Red Cloud buy rating (Trading at .45 at the time of rating) Valuation:
We maintain a BUY rating and target price of C$1.15 target. Our target
price is based on 0.8x our sum-of-parts derived NAVPS estimate of C$1.40
(unchanged). We note that the company currently trades at a discount
to peers on an EV basis at $46M (peers at $297M). It also trades at 0.30x
NAV versus peers at 0.45x. We believe there is significant potential for the
stock to re-rate with ongoing positive drill results and a maiden resource.
Upcoming Catalysts: 1) Shovelnose drill results (ongoing), 2) South Zone
maiden resource (Q4/21-early 2022), and 3) Metallurgical work (Q4/21).
- ALS Metallurgy Kamloops concluded that the highest recoveries/extractions of gold and silver were produced through initial rougher flotation with cyanidation leaching of the rougher tailings. At the finer primary grind sizing, the average combined flotation recovery and cyanidation extraction of gold and silver measured 95 and 96 percent, respectively.
Could we go three for three with additional positive assays and a Maiden Resource beyond what the market is expecting? GLTA