MST Access has prepared a research initiation note on Sunstone Metals Ltd, valuing the company at 2.3 cents per share — a sizable premium to the current 0.6 cents share price.
Sunstone is advancing two large-scale gold-copper projects in Ecuador — Bramaderos and El Palmar — with a 4-million-ounce gold-equivalent resource base already established on the prolific Andean Copper Belt.
Sunstone is establishing significant scale, with Bramaderos hosting a 2.7-million-ounce gold-equivalent resource with an exploration target of a further 3.3-8.6 million ounces gold-equivalent.
El Palmar has a 1.2-million-ounce gold-equivalent resource with an associated 15-45 million-ounce gold-equivalent exploration target.
The projects are each in regions attracting the attention of global majors with BHP (ASX:BHP), Newmont, Barrick, Codelco, Fortescue (ASX:FMG) and Hancock Prospecting all either active in or entering these regions in recent years.
Central to MST Access’ positive outlook is Sunstone’s Limon epithermal gold-silver discovery within the Bramaderos footprint, which it asserts has been “under-appreciated” by the market.
The higher grade, at surface Limon epithermal gold-silver deposit has delivered results including 243 metres at 1.32 g/t gold-equivalent from 46 metres and 185 metres at 2.85 g/t gold-equivalent from 90 metres.
A number of much higher grade sub-intervals have also been reported, such as 31 metres at 12.93 g/t gold-equivalent.
MST says that the Limon deposit is on its way to becoming a standalone open pit gold mine, with a resource base that could exceed 1 million ounces, which is not reflected in the current STM share price.
MST Access also highlighted the impressive track record of the company’s management team, which were central to the discovery and early development of major porphyries at Tujuh Bukit in Indonesia and Cascabel in Ecuador.
Others had key roles bringing online the King of the Hills gold mine in Western Australia and Koniambo nickel mine in New Caledonia.
Valuation upside
MST Access valued Sunstone Metals at $0.023 on an enterprise value per ounce basis, noting the upside potential as the company’s resource base grows.
“We have valued STM on an EV/oz basis identifying a peer group of +1-million ounce ASX-listed explorers who are yet to conclude studies.
“STM is currently trading on 9x EV/oz vs these peers on an average of 41x. We see upside to our valuation as the exploration target is converted into resource.”
The research group’s investment thesis was summarised as follows: “Sunstone has a proven management team that is well on its way to developing a resource base of significant scale that we expect to ultimately be of interest to major miners.
“The current 4-million-ounce resource is all pit constrained, so is literally just scratching the surface of the potential scale at Bramaderos and El Palmer.
“Limon adds material value as either a stand-alone operation or as potential higher grade feed to a larger Bramaderos porphyry development.
“The H1 2025 strategic partnership process will be a key valuation marker in our view, with STM turning to accelerating its resource development once this is concluded.”
Catalysts to note
MST outlined the potential catalysts that shareholders can expect in the year ahead: a strategic partnership process; establishing a maiden resource at Limon; growing the El Palmar resource; and growing the Bramaderos porphyry resource.