Liberty Gold Corp. (LGD:TSX; LGDTF:OTCQX) caught the attention of BMO Capital Markets, which initiated research coverage on it with an Outperform (Speculative) rating and deems it a "compelling investment opportunity," reported analyst Brian Quast in a July 14 research note.
"As an early stage development company in the prolific Great Basin of the U.S., we believe that the company's resources are destined to grow from an already impressive base," BMO's Quast wrote.
With a current share price of about CA$0.41, Liberty is trading at a discount to other project developers, specifically at 0.4 times net present value versus 0.6 times, Quast highlighted. Also, "relative to its resource, the company also looks highly attractive, with an enterprise value: resource mergers and acquisitions ratio of US$21 per ounce" compared to the average of its peers, US$100 per ounce.
"As the company advances its projects, we expect the stock to rerate towards peer averages. As such, we view the current valuation as an attractive entry opportunity," wrote Quast.
The analyst presented the key points about this investment story.
Low-cost U.S. gold projects
Liberty Gold's two primary assets are Black Pine in southern Idaho and Goldstrike in southern Utah, relayed Quast. These two sites of past-producing mines are in a tier one mining jurisdiction. BMO conservatively values Black Pine at US$254 million (US$254M), or US$0.37 per share, and Goldstrike at US$147M, or US$0.21 per share. Both projects are expected to be low cost given that heap-leach processing would be employed.
While it is advancing both projects, the Canadian mining firm is concentrating more on Black Pine in the near term, noted Quast.
For this project, BMO's forecasted timeline has mine construction starting in 2027, first gold being poured in 2028 and full-scale production commencing in 2029.
Another project of Liberty is TV Tower in Turkey, an early-stage gold-copper asset in which it has a 68.7% interest via a joint venture agreement.
Strong resources so far
Black Pine and Goldstrike each has an existing resource, noted Quast. Black Pine has an Indicated resource of 2,600,000 ounces (2.6 Moz) of gold (Au), or 157,300,000 tons (157.3 Mt) at 0.52 grams per ton (0.52 g/t) Au. The Inferred resource is 483,000 (483 Koz) Au, or 31.2 Mt at 0.43 g/t Au. The deposit's high-grade core hosts 1.5 Moz Au (47.4 Mt at 1.02 g/t Au), Indicated, and 219 Koz Au (7.3 Mt at 0.93 g/t Au), Inferred.
Goldstrike's resource consists of 925 Koz Au (57.8 Mt at 0.5 g/t Au) in the Indicated category, 865 Koz Au (49.6 Mt at 0.54 g/t Au) in the Inferred.
Inherent growth potential
The resources at Black Pine and Goldstrike can be increased through additional exploration and changes in cutoff grades, Quast purported.
"We are convinced these resources are destined to grow," he added.
Recent drill results from Black Pine expanded the mineralization there. Standout intercepts included 3.74 g/t Au over 21.3 meters (21.3m), in hole LBP906, and 3.28 g/t Au over 10.7m, in hole LBP893.
Future funding needs
With US$15.7 million in cash and no debt, Liberty's management expects the company's current cash balance to be enough to fund its 2023 exploration efforts, Quast wrote. However, BMO expects Liberty will need to raise funds in the future to cover these expenditures.
In terms of development, capital expenditures for Black Pine are an estimated US$250M and for Goldstrike, US$113M. To cover capex and other costs, Quast added, BMO expects Liberty will need to do a CA$75M equity raise in about Q4/23 followed by another raise of CA$65M in Q4/25.
What to watch for
Quast indicated that as Liberty continues advancing its two Great Basin projects, stock-catalyzing events are expected to happen. They include ongoing exploration updates from Black Pine and in Q4/23, an update of its resource estimate.
"With an expanding exploration program at Black Pine in particular, we expect continued exploration results to drive the stock higher," Quast wrote.
Next, a prefeasibility study, to include an initial mine plan, is slated for release in mid-2024.
Achieving the various permitting milestones and securing financing with acceptable terms also would likely boost Liberty's share price.
Proven management team
Quast described Liberty's management as made up of seasoned, successful professionals. At the helm is Jason Attew, president, chief executive officer (CEO) and director and 25-year veteran of the mining industry. Most recently he was the president and CEO of Standard Ventures until it was acquired in 2022. Before that, he served as the chief financial officer at Goldcorp.
Other Liberty executives include Dr. Jon Gilligan, chief operating officer, who has more than 35 years of multi-commodity, international experience in technical services, capital projects, and open-pit mine construction and operations, and Peter Shabestari, vice president of exploration, a geologist who worked 25 in the Great Basin and around the world.
Notable insider ownership
Just over half (51.1%) of Liberty's shares are owned by retail/other investors, and institutions/funds hold 39.6%, Quast reported. Insiders ownership is noteworthy at 5%. Newmont has a 4.3% interest.
Liberty had 319.2M common shares outstanding as of May 11, 2023.
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Important Disclosures:
- Liberty Gold is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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BMO Capital Markets Disclosures for Liberty Gold, July 14, 2023
IMPORTANT DISCLOSURES
Analyst's Certification
I, Brian Quast, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 16: A research analyst has extensively viewed the material operations of Liberty Gold Corp..
Disclosure 17: Liberty Gold Corp. has provided at its expense some or all of the itinerant travel for the research analyst related to facilitating a material site visit.
Disclosure 18: A redacted draft of this report was previously shown to Liberty Gold Corp. (for fact checking purposes) and changes were made to the report before publication.
