Analyst bullish on Big River’s Borborema Gold project

Pitt Street Research, a Sydney-based research house, has broken ASX-listed Big River Gold down into the sum of its parts and says it has a set a “base case” share price target of 9.4c a share for the Perth based company that is currently trading at 2.3c a share. Pitt Street’s “optimistic” case for Big River would see it achieve a price target as high as 15c a share.  

It has undertaken an analysis of the company’s predicted forward earnings based on Big River getting its Borborema gold project in North-Eastern Brazil into operation and it has used the “discounted cash flow” method of calculating its price targets.

Pitt Street said it has taken the “cautious”  approach of assigning no value to Borborema’s exploration upside, stage two or three mining scenarios or additional resources, reserves and by-product credits. 

The research house found that at the time of writing its report, Big River’s enterprise value versus its inground resources was around USD$5.50 an ounce. 

It said this figure represented a 90% discount relative to a peer group of ASX-listed gold companies that are exploring and developing projects that have over a million resource ounces. Pitt Street said it expected the gap to narrow as Big River progressively develops Borborema. 

Big River was trading at 1.8c a share at the time of the report and hit 2.4c yesterday. 

Pitt Street calculated a post equity base case net asset value for Big River of A$295.1m using a relatively conservative 9.6% weighted average cost of capital. 

Pitt Street ran another valuation cross-check against ASX-listed gold developers at a comparable DFS or development phase to Big River. It found that the average valuation multiple or Enterprise value per resource ounce was A$43 an ounce. At this price, Pitt Street said Big River would have an enterprise value of A$104m today. 

Big River’s market cap was sitting at just over A$30m this week. 

Notably, Big River is now debt-free and backed by its Chairman and renowned mining investor, Steven Copulos, who holds 38.6% of its equity. 

The company recently tabled its maiden DFS that demonstrated Borborema to be a highly profitable, decade-long gold mining operation that could pay for itself within just two and a half years. 

It's Borborema operation could churn out at least 729,000 gold ounces over an initial, phase one 10.2-year mine life. 

The company used a conservative USD$1,400 gold price to produce its DFS and tabled an impressive all in sustaining cost of US$759/oz. Further DFS modelling shows the project has a pre-tax net present value of around AUD$320m. 

With gold prices looking well settled now at well over A$2000 per ounce, lower grade gold projects like Big River’s are looking increasingly lucrative. 

It would seem that the market has taken note too with the company’s stock rising to a high of 2.9c recently, representing a spike of around 70% just in the last week. 


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