MoneyTalks: Speculative buys on these gold and lithium stocks, and why Camplify is a good defensive play
Aussie resources sector specialist Argonaut Funds Management has put Speculative Buy recommendations on these two ASX gold producers.
Argonaut believes Ausgold is well poised to capitalise on the buoyant gold market, improving its target price on AUC from 11c to 13c – versus the current price of 5c.
Ausgold has commenced definitive level studies on its Katanning Gold Project. Key areas of the study will include investigation into whether the deposit will support a larger-scale project.
Release of the updated study is scheduled for Q3 this calendar year, with an updated Resource Estimate also scheduled for Q3.
Ausgold has said it plans to make a final investment decision in the second half of the year before commencing project financing discussions.
Argonaut warns that financing remains a key risk to the project, and potential cost inflations could impact the ability to fund the project.
“We feel that costs have at least plateaued since the first study was completed in August, so we are not expecting a large mark-up, but this does remain a risk,” said the note out of Argonaut.
Another key risk is the ability of Ausgold to secure the farmland the project is located on, but the project is on granted mining leases, so risk to eventual development is low.
Three exploration streams are underway in parallel right now: Near-mine exploration, which may add incremental ounces to the mine plan, regional gold exploration, which may identify satellite projects for future development, and lithium exploration.
Results for this work will be reported throughout the first half of the year.
“We maintain our Speculative Buy recommendation on AUC,” said Argonaut.
In February, Predictive announced that 50% of its contained gold has been upgraded from Inferred to the Indicated category.
This is a result of a substantial increase in geological understanding of the mineralisation, combined with the additional drilling undertaken.
“The significance of this update should not be understated, the ability and means to do this speaks to the consistency of the orebody,” said Argonaut’s note.
“In addition, the upgrade is key to progressing a scoping study, which is fundamental towards commencement of mining licence negotiations, and the means to address permitting risks. Continued infill drilling is planned to progress this front.”
Argonaut believes Predictive will focus on adding ounces with planned extensional drilling, new near-mine exploration targets, and regional geophysics surveys and RC drilling.
“Should regional targets bear fruit, with Predictive’s previous record of defining 4.2Moz in approximately 2.5 years, ounces could be added quickly,” said Argonaut.
The broker said key changes to its previous valuation of PDI include a slightly more conservative construction start date, as well as updating the current cash position and factoring in an additional $30 million cap raise.
“We retain our nominal exploration upside approximation of 30% of the project level valuation, which we consider conservative should any regional exploration potential targets realise.
“Our NPV for the NE Bankan increases slightly to $707 million, and our valuation remains speculative due to the early stage of the project, jurisdiction risk and permitting risks.
“Our sum of parts valuation is $0.32 per share, versus prior target price of $0.35. We maintain our Speculative Buy recommendation,” said Argonaut.
PDI currently trades at 18c.
Leo Lithium (ASX:LLL) has recently reported an updated Resource for its flagship Goulamina spodumene lithium project in Mali.
The new MRE more than doubles tonnes and contained lithium within the Danaya domain, resulting in a 26% increase to contained metal within the global project resource.
Global Indicated category tonnes have increased by 30% to 72.8Mt at 1.44% Li2O.
The new MRE provides a foundation for revised pit designs and scheduling. The deposit remains open at depth, and a second MRE update is scheduled for release during the first half of this calendar year.
LLL has stated it has no intention to raise capital, and said that any funding shortfall could be filled through either early-stage DSO sales, concentrate pre-sale payments, or expansion of the Goulamina JV Company debt facility.
Argonaut has compared LLL to hard rock lithium peers using several ratio metrics, and concluded that LLL trades cheaply against all operators and many other developers.
“Successful project development and export of product from LLL should see a major re-rating in market value,” said Argonaut.
“While nothing can be done about the project’s host jurisdiction, we expect timely development progress, endorsement by sophisticated institutional funds, comfort in funding options and successful execution of the logistics strategy to unlock value.
“We maintain our Speculative Buy recommendation, and increase our valuation from $1.46 to $1.56 to account for progression of time towards first production,” said the note from Argonaut.
LLL currently trades at $0.51.
Broker Ord Minnett has an Accumulate recommendation for Camplify Holdings (ASX:CHL), with a target price of $2.11 vs current price of $1.83.
The broker says Camplify has been a clear winner from demand in domestic travel, and the consumer’s desire to spend on nature experiences post Covid.
This has driven the growth for recreational vehicle (RV) rentals, which appears to be showing little signs of slowing.
At the same time, history suggests that if economic conditions get tougher, the company should benefit from a shift to domestic travel demand, and the need for some RV owners to generate income by placing their vehicles on the CHL platform.
Campifly has noted that the PaulCamper acquisition completed in late 2022 is performing in line with expectations.
Post this transaction, CHL is now positioned as the largest peer to peer RV rental platform in Australia, New Zealand, Germany, and Austria.
According to Ord Minnett, the tailwinds for Camplify include the company’s ability to develop and sell what it calls “the holy grail”, best-in-class global insurance products suitable for both hirers and owners using a single underwriter.
The broker also said that Camplify should be able to increase the level of automation across the group such that the company can prove the business model is profitable at scale.
“The first of these opportunities has the potential to drive a material increase in ARPV across the combined group, and the second improved EBITDA margins,” said Ord Minnett.
Camplify also has ample cash (~$24m), and no debt and is expected to deliver positive free cashflow in FY24.
Ord Minnnett’s earnings assumptions in CHL have now been updated to reflect the stronger than expected first half.
“Our DCF based price target has increased 13% to $2.11 due to our earnings revisions and higher than expected cash levels,” said Ord Minnett.
“We maintain our Accumulate rating.”
The views, information, or opinions expressed in the interview in this article are solely those of the brokers and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.