White Cliff Minerals is poised to begin field activities across its promising Canadian tenements shortly. Pic via Getty Images
Mining
Special report: With exposure to the full beneficiaries of the decarbonisation trend at its projects in Canada, East Coast Research believes White Cliff Minerals boasts a head start in rapidly defining drill targets.
White Cliff Minerals (ASX:WCN) saw a turnaround in its share price trajectory after securing two advanced Canadian exploration projects, leveraged to the ongoing shift towards a net zero economy with proven economical grades of various green metals such as copper and uranium.
In November 2023, WCN purchased the 805km2 Nunavut copper-silver-gold project followed by the acquisition of the Radium Point uranium-copper-gold-silver asset in January 2024.
WCN’s ground grab is timely given the surge in prices for both metals due to a rising demand from the construction of more nuclear power plants to reduce emissions and the adoption of energy transition technologies.
Miners are betting uranium spot prices will hit further records owing to the limited supply from years of underinvestment in mine development.
Meanwhile, copper has become the third most utilised metal globally with analysts tipping a surge in demand over the coming decade alongside a dearth of new projects and stagnant supply of the metal.
Diminishing copper reserves and lower ore grades in some of the world’s major mines means that any new deposit would merely be substituting existing output.
East Coast Research believes this all bodes well for White Cliff given the company’s projects are highly prospective for significant copper discoveries.
At the ‘Coppermine’ in Canada’s Nunavut province, numerous historical non-JORC and blue-sky mineral estimates have been identified, signalling the potential to be converted into JORC classifications with further drilling.
Several high-grade mineralised occurrences have also been uncovered using high-resolution magnetics and extensive rock chip, trench and drill results such as copper grades surpassing 30% and silver grades exceeding 40g/t.
To value the Coppermine project, East Coast Research has looked at some similarly early-stage copper explorers listed on the TSX (Toronto Stock Exchange) with their projects located in Canada.
Due to the strategic benefits of the Coppermine project compared to its peers, East Coast Research analysts have concluded this project should be valued at least a 25% premium to the peers’ average market value of $18.8m.
A similar methodology was used to value WCN’s Radium Point project by examining several Canadian uranium explorers with projects in Canada.
Ranking second only to Kazakhstan in uranium production, Canada’s uranium mining industry stands to reap substantial benefits from the projected strength in uranium prices.
East Coast Research says this outlook is particularly favourable for WCN from an investment standpoint in light of the substantial historical mine production carried out on the project pre-1982.
Radium Point previously produced 13.7Mlbs of uranium oxide, 34.2Mlbs of refined silver, and 11.37Mlbs of copper with gold, lead, nickel and cobalt credits.
By comparing Radium Point’s advantages to those of its peers, East Coast Research concluded the project should trade at a 25% premium to the peers’ average valuation of $16m.
To arrive at its overall base case valuation for WCN, East Coast Research has conducted a ‘Sum of the Parts’ (SOTP) valuation, resulting in a 3.1c per share scenario.
“Our bull case scenario is based on some recovery in explorers’ valuations,” the research company says.
“We believe the general valuation for commodity stocks will improve in the next 12-18 months as interest rates are expected to have peaked and are likely to decline in the medium to long term, therefore improving the general sentiment towards pre-revenue companies.
“Therefore, our bull case scenario has an 18% higher valuation of A$0.036 per share, it is important to note that we have not included any value from the company’s other assets in Western Australia.”
The mid-point target price of 3.4c represents a price/NAV of 0.57x, indicating a significant valuation headroom of more than 60% to the current share price of 1.9c.
“We think the discount to WCN’s current market valuation compared to our fair valuation can be partially explained by the fact that WCN has recently made the transformational acquisition of its highly prospective Canadian assets, which the market may not yet fully recognise,” East Coast Research says.
“Additionally, WCN’s primary assets are now located in Canada but the company is not listed on the Canadian stock exchanges, further contributing to its undervaluation relative to its Canadian peers.”
This article was developed in collaboration with White Cliff Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
