Shares in Gina-Rinehart-backed G50 Corp Ltd (ASX: G50) are trading about 50% below their highs over the past year, but the team at Morgans believes the shares are ripe for a rerating.
The broker has issued a research note to its clients with a speculative buy recommendation on the shares and a very bullish share price target, which I'll get to shortly.
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What's so special about this ASX explorer?
One of the reasons for their confidence in the exploration company is the backing of iron ore magnate Ms Rinehart, whose company Hancock Prospecting invested $7.95 million into G50 as part of a recent share placement, emerging with a 5.4% stake.
The $26.25 million which was raised at 59.5 cents per share – the shares are currently changing hands for 49.5 cents – is to be used to accelerate exploration at the company's Golconda Project in Arizona and its White Caps Project in Nevada.
The work will include further drilling, geological studies, gallium test work, and early permitting activities at Golconda.
Chair Ian Davies said regarding the placement:
We're pleased to welcome Hancock Prospecting to the register as a cornerstone investor. Hancock is one of Australia's most respected resources investors, and their decision to back a company whose assets sit entirely in the United States, across both precious metals and strategic minerals, is a meaningful endorsement of the work Mark and the team have done at Golconda and White Caps. The board's focus is now on deploying this capital with discipline against the program we've set out and on the drilling and metallurgical test work that will ultimately determine the value of both projects.
Shares looking cheap, broker says
Morgans said recent drilling results had extended the strike length at Golconda to 1.8km, and there had also been a high-grade gold discovery at White Caps.
They added that metallurgical test work had confirmed the potential to generate a gallium-rich precious metals concentrate at Golconda through conventional processing methods.
The broker added:
We view Hancock's investment as a strong endorsement of the G50 story, in particular its strategy to unlock and monetise its Golconda gallium. Hancock has taken a selective approach in recent years, deploying capital offshore and across the broader critical minerals thematic, taking substantial positions in names such as St George Mining, Vulcan Energy and MP Materials. We think Hancock's due diligence of the project, capacity to support further funding and diversification into North America are all very supportive of the factors which differentiate G50 from other precious metals exposures.
Morgans said G50 was well-funded for 18 to 24 months. The broker has a price target on G50 shares of $1.94.
The company is valued at $118.4 million.
