Leede Jones Gable analyst Ron Stewart initiated coverage on Thesis Gold Inc. (TAU:V) with a Buy rating and a February 2025 price target of CA$2.30 per share, according to a research report published on May 9, 2024. The analyst believes that Thesis offers investors the opportunity for superior returns over the next few years as the company advances on the path to production.
"Thesis was formed through a business combination that brought together the multi-million-ounce Lawyers project and contiguous Ranch exploration project in north central BC," Stewart noted. "The company is focused on advancing the exploration, engineering, and metallurgical test work on the combined project to create a new, intermediate gold producer."
The current NI 43-101 mineral resource for Thesis Gold stands at 5.0 million gold-equivalent ounces (GEO), comprised of 4.0 million oz GEO of measured and indicated resources (82.0Mt at 1.11 grams per tonne gold (g/t Au), 31.9 g/t Ag) and 727K oz GEO of Inferred resources (12.4Mt at 1.48 g/t Au, 24.8 g/t Ag).
"Despite the significant resource already identified, we believe the 325km2 property offers excellent exploration potential for additional high-quality resources," Stewart commented.
The analyst highlighted that over 20 prospects and deposits on the Ranch property remain open for exploration and resource expansion, with high-grade mineralization open at depth beneath the AGB and Cliff deposits at Lawyers.
Thesis Gold is planning to incorporate underground mining at Lawyers and satellite feed from Ranch in an updated Preliminary Economic Assessment (PEA), expected by late summer.
"We expect a significant increase in the annual GEO production to average over 200K oz per year over a mine life of 10 to 15 years," Stewart stated.
The analyst pointed out that Thesis Gold is currently trading at a 65% discount to peers on an enterprise value to total resource ounce basis, with an estimated valuation of approximately US$20/oz, compared to a peer average of US$54.9/oz.
Stewart also highlighted the appointment of William (Bill) Lytle as Chairman in February, noting that "Mr. Lytle is a mining engineer with extensive construction and operating experience and is currently the Vice President & COO of B2Gold Corp (BTO.T, Not Rated), a highly successful intermediate international gold producer."
Leede Jones Gable's valuation of Thesis Gold is based on an adjusted Net Asset Value (NAV) per share, comprised of the estimated fully financed, after-tax discounted cash flow (DCF) plus the additional exploration value from the residual contained metal not included in the mine plan.
"Our estimated NAV at 5% includes a DCF of CA$871M and exploration value of CA$98M. We adjust the DCF by 50% to reflect the exploration stage of the project to arrive at an adjusted NAV of CA$436M, resulting in a target price of CA$2.30/share," Stewart explained.
The analyst identified several key catalysts for Thesis Gold, including additional metallurgical test results expected in the current quarter, an updated PEA by the end of the summer, and the announcement of the 2024 exploration program by the end of the quarter.
With a Buy rating and a target price of CA$2.30 per share, representing a potential return of 199% from the current price of CA$0.77, Leede Jones Gable sees significant upside potential for investors in Thesis Gold as the company advances its projects toward production.
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Disclosures for Leede Jones Gable, Thesis Gold Inc., May 9, 2024
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