First Mining Finance Corp (TSE:FF) is an undervalued 'mineral bank', led by an experienced team with a proven track record, says broker HC Wainright, which has started covering the stock with a 'buy' rating.
It targets C$1.10 per share, which is a hefty distance from where they are now at about 67 cents.
The group's portfolio includes 25 projects with a combined gold resource of 7mln ounces in the measured and indicated categories and 5mln ounces in inferred. They range from PEA (preliminary economic assessment) stage to grassroots.
Five Tier one sites..
Its tier one sites (there are five) include the Springpole gold project and the Goldlund site in Ontario, Canada.
"The company initially planned to create value by buying and holding undervalued assets until market conditions improved," said analyst Heiko F Ihle.
"In 2015 and 2016, the company acquired over 12 million gold equivalent ounces (GEO). We note that management adjusted their strategy once it became cheaper to drill for additional mineral resources, rather than acquiring them."
Ihle reckons the group should now unlock value by growing and de-risking its assets by additional exploration, building infrastructure, and permitting advancement.
"First Mining Finance is undervalued relative to its peers. First Mining’s resources are currently valued at $24 per GEO based on the company’s market cap," added the broker.
A large premium...
"This is a large premium to the price at which these assets were acquired, showing that management has created substantial shareholder value with the vehicle in the past," it noted.
"We believe that the market does not fully appreciate the optionality that the company's assets provide. We further believe that the firm should begin to trend closer to peer averages as the company continues to develop its Tier 1 assets."
The analyst also noted that Keith Neumeyer, the founder and chairman, has experience building two separate billion dollar companies, beginning with First Quantum Minerals in 1992, while in 2002, he founded First Majestic Silver.
HC Wainright values the firm at C$712.8mln, or C$1.13 a share.