Red Mountain Mining Limited [ASX: RMX]
Metals & Mining
On the way to building maiden lithium resources in a tier 1 jurisdiction
We initiate coverage on Red Mountain Mining (ASX: RMX) with a 12-month target price of $0.0065 – representing a 62.5% upside from the current share price of $0.0040. RMX is a mineral exploration company focused on lithium, REEs, and gold projects in the US and Australia. RMX has two claystone-hosted lithium projects in Nevada, US – Mustang and Lithic. Nevada has become a hub for claystone-hosted lithium deposits, and RMX’s maiden drilling at Mustang has shown the project’s potential for building maiden lithium resources through further drilling, which is currently being planned by the company.
The two flagship lithium projects offer compelling potential
RMX's two flagship lithium projects, Mustang and Lithic, present an enticing opportunity due to their substantial potential for claystone- hosted lithium deposits. Covering an expansive 1,906 hectares (ha), Mustang stands out as a vast project with the potential for shallow lithium mineralisation. Meanwhile, the relatively underexplored Lithic project has shown promising results in surface sample analyses.
Lithium demand to soar globally as EVs take the lead
Global demand for lithium is poised to surge as electric vehicles gradually replace those powered by internal combustion engines. Benchmark Mineral Intelligence forecasts a staggering fourfold increase in demand from 2022 levels to 2030. This is creating a lithium supply deficit that is expected to last for the next several years as greenfield lithium projects have very long development timelines.
Valuation range of A$0.0055–0.0075 per share
Using a resource-based comparable valuation methodology and our own conservative estimation of mineral resources at Mustang based on the maiden drilling results at the project, we have come to a mid-point valuation target of A$0.0065 per share for RMX, indicating a significant valuation upside potential to the current share price. Our valuation solely considers the Mustang Lithium Project and does not take into account potential value-unlocking from the Lithic Lithium Project and other projects in the portfolio, allowing for ample room for further upside potential. Key risks include commodity price risk, execution delays, funding risk and geological risk.