Fundamental Research Corp has issued a 'Buy' rating on Tartisan Nickel Corp with a fair value of $0.85 per share, well above current levels of $0.28.
In a note, Fundamental Research analysts pointed out that the recent Preliminary Economic Assessment (PEA) on Tartisan's Kenbridge nickel project in the Kenora mining district, northwestern Ontario, returned attractive economics, with an After Tax-NPV5% of $109 million, and a high AT-IRR of 20%, using US$10/lb nickel.
They noted that unlike the historic PEA, which was based on an open-pit/underground operation, the latest PEA was based on a smaller-scale underground operation, targeting the project’s deeper/higher-grade resource, saying this scenario is more attractive as higher-grade ore can be accessed in the initial years of operation, through an existing shaft infrastructure on site.
The analysts concluded: "We believe the PEA was conservative as it did not account for the remaining 30% of open-pittable resources".
READ: Tartisan Nickel says a PEA of its Kenbridge Nickel Project makes 'solid base case' for moving toward feasibility and production
The analysts noted that Tartisan's 2021 drill campaign resulted in a 25% increase in contained nickel (146 Mlbs), and an 18% increase in contained copper (78 Mlbs), with approximately 70% of the resource estimate classified as underground resources.
Nickel grades of the underground resource increased 16% to 1.08%, and copper grades increased 10% to 0.55%, they said, adding that nickel grades of over 1% are considered high. Management is planning to conduct a resource expansion drill program to test the deposit at depth, they noted.
The analysts said they believe very few nickel juniors in North America have as high-grades and low CAPEX/OPEX as Tartisan does. The company is trading at just 20% of AT-NPV5% while, for comparison, shares of Talon Metals, a comparable advanced-stage nickel junior, are trading at 61% of AT-NPV7%.
They said upcoming catalysts include a resource expansion drill program, and positive sentiment towards juniors focused on electric vehicle (EV) metals, pointing out that the discrepancy between Tartisan and Talon’s EV/AT-NPV indicates that the market has yet to realize Tartisan’s potential.
The analysts noted that nickel prices are down 23% in the past two months, and they are expecting prices to be under pressure amid rising rates, and slower global GDP growth. In addition, the nickel market is expected to move to a supply surplus this year.
"That said, we are expecting long-term prices of US$8/lb or higher (current price: US$9/lb) as most of the large undeveloped nickel projects cannot generate attractive economics if prices fall below US$8/lb," they concluded.
Contact the author at jon.hopkins@proactiveinvestors.com