Barry FitzGerald: 11 undeveloped ASX projects that Argonaut thinks are undervalued – and by how much

The pool of luck is only so deep when it comes to investing in junior explorers and developers. So introducing a bit of science to the process should be the aim.

It is with that that Garimpeiro notes Argonaut has just released its “Best Undeveloped Projects’’ or BUPs list for 2023.

It is something Argonaut has done for the last 10 years and the idea behind it is that companies owning the best discoveries/projects can be expected to outperform in the year ahead.

On average over the nine years to 2022, the annual gain for companies in the ever changing list of BUPs has been 15% which compares with 3% for S&P/ASX 200, and 9% for the more relevant S&P Small Resources indices.

In what has been a difficult year for everything bar lithium in the junior space, companies on the 2022 list of BUPs were up by 6% in the 12 months to October 31. Not startling stuff but handy nevertheless when compared to losses of 1% and 4% respectively for the two indices mentioned above.

Argonaut’s search for BUPs is confined to stocks with a sub-$5 billion market cap. There are hundreds of those. But then the resources corporate adviser/stockbroking firm puts them through a further screening process.

That process seeks to capture projects at the development stage with an assessed potential to generate internal rates of return exceeding 25%.

They must have the potential to be profitable through all market/commodity cycles, and a likelihood of achieving a project valuation of more than $100m within 24 months, if not there already.

Inclusion in the list of BUPs does not in itself represent an opinion, recommendation or valuation of a stock by Argonaut. But where Argonaut does cover the stock, its valuation is given.

So which companies/projects made the 2023 BUPs list? Eleven did, split across lithium, nickel, gold, graphite, copper, uranium, rare earths and rutile. Something for everyone you might say.
 

The Magnificent 11

Atlantic Lithium (ASX:A11): The Ewoyaa lithium project in Ghana. The stock was a big gainer during the week, hitting 52c on Wednesday in response to a hostile 63c a share bid from its major shareholder Assore. Argonaut does not cover the stock but it can be said its 2023 BUPs list is off to a flying start.

Centaurus (ASX:CTM): The Jaguar nickel project in Brazil. It has been caught in the second half downdraught that has hit all juniors and traded mid-week at 50.2c. Argonaut’s valuation is $1.60 a share.

De Grey (ASX:DEG): The Mallina gold project in the Pilbara. The resource underpinning what will be Australia’s next Tier 1 one gold mine is getting bigger and bigger. Trading mid-week at $1.20 compared with Argonaut’s $1.69 a share valuation.

Evolution Energy (ASX:EV1). The Chilalo graphite project in Tanzania. Graphite stocks are on the move in response to Chinese supply fears. It traded mid-week at 14c compared with Argonaut’s 52c a share valuation.

Global Lithium: (ASX:GL1). For its Manna project in WA. It has a fast growing resource base and a share register that suggests it too could be swept up in the current lithium merger and acquisition mania. Trading mid-week at $1.34 compared with Argonaut’s $2.45 a share valuation.

New World (ASX:NWC): Antler copper project in the US. A growing resource base for a near-term high-grade copper development. Trading mid-week at 3.5c. Not covered by Argonaut.

NextGen (ASX:NXG): Rook 1 uranium project in Canada. It is an advanced high-grade uranium project plugged in to rising uranium prices as global sentiment towards nuclear power takes hold. Trading mid-week at $9.54 compared with Argonaut’s $11.97 valuation.

Northern Minerals (ASX:NTU): Browns Range rare earths project in northern WA. An old-timer in the space that looks about to have its day in the sun thanks to it having the heavy rare earth elements the market wants, and support from Iluka. Trading at 3c compared Argonaut’s 6.4c a share valuation.

Peak Resources (ASX:PEK): For its Ngualla rare earths project in Tanzania. Another to benefit from having the right mix of rare earths and the apparent recent bottoming of demand and pricing of rare earths. Not covered by Argonaut.

SolGold (LN:SOLG): Cascabel copper in Ecuador. Not listed on the ASX but included because of the scale of the project and strategic shareholdings of BHP and Newcrest (now part of Newmont of the US). Not covered by Argonaut.

Sovereign Metals (ASX:SVM): For the world-scale Kasiya rutile/graphite project in Malawi. It is the one that recently attracted the interest of Rio Tinto, now a 15% shareholder. Trading at 43.5c mid-week compared with Argonaut’s 86c valuation.

 
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