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Broker share price target suggests Matador offers 200% upside


Published 18-MAR-2020 10:18 A.M.


2 minute read

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Hartleys’ resources analyst Paul Howard has released an upbeat report on Matador Mining Ltd (ASX:MZZ), valuing its assets at 43 cents per share and attributing a 12 month price target of 38 cents per share to the stock.

This compares with Tuesday’s closing price of 12.5 cents - it should be noted though, that the Matador story may be starting to resonate as its shares surged 20% yesterday.

It was just last month that the company significantly increased the mineral resource at its Cape Ray Gold Project in Newfoundland, Canada.

The 18% increase in contained gold metal followed a 12,600 metre drilling program conducted in 2019.

Matador’s tenure covers 80 kilometres of continuous strike along the highly prospective Cape Ray Shear.

Within the package is a 14 kilometre zone of drilled strike which hosts a JORC resource of 16.6 million tonnes at 2.2 g/t for 1.2 million ounces gold.

Upcoming scoping study should highlight value

This is an under explored tenure, with only a small portion of the 80 kilometre strike previously drilled.

With a number of key operational and environmental studies targeted for completion in 2020, the next 12 months is shaping up as a very full year for Matador.

We have already touched on the issue of environmental assessments, but from an operational viewpoint, 2020 is a watershed year for the group.

As indicated below, the scoping study is due for completion in the March quarter and the prefeasibility study should be prepared by the September quarter, with the latter being an important indicator of the economic viability of the project.

MZZ task

Hartleys crunches the numbers

In assessing the project, Howard said, ‘’Matador has a conceptual exploration target of 30-36Mt grading 1.4 to 2.4 g/t Au for 1.3Moz to 2.8Moz across the 80km of ground it holds along the Cape Ray Shear Zone.

‘’Of this, 5km contains its 1.2Moz resource with extensions likely at depth and along strike.

‘’On EV/M&I resource (enterprise value to measured and indicated resource), MZZ is a strong buy but is still to release a formal study and hence presents some risk, as does current market conditions (i.e. Coronavirus impact).

‘’However, at 2.2g/t gold, Cape Ray is the highest grade, sole open pit resource of the 45 ASX-listed companies we have reviewed.

‘’We therefore initiate coverage with a Speculative Buy recommendation.’’

The following graph highlights Matador’s heavily discounted valuation compared with its peers based on enterprise value to resource ounce metrics.

ev resource

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