Predictive Discovery Ltd (ASX:PDI)’s valuation has been upgraded by Argonaut Research as drilling results continue to demonstrate the potential for growth at the Bankan Gold Project in Guinea.
Argonaut has upgraded the sum-of-parts valuation for Predictive to A$0.27 per share from A$0.23 per share (current share price: A$0.20) with a Speculative Buy recommendation.
The following is an extract from the research report:
Quick Read
Ongoing exploration success for PDI in one of the most exciting gold exploration plays globally, the eventual scale of this project is anyone’s guess. With no sitting government and no further clarity on development potential within the National Park buffer zone to date, key questions remain. What isn’t in question is that this project will continue to grow in scale as drilling continues.
Bankan Bolt-ons
Ongoing Exploration Success: Today’s aircore results continue to demonstrate the potential for growth at the Bankan project. In the immediate vicinity of the 3.6Moz Au Resource estimate, numerous auger results have now been backed up with oftentimes better tenor aircore results. Aircore results can be unreliable predictors of fresh-rock mineralisation, but PDI’s conversion track record at Bankan has been good to date. Diamond drilling has now demonstrated continuity of the high-grade core almost 100 m down plunge from the optimised pit-shell outlined in the September MRE. As the project advances, PDI continues to add to its understanding of controls on mineralisation, and applies this understanding to the regional effort. Drilling is expected to resume early next year. We are excited to see how big Bankan is by the end of 2022.
Argonaut’s Mining Scenario and Valuation: We retain our previous mining scenario as a basis for valuation. While exploration success has demonstrated potential it’s not quite to the level that we are willing to build into a mine plan at this stage. Underground likelihood is growing, but on the basis of widely spaced holes. The potential to add additional Resources away from the existing MRE areas has only been demonstrated by less reliable first-pass aircore drilling to date.
As mentioned above, we see significant exploration potential at Bankan. We’ve factored this in by increasing our nominal exploration value to 50% of the Bankan project’s post tax valuation (inclusive of the assumed 15% government free-carry). As the project advances we intend to wrap more robust numbers around these exploration assets. We derive a NPV10 for the NE Bankan project of A$416M. Our nominal exploration upside valuation is A$177M. Our valuation remains highly speculative due to the early stage of the project and jurisdiction risk.
Recommendation
Our sum-of-parts valuation improves to $0.27 per share, prior $0.23 per share. We maintain our Speculative Buy recommendation.