Lion One recently announced aggressive plans to explore its recentlyconsolidated property, with the aim of demonstrating its potential to hostan expansive alkaline epithermal gold system, analogous to the nearbyVatukoula (7Moz Au) deposit. The company is back-stopped by therobust, high grade (739Koz at 9.5 g/t Au) Tuvatu gold project in Fiji,which steadily continues to be advanced to production. We are revisingour valuation to better reflect the significant potential we thinkcould be revealed as drilling ramps-up.
In our view the market is undervaluing Lion One. Lion One currentlytrades at 0.38x (peers 0.52x). This valuation is easily underpinned bythe high-grade Tuvatu gold project, currently under development. LionOne could re-rate as it continues to move Tuvatu towards productionand as it begins to demonstrate the project’s significant explorationpotential. We believe Lion One is worth C$1.35/sh (new fair value est.),based on 0.70x our NAVPS8% estimate of $1.93 (was $1.86 using a 5%discount rate). We believe the company’s renewed focus on drillingcould surface significant value and have revised our estimates to reflectthis exploration upside.
Red Cloud Research PDF - Unleashing the Lion
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