Shares in Lunnon Metals Ltd (ASX: LM8) have more than doubled in value over the past year, but at least one broker says the ASX gold stock could double again.
Lunnon is currently transitioning from developer to producer, having carried out its first ore blast just last week with delivery of ore to the run of mine (ROM) pad at its Lady Herial project now ongoing.
The company only discovered the Lady Herial deposit two years ago, marking a swift transition from discovery to imminent production.
Image source: Getty Images
More gold in the ground
Lunnon also upgraded the mineral resource estimate at the project last week, with a 49% increase in gold ounces to 54,200.
Managing director Edmund Ainscough said regarding the upgrade last week:
Lady Herial reporting more than 50,000 ounces in mineral resource is an outcome we could not have imagined back in early 2024 when we refocused our activities on gold. Having mining up and running and first ore already on the ROM, whilst the gold price tops $7,000 per ounce, is equally pleasing. The focus now switches to evaluating how the balance of the deposit not in the current mine plan can be profitably extracted, be that by a second stage of open pit mining, underground development, or possibly both. In parallel, as the ore purchase agreement model starts to deliver cash flow and with the heavy lifting of drilling at Lady Herial completed by the exploration team, they can pin their ears back and crank up the rigs to tackle our portfolio of high-ranking targets on the rest of our leases at St Ives.
The company said that free cash flow from Lady Herial was expected "in the near future".
Lunnon metals added:
This, coupled with the company's existing cash balance and recently secured small working capital facility, sees the company well placed to continue its aggressive program to evaluate all gold opportunities at Foster-Baker whilst enabling the company to consider new opportunities within the district.
ASX gold stock looking cheap
The team at Shaw and Partners has looked at the ASX gold stock's update and said it bodes well for the company.
Shaw and Partners said the company is poised to generate "significant cash flow" which it can use to fund its "prolific Kambalda targets''.
Shaw and Partners added:
The current Stage 1 open pit is just the beginning, as the company is simultaneously exploring the potential for underground mining to follow the high-grade shoots as they extend deeper into the fresh rock. Lady Herial remains open down plunge, and technical studies are evaluating a second stage of mining through open-pit cut-backs or underground development to extract the remaining 30,100 ounces.
Shaw and Partners has a price target of 92 cents on Lunnon Metals shares, compared with 47 cents currently.
Lunnon Metals was valued at $102.7 million at the close of trade on Friday.
