St George Mining Ltd (ASX: SGQ) shares have climbed another 1.9% on Thursday. At the time of writing, the shares are changing hands for 11 cents each.
This year has been an incredible success story for the miner, which is reaping the benefits from an explosion of interest in rare earths stocks. The shares have soared 167.5% higher over the past 9 weeks alone.
Two weeks ago, the shares spiked at a five-year high of 17 cents each. This was after institutional investors committed to raise $72.5 million via a placement at 10 cents per new share.
For the year, the shares are a whopping 435% higher. And analysts at Macquarie Group Ltd (ASX: MQG) think there is plenty more upside to come.
The ASX mining stock is ready to soar
The broker revealed it has an outperform rating on St George Mining shares and a 20 cent target price. At the time of writing, that represents a potential 81.8% upside for investors over the next 12 months.
"Valuation: We derive our A$0.20ps target price by using 100% of 1.0x NPV. We attribute a 9.4% WACC (real) which is in line with our methodology for other rare earths developers in the region under our coverage," the broker said.
"Araxá project could be the next key Nb producer and generate strong returns with earnings from rare earths a bonus. We see material upside through exploration success, offtake funding, and accelerated development."
Multiple upside drivers for St George Mining shares
Macquarie said it sees the miner as an attractive explorer offering exposure to two critical minerals: niobium (Nb) and rare earths (REE). It added that the company also has appealing investment fundamentals.
"Araxá could be the next Nb producer given it is located next to the world's largest Nb producer, CBMM. Its speed to market is enabled by the access to infrastructure, operational know-how, and a skilled workforce in a stable regulatory regime," it told investors.
"The current 10km drilling program presents upside to Araxá's 41mt niobium resource with the M&I resource averaging 0.99% Nb₂O₅ and 4.13% TREO. Mosaic's nearby phosphate plant divestment could accelerate Araxá's development timeline. EPC contractor with potential funding support could uplift SGQ's operating leverage and return (+400% upside in a blue sky scenario)."
Meanwhile, when it comes to the miners appealing investment fundamentals, Macquarie said, "SGQ screens attractive for value given its ~0.65x Price/NAV. Araxá, ~30% IRR and EV/Resource (US$0.4/kg Nb equivalent and US$1.1/kg NdPr). Given Araxá enjoys a comparable Nb and NdPr grades to peers, potential value may be unlocked as the earlystage Araxá project advances through resource growth, metallurgical studies, and pilot plant operations."
