Analysts believe Firefinch Ltd (ASX: FFX) is significantly undervalued at its current market capitalisation. At the time of writing, the Firefinch share price is 90 cents, a 1.13% gain on the day. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.07%.
Firefinch is a gold explorer and a lithium developer working on the Morila gold mine and Goulamina lithium project in Mali, West Africa.
Let's take a look at why one broker sees huge upside for the Firefinch share price.
Firetech undervalued
Analysts at J Capital Research believe the Firefinch lithium asset Goulamina is "underappreciated" and gold mine Morila "significantly undervalued".
Commenting on their view of the company, analysts said:
We believe Firefinch should be trading at a valuation between $1.68 and $2.28 billion. With the current market cap of $990 million, the upside is between 70% and 130%.
We believe Firefinch's under-appreciated lithium asset, Goulamina, alongside its operational gold mine, Morila, are significantly undervalued based on the current market capitalisation. We view both the gold and the lithium project as de-risked as they are operational and fully funded respectively.
J Capital believes Firefinch's Goulamina lithium project should be worth at least $1.4 billion. Analysts said:
When we compare the Goulamina lithium project to the market value of eight other lithium companies with hard-rock lithium projects, we believe Goulamina is worth at least double what the market currently values it at.
Further, analysts valued Firefinch's gold venture Morila between $275 and $430 million. After engaging a team of geologists, J P Capital predicted the mine could produce between 100,000 and 156,000 ounces each year. Analysts said:
We have totally discounted any potential upside from an underground mine. This is more conservative than street analysts, who believe Morila is worth double our low-end target.
Firefinch share price snapshot
The Firefinch share price has exploded 316% in the past 12 months, while it has climbed 3.5% this year to date.
Over the past month, Firefinch shares have jumped 35% and are 11% higher over the past week.
Since the J Capital report, the company's market cap has increased to about $1.04 billion.
