Shaw and Partners have placed a ‘buy’ rating on Lunnon Metals Ltd (ASX:LM8, OTC:LNMLF), citing the explorer’s diversified portfolio approach and recent impressive gold drilling results at Lady Herial prospect within the company’s gold and nickel project in Kambalda.
The target price has been set at A$0.60, and with the company’s share price currently sitting at A$0.22, this offers an upside potential of more than 170%.
New gold dream
Lady Herial prospect continues to produce strong gold results as part of Lunnon Metals’ diamond and reverse circulation drilling program.
The prospect is shaping up as an excellent opportunity to define a gold zone suitable for open-pit operations, with the potential for a maiden mineral resource estimate in the coming months.
Noteworthy intersections include:
- 23 metres at 16.61 g/t gold, including a high-grade intersection of 6 metres at 62.47 g/t;
- 13 metres at 4.10 g/t;
- 16 metres at 1.15 g/t; and
- 7 metres at 2.58 g/t.
The company struck two thick, parallel mineralised structures, spaced 50 to 60 metres apart during its campaign providing it with strong confidence in the geological model.
The highest-grade intersection of 23 metres includes an impressive 1 metre at 350 g/t gold, which is believed to be located outside these known structures.
This substantial find warrants further follow-up drilling, particularly to the south and east.
Strategic location and infrastructure
Lady Herial is part of Lunnon Metals' broader exploration at Kambalda, a historically significant gold and nickel production centre.
The project benefits from its proximity to the Lefroy Gold Plant, owned by Lunnon’s 30% shareholder Gold Fields, which offers considerable spare capacity for processing.
Also on the upside, Lunnon holds 100% gold rights in the area at Foster-Baker currently being explored, with all targeted prospects situated on granted mining tenements.
Financial position and market potential
Lunnon Metals has plenty in the war chest, with a cash balance of A$22 million at the end of June 2024 positioning it well to fund ongoing exploration and development activities.
Shaw and Partners reason that the company has a proven track record in nickel and gold exploration and is poised for further growth, driven by its ongoing drilling success and resource expansion potential.
Long-term prospects
The company's diversified approach, exploring both gold and nickel resources, along with its strong financial backing, good drill results and convenient location all contribute to a balanced strategy for future growth.
The analysts say Lunnon Metals is highly leveraged to improved market conditions for nickel, particularly as nickel demand rises with the global shift towards electric vehicles.
In the meantime, the company’s current focus on gold continues to yield results – the Kambalda district, where Lunnon is focused, has produced more than 15 million ounces of gold and remains one of Australia’s most prolific mining regions.