Edison investment research said today a value of 43 pence per share for Baobab Resources (LON:BAO) is likely, yet more than 100 pence was possible.
The exploration company's shares are currently changing hands at 16.75 pence.
Edison's analysis comes in a week where the firm added 66 per cent - or 100 million tonnes - to its global resource base as it announced the completion of resource estimates at the Ruoni North and Chitongue Grande areas of the iron ore project in Mozambique.
Analyst Charles Gibson pointed out that Baobab's resource now stands at 267 million tonnes but importantly, ounces from Ruoni South and Tenge are yet to come.
Gibson said Edison estimated that there was 393 million tonnes at 34.8 per cent yet to be declared from Tenge, Ruoni South and Chimbala.
"On the basis of a potential 661 million tonne resource at a grade of 32.6 per cent Fe, we value Baobab at 43pence (assuming no blue-sky potential), reducing to 39 pence only if it raises £15million in equity funding at a price of 15p or less," said Gibson, who pointed out that Baobab has said it will only raise funds at a share price of 25 pence or above.
The analyst went on to say that if the blue-sky potential from Singore, Monte Muande, Mondonguara was in line with its 660 million tonne resource, Edison calculated that Baobab could still attract a value in excess of 100 pence.
The firm's current share price is only justifiable assuming no blue-sky potential beyond 267 million tonnes and shareholders receiving the dilution associated with raising an additional £15 million at a share price of 30 pence or below.
Baobab's plan in the next three-and-a-half to four years is to create an operation that will initially export magnetite and an increasingly more profitable ilmenite (titanium) concentrate.
It will then move into the production of pig iron using well established rotary hearth furnace technology successfully employed in South Africa and New Zealand.