Transformational upside bets
In this note, we present a list of resource stocks which we own and believe offer transformational upsides on realistic assumptions, and which have limited commodity price related downside risk.
The list is shown in the chart below, ranked by market cap. We then discuss each company.
Fair value upsides on respective bull cases of select natural resource stocks
Source: Asymmetric Research estimates. DCF based (WACCs between 9-11%). Bull cases described below
Greatland Gold (USD2.4bn market cap)
UK-listed gold miner and developer in Australia, which will also list on the ASX next month. Greatland Gold (GGP) operates the low-cost Telfer gold mine it recently bought from Newmont. As a reminder, Newmont had inherited Telfer in its acquisition of Newcrest. In addition, core to the GGP story is its development nearby of what looks to be a world-class gold project, Havieron (8Moz geo), which would utilise the existing infrastructure at Telfer; notably its significant and hungry 20Mtpa processing plant. Once operational in 2028, Havieron will have the potential to be a 30y+ mine, in our view. We expect GGP to become a consolidator in the Paterson region in Australia.
The company is in net cash and should generate >USD200m of FCF pa from Telfer this year-on and over the next three years at least we estimate at a conservative gold price of say USD 2700/oz. In other words, at that gold price, GGP can more than self-fund Havieron to production. At spot gold instead, GGP would also be left with > USD1bn of excess cash in 2028 (>40% of current market cap). Just for reference, given this is such a low-cost producer and developer, we think the stock presents upside even in a very low gold price scenario of USD 2300/oz gold in perpetuity. In any case, the company has put options on c40% of volumes over the next couple of years at a gold price of USD 2600/oz – protecting cashflows from any gold price downside yet keeping the upside unhedged. All in all, at this share price, you are getting Havieron for a cheap implied value of cUSD 100-150/oz.
The bull case upside presented in the chart assumes USD 3500/oz gold, and 1.3x NAV multiples on the two key assets. Not unrealistic since gold miners traded at to 1.7-2x NAV historically.
Key catalysts:
1) Quarterly results confirming the solid operational performance tendencies delivered at Q1 at Telfer and delivery of guidance. 2) Upgrading the category of the inferred resources at Telfer (c1.7Moz). 3) More resource discovery / consolidation. 4) ASX listing.
Dakota Gold (USD350m market cap)
US-listed gold developer and explorer led by mining legend Robert Quartermain who came out of retirement to pursue this endeavour. He owns 7% of the firm. The company is active in South Dakota where it unveiled in February a 6Moz Au heap leachable resource at Richmond Hill. The grade and mineralogy are similar those of the neighbouring operating Wharf mine, which can be used to infer the economics to be released in the upcoming Initial Assessment with Cashflow Analysis (IACA is equivalent to PEA) of the project due mid-year which we see as a key catalyst for the shares. Additionally, 2kms away, Dakota Gold has an extensive land package contiguous to the Homestake gold mine which it is exploring (40Moz past production). Even if Richmond Hill is 4y away from production, there is significant share price upside today from this project only, while you get for free: 1) the Homestake exploration prospect and 2) a mining legend running the company.
The implied gold price in the shares is USD 2600/oz, offering a cushion if gold were to drop. Following a capital increase in March, the company should be well funded to 2027.
The bull case upside we present assumes USD 3500/oz gold, and 1.2x NAV for Dakota.
Key catalysts:
1) Publication of Richmond Hill’s IACA by the summer, detailing a first set of financials for the project. 2) Drilling results across. 3) Feasibility Study in 2026 and permitting in 2027 (worth noting the project is on private land reducing permitting risk and delays).
Sovereign Metals (USD250m market cap)
UK and Australia listed Sovereign Metals is focussed on developing a unique rutile and graphite project in Malawi. This is a globally significant deposit by any measure, and a disruptor. It hosts both the world’s largest rutile resource - the superior form of titanium dioxide - as well as the world’s second largest flake graphite resource. In our view, it could sustain a 70y mine life. The FS is expected in Q4. PFS and optimised PFS showed the project would be in the lowest decile on the cost curve, with graphite costs competitive with China. The project could satisfy c3% of the world’s demand for titanium and double digit % of the world’s graphite demand. Rio Tinto is a 18.5% shareholder in Sovereign, taking a stake in 2023. The mining giant is a leading player in titanium dioxide.
We estimate the Sovereign stock currently discounts bear cases in its respective commodities. Indeed, it offers more than a double in terms of upside at say commodity prices c20% below where they are now: so on trough prices. The project has been meaningfully derisked with successful large scale pilot trial. This is an M&A target by Rio Tinto in our view, with a takeover possible in the next 12 months.
Our bull case assumes incentive pricing and 1x NAV.
Key risk here remains jurisdictional. There are upcoming presidential elections in Malawi in September where the current president is running against the one before him, but both are pro mining. The firm did a capital increase in April so it should be funded well into 2026.
Key catalysts:
1) Publication of an updated MRE in the coming months and FS in Q4. 2) Rio Tinto then has 6 months following the FS release to decide whether it will be appointed as the operator of the project and be granted rights to 40% of the yearly production of the project. If it does, it would most likely announce a takeover of Sovereign, in our view. 3) Developments on permitting, 4) Rutile and / or graphite rerunning to favour.
Meteoric Resources (cUSD150m market cap)
Australia listed rare-earths developer. Its flagship project has world-class Tier 1 potential in Brazil, within the most sought-after rare-earths deposit type, and with grades >3x that of ionic clays in China. The 1.5Bt resource base entails a c125y life on our estimates, something the market misses. And the resource could grow a lot more, the company argues. Indeed, the chairman recently suggested it could grow by >5x over time. While adding resources to an already long-life asset does little to the NPV calculation today, it warrants a higher NAV multiple to factor in the NPV-reset effect. The scoping study published in summer 2024 suggested the project being in the bottom decile on the cost curve.
On our calculations, the stock is pricing here Neodymium at USD 57k/t, well below spot, and which is incidentally the price needed by Chinese incumbent producers to make their cost of capital. In other words, the stock is discounting floor Neodymium prices into perpetuity.
Our bull case assumes incentive pricing and 1x NAV.
To de-risk the project, the company still needs to build a pilot plant and will need the money to do so. In the fall of 2024, the project was included in the Brazil Climate and Ecological Transformation Investment Platform. Eyes on whether they can get access to preferential funding in Brazil for this. Risks to the equity story lie primarily on geopolitics in Brazil and whether China has an intention and is ultimately able to keep NDPR prices low for longer. It is funded in our opinion until around Q3 this year.
Key catalysts:
1) PFS is expected by July 2025, which is expected to show improved economics vs the scoping study on a bigger resource and incorporation of high-grade material. Work will then immediately start on the DFS. 2) Environmental permit early Q2 2026. 3) Construction start mid-2026, with around one year construction time. 4) Neodymium returning in favour.
Centaurus Metals (cUSD120m market cap)
Australia listed nickel sulphide developer in Brazil. This is a shovel ready project with Tier 1 metrics (FS released in July 2024, environmental approvals in hand). The project ranks bottom quartile on costs globally and has a distinct advantage of being high-grade open pittable (the resource being less than 100m from surface). The low capex of cUSD400m means the capital intensity is also in the bottom quartile. We think it could have a mine life of close to 50y.
We estimate the share price is discounting USD 15k/t nickel (spot at USD 15.6k). This is bear-market pricing. Average producing nickel mines are not making any money here we believe, and the incentive price is meaningfully higher. Looking at historical trading ranges for nickel, the nickel price implicit in Centaurus is very near the bottom of the commodity’s price range (nominal range USD 14.5-20k/t).
Our bull case assumes incentive pricing and 1x NAV.
The key risk is geopolitics in Brazil but also obtaining funding to finally begin building the project.
Key catalysts:
1) Mining lease in the coming months. 2) FID this year. 3) Nickel returning in favour.
Cerro de Pasco Resources (cUSD120m market cap)
CDPR is Canadian listed. The company is run by the founder of what has become Aya Gold. The company is backed by Eric Sprott with a 17% stake, and management holds 14%. CDPR’s project is in Peru and doesn’t involve mining but the mineral rights to the reprocessing of tailings and stockpiles to extract silver, zinc, lead, gold, copper while addressing environmental remediation. Located c170km from the capital Lima, in the Andes, Cerro de Pasco had been the one of the most significant polymetallic mines globally since the 17th century and remained a major producer of these minerals into the 20th century. Over the period, 300Mt was extracted from the mine. Material stopped being sent into CDPR’s tailings storage facility in the 1990s, and the company now evaluates it has a significant resource of 430Moz Ageq in the tailings + stockpiles (silver making up c30%), based on its studies of monthly production reports since the early 1900s. This large remaining resource is explained by a combination of past inefficient extraction processes and what would have been a deliberate preference for maximizing extraction over recovery (60% historically) given how large the mine was at the time. Recent 40-hole drilling has so far confirmed the company’s hypothesis on mineral grade and size, but importantly, also surprisingly unveiled the presence in notable quantities of high-value critical minerals gallium (which has been weaponized by China) and indium. In terms of economics, it should be noted that since this is a reprocessing project no mining costs would be involved and so opex would be much lower (c40%).
Two development options here, both presenting NPV upsides but in the second case, the upside is dramatic. The decision will be based chiefly on ongoing metallurgical tests.
Option 1: This was their selected route prior to discovering the gallium. The idea is to leverage existing infrastructure thanks to two adjacent processing facilities with functional flotation circuits – a simple process. It is likely CDPR would have to buy those facilities, for a limited amount of investment since these plants are old and inefficient. The company argues it carried out tests in the past which pointed to the ability to recover c40% of the metals using these facilities. This option has for advantage of being faster to get to cash generation. Recovering gallium with this option is not excluded but would require additional investments. The resource would sustain a 20y mine life.
Option 2: Alternatively, the company could construct a large-scale flotation plant tailored to the tailings and with double the current capacity, so at 7.2Mtpa. The investments required would be clearly larger (probably in the region of USD300m in our view) but would offer a step change in the economics. According to the company, this would lift recovery to 70% and allow for the extraction of gallium and indium.
Option 2 would be a game changer for the equity story and upside, as shown on the chart. The bull case assumes a silver price of USD 40/oz and gold at USD 3500/oz (all other commodities at spot) and 1.2x NAV. But even in a conservative commodity case of USD 32/oz silver and USD 2800/oz gold, at 1x NAV, the upsides would still be substantial (300-800%). Gallium and indium account for c20% of value.
Key risks include proving up the metallurgy and recovery. The company seems highly confident on the ease to achieve 40% recovery from prior tests and given the simple process. Demonstrating 70% recovery is critical for option 2. The company says it has sufficient funds to take them passed the PFS.
Key catalysts: 1) Special decree in 1-2 months that would widen the mineral rights tenement to cover the entire 430Moz estimated resource area (currently only half of that is within the rights surface area) – the company appears highly confident this will be obtained. 2) Outcome of metallurgical work. 3) This will be followed by the submission of EIA. 4) PFS is then expected in Q1 2026. 5) Could be in production within 3y. Local support for the project appears strong, since this has been a mining area for centuries, and it also offers the environmental solution to acid rain that comes from leaving the tailings as is.
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These are our views only and not investment advice. We own shares in each of the above companies. We have not been paid by the companies for this research nor have they seen it prior to publication.