Gold Co. One of 'Biggest Sleepers in Business,' Newsletter Writer Says

A drop in share price last week after Lion One Metals Ltd. (LIO:TSX.V; LOMLF:OTCQX; LLO:ASX) announced a private placement represents a major opportunity for investors, one newsletter writer said.

The company's flagship Tuvatu project in Fiji is just miles away from the country's highest-producing gold mine, Vatukoula, and could promise comparable riches, he said.

"Lion One is my biggest position. I am going to go into the placement because absolutely, if you’re buying Lion One at these prices, you’re stealing," Bob Moriarty of 321gold.com said in a recent interview. "But what everybody’s missing, ... there’s an identical mine 40 miles to the northeast" that has produced more than 7 million ounces gold (Moz Au) over nearly nine decades.

Vatukoula, which means "gold rock" in Fijian, shares the same geological setting as Tuvatu, an alkaline-epithermal gold deposit. Vatukoula has a resource of 3.8 million ounces Moz Au.

Lion One is already extracting material from a new lode discovered at Tuvatu and is expected to start moving material from a second new lode soon.

The company last week announced it had entered into a CA$27 million "bought deal" offering of units with a syndicate of underwriters.

Net proceeds from the sale of 29.35 million units of the company at CA$0.92 per unit will be used for development and exploration at Tuvatu, working capital, and general corporate purposes, the company said.

Moriarty said company Chief Executive Officer Walter Berukoff knew he needed to finish construction of the mine and processing plant.

"He has to build 100% of the mine so it can be in production in Q4, he cannot build 98% of the mine," Moriarty wrote on 321gold.com on May 5. "If you liked Lion One at (CA)$1.05 two days ago, you should love it at (CA)$.85."

The stock was CA$0.87 on Tuesday morning. It fell from CA$1.05 on May 2 to CA$0.87 on May 3 after the news of the private placement.

Gold last week hit near-record highs and could be heading into a new bull market, some analysts think.

"Lion One is one of the biggest sleepers in the business," Moriarty wrote. "One of these days, investors will see the opportunity that exists in resource stocks."

The Catalyst: Abundant Free Gold

Workers have begun extracting material from one of the new lodes, URA1, and will begin extracting from the other, URW1, soon, the company has said. Workers have taken 475 tonnes of material from 14 cuts at URA1.

This mineralization represents the first modern extraction from the Tuvatu deposit, Lion One said.

High-grade gold from the mining will contribute to the stockpile the company is building for the processing facility, which is scheduled to start up in the fourth quarter of this year.

Tuvatu's narrow vein deposit excluded many bulk mining techniques. Airleg mining using compressed-air-powered cylinders lets workers get at high-grade veins with widths as small as 1.8 meters with minimal dilution of the ore by waste.

The mineralization consists of "abundant free gold," the company wrote, often associated with light to dark gray chalcedonic quartz and roscoelite, locally accompanied by minor amounts of pyrite, sphalerite, galena, and lesser chalcopyrite. 

Results from grade-control drilling close to a newly discovered mineralized zone at the project included 88.07 grams per tonne gold (g/t Au) over 5.7 meters, including 1,396 g/t Au over 0.3 meters; 27.52 g/t Au over 5.55 meters; 20.93 g/t Au over 7.2 meters; 16.12 g/t Au over 9.3 meters; 16.48 g/t Au over 9.6 meters; 14.6 g/t Au over 6.6 meters; 14.97 g/t Au over 5.4 meters; and 10.85 g/t Au over 6.9 meters.

Visible gold was also seen in several drill holes, the company said.

"Tuvatu gold deposit is emerging into a very large high-grade alkaline gold deposit," wrote newsletter author Jay Taylor of J Taylor's Gold, Energy & Tech Stocks. "The company is fully permitted for production as it continues to add incredibly high-grade ounces of gold at depth. Continuous high-grade gold in the '500 Zone' is deeper and will add a very significant number of ounces of gold to Lion One's Tuvatu gold mine."

Drilling "appears to be confirming even higher grades than had been anticipated," Taylor continued. "The headline assay number on 4/25 was 88.07 g/t Au over 5.7 meters for a 502-gram meter reading!"

Another K92?

Tuvatu is on the island of Viti Levu in the archipelago nation. A September 2020 Preliminary Economic Assessment (PEA) outlined an indicated resource of 1,007,000 tonnes grading 8.48 g/t Au for 274,600 ounces Au and an inferred resource of 1,325,000 tonnes grading 9 g/t Au for 384,000 Koz Au. The study used a cut-off grade of 3 g/t Au.

ROTH Capital Partners analyst Mike Niehuser also compared Tuvatu to Vatukoula, calling Tuvatu "one of the highest-grade gold mines in the world."

ROTH has a Buy rating and a CA$2.50 per share target price on the stock, which would be nearly three times its current price.

Lion One plans to operate the new plant at Tuvatu at an initial production capacity of 300 tonnes per day for the first 18 months before increasing capacity to 500 tonnes per day in mid-2025. Initial mining will focus on the near-surface resource while advancing underground development.

The drilling campaign at Tuvatu this year will be focused on grade control of the near-term production blocks, identifying separate mineralized systems within the greater Navilawa caldera, and completing geophysical surveys to delineate further drill targets, the company said.

Asset manager Chen Lin, author of the What's Chen Buying? What's Chen Selling? newsletter, compared Tuvatu to another lucrative high-grade gold project, K92's Kainantu mine in Papua New Guinea, which was able to recover more than 5 million Au equivalent ounces (oz Au eq) of resource.

"If they can execute, LIO can be the next K92 as it has a very high grade," Chen wrote.

Ownership and Share Structure

About 14% of the company is held by insiders, about 6% by institutions, about 20% by other investors, and about 60% is retail.

The CEO, Berukoff, owns about 11.8% or 20.9 million shares, according to Reuters. Franklin Advisers Inc. owns 4.27% or 7.56 million shares.

Lion One's market cap is CA$157.44 million with 176.9 million shares outstanding, 155.66 million of the free-floating. It trades in a 52-week range of CA$1.66 and CA$0.59.

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1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.

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Disclosures for Mike Niehuser, ROTH Capital Partners, Dec. 16, 2022: 

Shares of Lion One Metals Limited may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.

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