Brazilian nickel developer Centaurus Metals (ASX: CTM) is poised for a substantial re-rating, according to new research notes released by mainstream brokers in Australia and North America.

Two new reports – by Perth-based Argonaut Securities and SCP Resource Finance Research – have placed Buy recommendations and respective price targets of $1.95-a-share and $2.30-a-share, on the nickel sulphide developer.

The notes were completed last week, before Centaurus yesterday unveiled a crucial deal to buy the off-take rights for its Jaguar nickel project in Brazil from Vale, clearing the way for it to pursue strategic funding and partnerships for the large-scale nickel development asset.

The Argonaut analysis is based on a peer comparison of Centaurus’ flagship Jaguar nickel sulphide project in northern Brazil stemming from the recent news that Appian Capital Advisory would sell two of its Brazilian base metals companies.

The transaction, valued at US$1.06 billion, encompasses the sale of Atlantic Nickel and Mineraçāo Vale Verde to a London-listed SPAC, ACG Acquisition Company.

Jaguar “shines” when compared to these peers, says Argonaut

The Argonaut analysis focuses on the key assets being divested as part of this transaction, the Santa Rita nickel-copper-cobalt and Serrote copper-gold mines, using an EV/NPV (enterprise value to net present value) analysis to compare the Jaguar asset to these projects.

“Jaguar project ore against shines on a value per tonne basis compared with its peers,” Argonaut said.

“On our numbers, Jaguar’s NPAT cash flows during the first 10 years of mine life will exceed that of ACG’s combined operations,” it continues.

Argonaut say that, using their metal price deck they estimate that ACG’s projects have mineable reserves/inventories valued at US$13 billion, compared with US$7.7 billion for Centaurus’ Jaguar.

“Our unoptimized cashflow model (including capital requirements) for ACG’s combined operations estimates a present day NPV7 of A$2.2 billion compared with A$1.4 billion for Jaguar.”

Applying these metrics across to Centaurus allows Argonaut to update its valuation, resulting in an unrisked NPV-based valuation of A$2.32 per share, reduced by an appropriate risk discount to underpin a valuation of A$1.95-per-share.

“We maintain our Speculative Buy and valuation to A$1.95-per-share. The ACG-Appian transaction provides a good indication of Jaguar’s true value, which in our view remains unrecognised by the broader market,” Argonaut concludes.

SCP Resource Finance chimes in with $2.30 price target, “top pick” in our space

Meanwhile, SCP Resource Finance (SCP) has continued its coverage of Centaurus and the Jaguar project with an updated SCP Equity Research paper with updated inputs ahead of the Definitive Feasibility Study due to delivery by the end of this year.

The key changes in SCP’s analysis include a lift in in-pit inventory from 36.6Mt to 55Mt (vs. the 108Mt Mineral Resource), plus an improved Class-1 nickel premium of ~US$1.5k/t Ni and a lift in by-product credits to SCPe + 10% revenue after zinc and cobalt streams were successfully produced in recent pilot testwork.

“Jaguar is the largest and highest-grade pittable pre-revenue nickel sulphide name globally, benefiting all the more from low taxes, cheap electricity and good infrastructure,” the SCP note says.

“We maintain our BUY rating but lower our A$3.10/share price target to A$2.30/share based on dropping our NAV multiple from 0.6x to 0.5x in reflection of weaker equity markets, diluted for options but not mine build.”

“With DFS, permits and early works/FEED coming in the next 12 months, we see the cyclically low share price for a demonstrably world-class asset fully exposed to the EV thematic as top pick in our space,” it adds.

SCP notes that Australian peers trade at up to 10x higher on EV/payable metal basis, with the recent bid for Mincor Resources valuing that asset at >1.5xNAV despite challenges.

Acquisition of off-take rights opens up strategic pathways for Jaguar

As part of a pivotal deal with Vale announced yesterday, Centaurus has acquired 100 per cent of the off-take rights for Jaguar nickel products from Vale in exchange for an increase in Vale’s net operating royalty over the project.

The extinguishment of Vale’s off-take rights provides Centaurus with control and optionality over future marketing of Jaguar’s low-greenhouse gas emission nickel sulphate product, which is expected to be strongly aligned with the fast-growing Western battery market.

Centaurus said the deal “significantly broadens” the strategic pathways available to Centaurus to fund and further de-risk the development of Jaguar against the backdrop of robust demand growth for nickel sulphate products globally.

At the same time, the “clean transaction structure” allows the company to preserve its cash reserves for ongoing project development while avoiding dilution of existing shareholders.

 

 

 

This article was developed in collaboration with Centaurus Metals, 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.

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