Rupert Resources Ltd. (RUP:TSX; RUPRF:OTCQX) garnered additional research coverage as iA Capital Markets just initiated on it with a Speculative Buy rating and a CA$8 per share target price, reported analyst Ron Stewart in a January 23 research note.
The Canadian gold explorer-developer just released a preliminary economic assessment (PEA) for its Lapland gold project in northern Finland.
"The PEA demonstrates a best-in-class economic forecast of the project's development potential," Stewart wrote. "It boasts an industry-leading, low-cost profile."
60% Return Implied
Compared to the CA$8 per share target, Rupert is currently trading at about CA$5 per share, "at 0.6x net asset value," Stewart reported. "This is at the high end of the range of single asset developers, which reflects the high-quality nature of the Lapland project."
The gap between the current price and the target price reflects a potential return for investors of 60%.
High-Confidence Resource, Robust PEA
Stewart presented the highlights of this investment story.
Rupert's Lapland project, spanning about 700 square kilometers, boasts a large, high-grade resource and attractive preliminary economic assessment (PEA) results.
"We expect the company will look to fast-track the project to development and production by as early as mid-calendar 2027," the analyst commented.
Lapland encompasses the Pahtavaara deposit (a past-producing mine) and 20 kilometers to the east, the flagship Ikkari deposit and the Heinä Central deposit. The existing resource encompasses all three deposits.
Stewart pointed out that the project's current resource is large and high grade. The Indicated resource is 3,860,000 ounces (3.86 Moz) of gold, or 48,300,000 tons of 2.5 grams per ton (2.5 g/t) of gold, and the Inferred resource is 1.26 Moz gold, or 20.4 Mt of 1.19 g/t gold.
The PEA of Lapland was completed in 2022, just two and a half years after the first discovery drill hole, Stewart wrote.
"One of the hallmarks of a good gold discovery is the length of time between discovery and a PEA," he added.
The PEA's mine plan outlined a 22-year mine, which delivers 3.5 Mt to the mill each year. Over the life of mine, the operation would produce about 4.25 Moz of gold.
"With estimated gold production of 200,000 ounces per year, Rupert's Lapland project is bound to be on the radar of investors and producers alike," commented Stewart.
The company would mine using a conventional open-pit operation for the first 11 years, then switch to a sublevel block cave underground mine for the remaining 11 years. The plan also calls for the design of a conventional mill to process 3.5 Mt of ore per year at a diluted grade of 1.9 g/t, with recoveries averaging 94.8%.
The project costs outlined in the PEA are "competitive," Stewart described. The mine would require US$405 million (US$405M) for development and US$395M of sustaining capital. The all-in-sustaining cost for operation would be about US$759 per ounce, at the low end of the industry cost curve.
Stewart also highlighted the "very attractive" PEA economics of Lapland. The project would have a US$1.6 billion estimated net present value discounted at 5% and a 46% internal rate of return. Payback would take two years.
Funds on Hand
Rupert had CA$36.5M in cash and CA$34.1M in working capital as of August 31, 2022, Stewart reported.
The Next Steps
Several big catalysts lie ahead for Rupert, wrote Stewart. They include 73,000m of infill and exploration drilling of Ikkari and nearby prospective targets.
A prefeasibility study and environmental impact assessment will be done next, followed by a full feasibility study.
Key Team Members
Rupert's leadership includes numerous professionals, most with experience in the mining industry, noted Stewart, who presented bios for each one.
To name a few, Rupert's chief executive officer is James Withall. He started his career as an exploration and mine geologist in Western Australia, working for various gold mining companies, then joined the development team at the Xstrata Windimurra vanadium project. He also was a managing partner of Baker Steel Capital Managers in London, where he was an award-winning precious metals fund manager.
The managing director of Rupert Finland is Jukka Nieminen, a geologist with 20-plus years of experience in mining, specifically with Outokumpu in Western Australia and the Orivesi and Pahtavaara gold mines in Finland. He played a critical role in acquiring the latter for Rupert.
Thomas Credland, head of corporate development, is also a geologist in the mining industry for more than 15 years. He spent some of it as a mining analyst in the United Kingdom.
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Disclosures for iA Capital Markets, Rupert Resources Ltd., January 23, 2024
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