Strickland Metals [ASX:STK]
Metals & Mining
A low-risk and high-potential gold miner
We initiate coverage on Strickland (ASX: STK) with a 12-month target price of A$0.282, representing a 257% upside from the current share price of A$0.079. Strickland is a developing gold and base metals exploration company with an inferred resource base of ~5.7Moz AuEq across the highly prospective and favourable mining jurisdictions of Serbia and Western Australia. The company owns 100% of its assets, the flagship being the Rogozna project (Serbia) and the Yandal project (WA). The regional geological settings enhance the attractiveness of STK as an investment opportunity.
Rogozna’s potential is enhanced by the emergence of new prospects
The Rogozna Project is strategically located in Serbia's highly prospective geological region, which is recognised as a Tier-1 active mining and exploration jurisdiction. The project contains several unexplored prospects, encompassing an area of ~184km². The JORC-compliant inferred resources are derived from just two of the four drilled deposits. >100,000m of diamond drilling and study of the region's geophysical data has provided STK with a pipeline of >20 deposit targets. The region's multiple mineralisation systems suggest significant resource upgrade potential. Recent highgrade deposit hits (best Au-deposit hit by a junior ASX-listed miner in ~two years) indicate a strong probability of doubling the resource base. Additionally, the region's well-developed infrastructure, the availability of a skilled workforce, and lower corporate tax rates (around 15%) further support investment in STK.
Balance sheet strength should drive aggressive exploration target
After selling the Millrose Gold project to Northern Star Resources, STK holds 1.5m fully paid shares of ASX-listed Northern Star Resources. Consequently, ~A$41m of liquid funds can be deployed immediately. On the back of these funds, the company management has set an aggressive programme to achieve up to 80,000m of combined drilling across its two projects by late 2025. With four diamond rigs already at the site in Rogozna, we believe that significantly high cash on books allows the management to achieve its exploration target without disruption. The strength of the balance sheet should reassure shareholders about the pace of project development.
Valuation range of A$0.258–0.306 per share implies a significant upside
Using a SOTP-driven asset base comparable valuation methodology, we have valued STK at A$0.258 per share in a base-case scenario and A$0.306 per share in a bull-case scenario. Our mid-point target price of A$0.282 represents a Price/NAV of 0.28x, indicating a significant valuation upside potential to the current share price. We anticipate Strickland will undergo re-rating with the announcement of an upgraded mineral resource estimate for the Rogozna project. Significant value unlocking is also possible amidst further drilling from the Yandal project. Any M&A activity by the management will be value-accretive. The downside risk to the stock is highly limited. Key risks to our investment thesis include project execution delays, geological risks, and commodity cycle risks.