microscope of speculative investors, particularly those who are looking for a company that is exposed to lithium that can also generate cash flow from an established asset.
