The next few months are likely to be a news-flow intensive period for First Class Metals plc (FCM), with exploration drilling likely on at least two high priority properties and work planned to move other prospects towards drill- ready status. In this updated research note we look at FCM’s exploration properties to understand the catalysts that could spark a share price uplift. We also analyse the additions made over the last 12-months to FCM’s expanding exploration portfolio of interests.
- Sunbeam is the most advanced asset that produced gold between 1898 and 1905, upon which it is estimated 50,000 to 70,000 tonnes of gold at a 13.0 g/t grade exist in old workings.
- Several exploration targets and trends at Sunbeam have been identified. Following channel sampling work, some of these are likely to be drilled within the next few months.
- The high-grade nickel drill results reported by JV partner Palladium One (PDM) at West Pickle Lake (WPL) provides clear evidence that a district- scale sulphide nickel play has emerged on the North Hemlo properties.
- The management believe similar high-grade mineralisation discoveries at WPL could also be present on their 100%-owned North Hemlo properties. One prospect targeted for near term drilling is ‘Dead Otter Lake’, where high grade gold samples have been recorded.
- FCM expanded its footprint at North Hemlo by 30% in area after securing a JV earn-in deal with OnGold in July 2023.
- The addition of the Zigzag earn-in JV provides investors with exposure to a property prospective for a vital battery metal, lithium, from which historic drilling has returned lithium grades of over 1.00% lithium.
First Class Metals has made notable advancements since listing on the LSE 12-months ago, by adding three new exploration properties (Sunbeam, Zigzag and OnGold), and through improving value to these and its existing projects. Despite this progress, the shares are now back to around their IPO placing price of 10p per share, after trading at between 15p and 17p for the last two months of 2022.
A drop in sector wide sentiment towards junior exploration companies may have impacted the share price in the last six-months, as investors have become more risk-adverse and aware of potential downside risks such as commodity price falls or exploration disappointment. Nevertheless, such an environment can create a good entry point for investors.
As explained in our last research note in January, we still believe the company should command a market cap valuation in the region of £20m, possibly as high as £25m, given the recent addition of new projects, coupled with its high quality and exciting exploration properties within a low risk and established mining jurisdiction. A market cap of around £20m to £25m would imply a value per share in the range of 24p to 30p, and thus leads us to a ‘Buy’ recommendation for the shares.
View the full broker note here First Class Meals – First Equity Broker Note 2nd August 2023