07/08/2023

Introduction:

Since listing on the London stock market in May we have seen Golden Metal Resources fulfil its promise of delivering significant and regular newsflow. This is something which is appropriate to a company whose portfolio of mining assets are outstanding as compared to many of its peers. This would explain the current relative outperformance of the shares in what are still difficult conditions for many junior mining stocks.

However, as recent moves by Rio Tinto (RIO) have shown with regard to deals with the likes of UK listed Sovereign Metals (SVML) and Aterian (ATN), we are likely to see more and more major mining groups swoop on companies like GMET. Fundamental changes such as securing commodities supply in the wake of the Ukraine invasion, as well as the moves to lower Western economies’ dependence on China, start to kick in over the next few years. This means that the USA has to secure its domestic supplies, ahead of the 2026 ban on China imports. One would expect significant funding to emerge for GMET’s flagship Pilot Mountain tungsten asset.

We were reminded of the importance of supply issues in the wake of last month’s GMET’s MOU will Oxford Sigma, focused on tungsten supply within the fusion industry.  This along with the energy transition, which requires critical metals, means that GMET’s portfolio which includes lithium and tungsten, is right in the box seat as far as production requirements.

Pilot Mountain

The jewel in the crown for GMET is Pilot Mountain, Nevada, with it strategically being the largest undeveloped tungsten asset in the USA. This has key importance given the way that the USA will be banning the use of China sourced tungsten from the beginning of 2026. Tungsten’s importance in the defence industry cements the importance of Pilot Mountain and means that we are less than three years from a transformational event for GMET. The run up to the China tungsten ban will in itself be a catalyst for a re-rate of the company, currently on a market cap of just £7m.

Of course, the big picture drivers for GMET are all very well, but there are investors who prefer to number crunch. In this respect one can refer to the SI Capital’s latest research report on the company. It suggests via its Project Valuation’ analysis. This used a risked in-the ground valuation to arrive at a base-value of $58.2m (£44.8m). This was spilt into the existing resource ($41.6m) and exploration potential ($16.6m). All of this underlines the base level valuation GMET currently has at 8p versus the 35p broker share price target.

Kibby Basin

GMET has consolidated its portfolio with the recent addition of Kibby Basis, which adds the prospect of lithium brine mineralisation. The latest here is a 169-metre-thick zone of lithium brine mineralisation from hole KB22- 02, open in all directions. Rather helpfully Kibby is just a few kilometres from Pilot Mountain. We are in the run up to GMET revealing more regarding what lies at Kibby Basin and this should be one of the drivers for the share price in the near term.

Conclusion:

The London market is spoilt for choice as far as junior mining prospects are concerned. The way of sorting out the wheat from the chaff is to identify the best fundamental differentiators. In the case of GMET, Pilot Mountain, tungsten, and 1 January 2026 when the US Department of Defense will be banning the use of tungsten from China.  The window between now and that event appears perfect for the company to deliver for shareholders in itself,  with the rest of the portfolio the icing on the cake.

This is especially the case as in June the company said it would be applying for non-dilutive grant funding for Pilot Mountain. Current speculation is that this funding could be $10m plus, something which makes sense given the scale of what GMET is sitting on. $10m would of course make a significant difference to a company trading on a market cap of less than £10m.

As the nature and quantum of this becomes apparent, it should also be a driver for the company. This is especially so given the case that funding concerns tend to be the biggest dampener for resource stocks.  In addition, offtake agreements such as that with Global Tungsten & Powders, will also underpin GMET.

GMET has already proven itself to be a company in a hurry, with CEO Oliver Friesen driving it forward at pace.