Metal Tiger (LON:MTR) is the topic of conversation when First Equity’s Analyst Jason Robertson caught up with DirectorsTalk for an exclusive interview.
Q1: Your target price Metal Tiger is 2.5p in your recent research note and that’s against a current share price of 1.4p. Can you explain to us how you arrived at this target price, which is 78% above the current price?
A1: Most of the valuation is attributed at the moment to the shares which the company have got in Sandfire which is that they’ve been issued the shares at the end of this month, they’re just going through the process of getting all that approved at the moment. As I said, they’ve acquired those from Sandfire’s acquisition of the MOD property in Botswana so that’s quite a significant stake for them.
That will give them a very liquid asset because Sandfire has a market cap of about £500 million so that’s a sort of mid-cap Australian company. So, it gives the company a number of different options from a corporate level because, for example, they can do a share buyback of shares in MTR or they could borrow against that asset so they can use that cash to invest in other MTR projects. They could also potentially maybe sell some of their shares in Sandfire Resources and use that to accelerate other projects so there’s a number of different corporate options which they’ve got and I’ve outlined that in the research note which I’ve done.
Essentially, the shares which they’re getting in Sandfire Resources is going to take us up to about half of my valuation and I also attributed some value to their Thailand assets so about £7 million. That’s based on in the ground value for the indicated resource at the moment, that’s just the indicated resource, it doesn’t attribute any value to the other resources which they’ve got there in the inferred category. It looks like they are doing quite well resolving some of the problems they’ve had in Thailand over the last recent years so that’s all been fixed.
There’s a valuation of the Kalahari Metals Limited project which they’ve got so just over 50% is attributed a £4 million value to that, that’s a private company unlike their assets in Thailand.
On the balance sheet at the moment, we estimate about £2 million in cash along with a small value attributed to their warrant portfolio based upon the Black-Sholes valuation, I think it’s about £50,000 there so that’s just a small valuation.
So, it all adds up, as I said, it’s the Sandfire acquisition of MOD which gives them that very liquid assets going ahead which takes up most of the valuation in my 2.5p price target.
Q2: What are the catalysts and news flow, in your opinion, that could move the shares upwards towards your target price over the next few months?
A2: There’ll be a bit of news, I would’ve thought, from Sandfire Resources, the Australian listed company, but in terms of where they can grow the assets themselves, there was some recent drilling work done on the Kalahari Metals project in Botswana.
We’re waiting for some drilling results from that, they said they’d drilled about 2,00 metres recently so we’ll just wait and hear what the results are there. That’s an asset that can be rapidly progressed and moved up the exploration curve over the coming 12 months, given that it is very near the T3 and the MOD/Sandfire assets that have recently been acquired, there’s enormous potential there.
In the report, I’ve got a diagram which shows where those exploration properties for Kalahari Metals are in comparison with the T3 asset that Sandfire have now got so that gives you an idea of how prospective that particular land could be. It’s only worth £4 million at the moment, which I valued it at, but that could be worth a substantial value that could be increased in the coming 12 months. That’s one particular quite exciting asset that can generate a lot of news flow in the short term.
Also, they’ve got a stake in Cobra which is a private company at the moment that we believe is going to be listed very shortly, that could be listed by the end of this year. That’s going to generate a valuation uplift, it’s just valued at the moment at £400,000 in my valuation but they’ve got a commitment to invest further funds in that. As I said, we believe that could be listed by the end of this year, it certainly will be within the next 6 months at the latest so that’s going to generate news flow and uplift for the shares in Metal Tiger.
In addition, given where the company are in terms of its assets, although their assets are in various different commodities, quite a lot of the valuation is attributed to copper prospective assets and projects.
Given the copper prices are at a 2-year low at the moment, I think there’s a strong chance we could see the copper price mean reversing at some point so if the copper price moves up then we could see a rerate of most of MTR assets so that would help the share price going ahead.
