Pivotal Metals [ASX:PVT]
Metals & Mining
A High Potential Copper and Critical Metals Play
We initiate coverage on Pivotal Metals (ASX:PVT) with a 12-month target price of A$0.033, representing a 264% upside from the current share price of A$0.009. PVT is a developing copper and nickel exploration company with a resource base of >200kt copper plus large byproduct components in the mature mining jurisdiction of Quebec, Canada. The company owns 100% of its assets, with the flagship being the Horden Lake project, as well as the Belleterre-Angliers Greenstone Belt (BAGB) project. The regional geological setting further enhances its attractiveness as an investment opportunity.
Horden Lake project holds immense potential
The Horden Lake project is strategically located in Tier 1 active mining and exploration jurisdiction. The project’s JORC compliant resources includes a large pit constrained component, indicating significant potential for low-capex open-pit mining. The deposit is currently defined over a 2,100m strike length, and has been intersected at depths of up to 540m. The deposit is open in multiple directions with recent assay results from step-out drilling demonstrates the presence of high-grade resources both along strike and at depth. Beyond this, favourable geophysical targets indicate continuity well outside the resource area. Combined, these results support excellent potential to increase resources on the project. In addition, being well connected with a highway and ability to access low-cost hydroelectric power makes Horden Lake a valuable and attractive asset for development into a mine.
Global demand-supply gap of copper a boon for junior miners
With an aggressive transition across the globe towards digitisation and green energy sources, the global supply of copper metal (the best conductor of heat and electricity) is forecast to be unable to maintain the demand momentum. According to S&P Global, global supply will fall short of ~10 million tonnes (Mt) of copper by 2035, i.e. ~25% of the worldwide demand. To maintain their hold on the material supply, prominent players have been consolidating and aggressively buying copper projects globally. Consequently, we believe a geologically superior mine in a Tier 1 jurisdiction makes PVT an attractive M&A target.
Valuation range of A$0.031–0.035 per share implies significant upside
Using a SOTP-driven asset base comparable valuation methodology, we have valued PVT at A$0.031 per share in a base-case scenario and A$0.035 per share in a bull-case scenario. Our mid-point target price of A$0.033 represents a Price/NAV of 0.28x, indicating a significant valuation upside potential to the current share price. We anticipate PVT will undergo re-rating with the announcement of an upgraded mineral resource estimate for the Horden Lake project. Significant value unlocking is also possible from the BAGB project. Any M&A activity by the management will be value-accretive. Key risks to our investment thesis include project execution delays, geological risks, funding risks and commodity price risks.