Boab Metals Limited [ASX:BML]
Metals & Mining
A compelling lead-silver play
Boab Metals Limited (ASX: BML) is focused on developing the Sorby Hills Lead- Silver Project in the tier-1 mining jurisdiction of Western Australia (WA). Sorby Hills has one of Australia’s largest undeveloped, near-surface lead-silver deposits. With the robust economics demonstrated in the Definitive Feasibility Study (DFS) and the projections of solid demand for lead and soaring demand for silver, we think BML offers an attractive speculative investment opportunity.
Increasing energy transition demand for lead and silver
Technological advancement has supported lead and silver demand as critical materials for industrial applications, i.e. automotive applications, power storage batteries, solar panels etc. However, COVID has forcefully suspended a lot of investment on the supply side, thereby causing a wide demand-supply gap. According to the Silver Institute, the industrial demand for silver is expected to reach an all-time high of 550 million ounces (Moz) in 2023. Similarly, global demand for lead is also expected to remain north of supply in the foreseeable future. This is expected to provide BML with a substantial market opportunity.
Valuation range of A$0.70–0.81 per share
Our DCF-based valuation across base-case and bull-case scenarios yields a target price range of A$0.70-0.81 per share, slightly lower than our initial valuation range of A$0.74-0.84 in March 2023, mainly due to the higher discount rate used to reflect the increased interest rates in the last several months. We see the announcement of an offtake agreement or a debt funding arrangement as catalysts for a re-rating in the share price towards our valuation range. Our valuation does not take into account the possible value-unlocking from non-core assets. The key risks include funding risk, project delays and commodity price risk.
We have also used a relative asset-based valuation methodology to determine the just as it is fair value of Boab only based on the defined Sorby Hills lead-silver resources in the absence of the funding required to develop the project. Boab is currently trading at an EV/ weighted average (comparable) resource multiple of A$0.19/oz compared to the peer group average multiple of A$0.51/oz, which shows that BML is currently trading at a significant discount to its comparable peers.
Disclaimer: Directors of Shares in Value hold shares in Boab Metals (ASX: BML).