Gateway Mining Limited [ASX:GML]
Metals & Mining
High-potential Western Australian gold play
We initiate coverage on Gateway Mining with a current fair valuation of A$0.036 – representing a 49% upside from the current share price of $0.024. The company is a Western Australia-based explorer focused on expanding its defined gold resources and making new copper-nickel discoveries at the Montague Project in the East Murchison Mineral Field. The project already boasts a JORC-compliant Mineral Resource Estimate (MRE) of 526,000 ounces at a grade of 1.6 g/t gold. Recently, the company raised A$1.2 million, which, combined with its existing cash, should be sufficient to complete the next phase of exploration aimed at potentially discovering new gold and copper-nickel deposits at Montague. Given the favourable geology and proven mineralisation of the project area, we believe GML offers an attractive speculative opportunity at current share prices.
Highly promising gold field with ready infrastructure
The Montague Project is easily accessible from Perth via major sealed and wellformed gravel roads, with the town of Sandstone providing limited logistics support. The Project is centrally located within a ~120km radius of six operational gold treatment facilities, providing Gateway with valuable toll-treating optionality and ready infrastructure. The Montague Project has the hallmarks of a major gold mineralised system, and Gateway has demonstrated step-change growth in Mineral Resources at the Project over the past few years, making the project highly promising for new gold discoveries, which is the current focus of Gateway’s strategy, along with expanding on the recently recognised potential for intrusive hosted copper-nickel sulphide mineralisation.
Gold’s bullish thesis is supported by many factors
As a safe haven asset, gold delivers strong returns during economic uncertainty. Gold prices rise with inflation, appreciating in real value over time, and fall with high real interest rates. Currently, high real interest rates are expected to decrease, supporting gold’s prospects. High global economic uncertainty further supports gold's value. Additionally, the discovery of new deposits is increasingly rare, enhancing the prospects for both gold and Gateway.
Valuation range of A$0.033–0.039 per share
We value GML at A$0.033 per share in a base-case scenario and A$0.039 per share in a bull-case scenario using a resource-based valuation approach based on comparable peers’ multiples. Currently, Gateway is trading at an EV/resources multiple of A$20/oz compared to the peer group average multiple of A$66/oz. However, we think that this discount is too big given the Montague Project’s strategic benefits, such as shallow resources and proximity to multiple operating gold processing facilities. As such, we believe GML is currently undervalued. The key risks to our investment thesis include commodity price risk and funding risk.