East Coast Research has initiated coverage of Flynn Gold Ltd (ASX:FG1), an ASX junior focused on exploring gold and battery metals in the world-class mining regions of Tasmania and Western Australia.
Flynn’s 100%-owned flagship Golden Ridge Project in Tasmania boasts multiple high-grade gold mineralisation prospects.
The company holds a pioneering position in the emerging gold province of Northeast Tasmania and with promising metallurgical test results, is swiftly progressing towards defining gold resources at Golden Ridge.
The company also holds 100%-owned tenements in the highly prospective Pilbara and Yilgarn areas of Western Australia, containing lithium, gold and nickel prospects.
“The high-quality prospects within FG1’s portfolio, particularly in battery metals and gold, present substantial value in response to the thriving market demand for these commodities. Our optimistic outlook on gold prices further enhances the appeal of investing in FG1,” said the East Coast report.
Valuation range of A$0.084–0.097
East Coast Research assessed Flynn Gold at A$0.084 per share in the base-case scenario and A$0.097 per share in the bull-case scenario using an asset-based comparable valuation methodology. This compares to the company’s current share price of $0.053, pointing to the potential for significant share price upside.
The valuation only takes into account the company’s Golden Ridge project and does not take into account the other Tasmanian gold and battery metal projects and its unexplored WA lithium assets.
“Our valuation range does not consider FG1’s unexplored lithium assets, which possess substantial value, especially considering the recent successes of some peers in the region. This suggests additional potential for long-term unlocking of value,” said the research group.
“The prevailing bearish sentiment surrounding junior explorers, coupled with limited drilling and FG1’s low free float, has resulted in a significant undervaluation of the stock.
"However, we anticipate that with a recovery in capital markets, an improving global economy, and potential enhancements in the stock’s liquidity, this substantial gap in relation to the stock’s intrinsic value will gradually narrow in the medium term."
It made note of the key risks to the investment thesis: “Key risks to our investment thesis encompass volatility in commodity prices, influenced by the current uncertain economic conditions, and funding risks. FG1 lacks current cash flows and heavily relies on capital raisings to support its operations.”
Significant IRGS: A distinct advantage
East Coast Research says that the initial and limited drilling to date at the Golden Ridge Project has shown promising indications of hosting a significant Intrusive Related Gold System (IRGS).
The substantial anomalies observed within the granodiorite and adjacent sediments across an 8-kilometre mineralised zone suggest the presence of large-tonnage gold deposits, a typical characteristic of IRGS gold.
It is this trait that positions the Golden Ridge Project as a potentially extremely lucrative asset.
Lab testing conducted on 26 samples from drilled holes confirmed an average gold recovery rate of 94.7%, with gold grades ranging from 0.43 g/t to 172.74 g/t, highlighting the potentially high economic value of the Golden Ridge Project.
Battery metal resources add value
Flynn Gold holds 24 tenements in the WA region, where it is advancing a portfolio of lithium prospects within hard-rock fields.
“The multiple exploration targets, rich in high-demand battery metals such as lithium and nickel, offer significant upside potential to FG1. The fully permitted licences allow an immediate start to exploration and drilling activities in the area.
While not specifically naming it, East Coast alluded to the Kali Metals IPO in the first week of the year, which was massively oversubscribed with the IPO opening and closing in less than 20 minutes.
“One of the Australian lithium explorers recently attracted an overwhelming response from the investor community during its IPO, owing to its portfolio of emerging and unexplored lithium deposits across WA's Pilbara and Yilgarn areas.
“This presents an economically lucrative outlook for FG1’s 100%-owned asset base in the same area."