Disclosure: New Age Metals Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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We maintain a positive outlook on Electric Vehicle/EV-focused juniors, as battery/EV manufacturers, and miners, are actively seeking long-term stable sources of supply. The sector has witnessed several M&A deals in the past year.
Relative to other PGM juniors, NAM is trading at a 71% discount ($2/oz PGM vs the sector average of $7/oz). Relative to other lithium juniors, NAM is trading at a 69% discount ($105/hectare vs the sector average of $333/hectare). Our immediate focus is on the initial results of the lithium drill program.
Lithium Portfolio
Portfolio Summary
Source: FRC/Company
14 early-stage lithium projects
NAM is the largest mineral claim holder (21,611 hectares across 11 properties) in the Winnipeg River field in southern Manitoba; MRL can earn up to 75% interest in these projects
Three properties in northern Manitoba (52,837 ha); two are available for JV
NAM and MRL have commenced a $7M exploration program (fully funded by MRL), including geophysical surveys, sampling, mapping, prospecting, and a 15,000 m drill program.
Southeast Manitoba Property Map
Source: Company
A recent exploration program identified several priority drill targets on the Lithium Two, Bird River, and Lithman East properties
Drilling underway
River Valley PGM Project (Ontario)
NAM is conducting leaching tests designed to potentially recover PGM, gold, and base metals, from low-grade, bulk-tonnage polymetallic deposits. Last year, NAM completed an updated PEA, which confirmed that the project can be advanced to production, through a smaller, higher-grade operation, with reduced CAPEX.
NAM is testing alternative technologies for potentially improving recoveries
The 2023 PEA returned an AT-NPV5% of $140M, and a low AT-IRR of 11%, using US$2,150/oz palladium vs the spot price of US$940/oz
2021 Mineral Resource Estimate
Source: Company
A large tonnage/low-grade PGM deposit
Palladium accounts for 65%-70% of contained ounces
We believe the PEA was conservative as it only used 43% of the project’s M&I resources
Resource Expansion Potential
Source: Company
Resources are spread across multiple deposits
We believe there is potential for resource expansion as multiple targets, located adjacent to existing resources, remain untested
If the upcoming programs are successful, we believe NAM will move towards a PFS in 2025
Management is aiming to potentially upgrade/expand the existing resource through infill and step-out drilling on at least six deposits, labelled in red in the image above.
Financials
Source: Company
FRC Valuation and Rating
Source: FRC/ S&P Capital IQ/ Various
NAM is trading at $2/oz PGM vs the comparables average of $7/oz (previously $8/oz)
Source: FRC/ S&P Capital IQ/ Various
NAM is trading at $105/hectare vs an average of $333/ha for early-stage lithium projects (previously $452/ha)
Using a sum-of-parts valuation model, we are arriving at a revised fair value estimate of $0.19/share (previously $0.21/share); valuation declined due to lower sector multiples
We are reiterating our BUY rating, and adjusting our fair value estimate from $0.21 to $0.19/share. NAM is well-funded, and as a result, we do not anticipate any near-term share dilution. As MRL is fully funding exploration, NAM can allocate all of its resources to the River Valley project, and its lithium projects in northern Manitoba. We are eagerly awaiting the upcoming results of the lithium drill program.
Risks
We believe the company is exposed to the following key risks (not exhaustive):
- Commodity prices
- Exploration and development
- No guarantee that NAM will be able to improve the economics of the River Valley project
- Project development and timelines are subject to JV partners' funding
- Access to capital and potential share dilution
