The shortest line between investing in mining stocks and a satisfactory return is found in wide dislocations between price and intrinsic value.
With junior stocks, or miners in the exploration and development phases, we can measure these dislocations by evaluating resource development progress and comparing it to how share prices have reacted in response. If a string of positive developments have been met with lackluster returns, this may point to undervaluation, barring any other potential causes behind the fall in share price.
Here are three mining stocks that embody this thesis, each in their own way, with underwhelming share prices that have arguably yet to fully reflect their underlying companies’ consistent project milestones.
Rock Tech Lithium
Our first underpriced mining stock is Rock Tech Lithium, market cap C$119.58 million, which is working to supply the electric vehicle and battery industry with sustainable, locally produced lithium.
Targeting a 100 per cent recycling rate, the company plans to build lithium converters beginning in Germany and Red Rock, Ontario. It will source raw materials for these converters from its Georgia Lake spodumene project in the Thunder Bay mining district of Ontario, in addition to other ESG-compliant mines.
The pre-feasibility-stage Georgia Lake project, slated for production in 2028, offers a post-tax net present value of C$200 million and sufficient SC6 spodumene concentrate capacity to supply 350,000 EVs per year.
The construction-ready Guben converter, slated to begin production in 2027, features a post-tax net present value of 1.2 billion euros and the ability to generate enough lithium hydroxide to service approximately 600,000 EVs per year. The facility secured an offtake agreement with Mercedes-Benz in 2023.
Georgia Lake’s neighbouring converter in Red Rock adds another C$2.3 billion in post-tax net present value and at least 900,000 addressable EVs, having recently completed a successful scoping study demonstrating the project’s economic viability.
With knowledge gained from the Guben converter expediting development in Red Rock, including more than 80 per cent of basic engineering, as well as working CAPEX and OPEX models, and lithium presenting a high-conviction case for a long-term investment, Rock Tech is only a few years away from converting its billions in potential value to dollars on its balance sheet.
Rock Tech Lithium stock (TSXV:RCK) last traded at C$1.18 per share. The stock has given back 20.81 per cent year-over-year, but has gained 122.64 per cent since 2019.
Dirk Harbecke, Rock Tech Lithium’s chairman and chief executive officer, recently spoke with Stockhouse’s Lyndsay Malchuk about the company’s scoping study for its multi-billion-dollar lithium converter in Ontario. Watch the interview here.
Vista Gold
Our next underpriced mining stock is Vista Gold, market capitalization C$127.18 million, whose underlying company is dedicated to advancing its Mount Todd gold project, an advanced development-stage gold deposit in Australia’s Northern Territory, a widely recognized low-risk, Tier-1 mining jurisdiction.
Mount Todd offers the attractive combination of growth prospects and demonstrated financial viability to the tune of US$1.13 billion in after-tax net present value at only US$1,800 per ounce of gold.
The feasibility-stage, shovel-ready project houses proven and probable reserves of almost 7 million ounces, representing more than US$18.7 billion in the ground at gold’s price of US$2,674 per ounce at the time of writing, making for an enticing acquisition target for major miners worried about diminishing reserves. An updated mineral resource estimate is planned after the conclusion of the 2024 drilling program.
Vista Gold stock (TSX:VGZ) last traded at C$1.04 per share and is approximately flat since the release of Mount Todd’s initial feasibility study in February 2022, failing to price in the project’s de-risked path to revenue.
Fred Earnest, Vista Gold’s president and chief executive officer, sat down with Lyndsay Malchuk earlier this week to shed light on interim phase-2 drilling results at Mount Todd. Watch the interview here.
Sego Resources
Our final underpriced mining stock is Sego Resources, market capitalization C$4.07 million, a growth-driven junior mining company exploring its flagship 2,056-hectare Miner Mountain copper and gold project in British Columbia.
The project covers a large porphyry system with high copper and gold grades and is only 15 kilometres north of Hudbay Minerals’ producing Copper Mountain mine (measured and indicated resources of 314 million tons at 0.18 per cent), with both projects sharing the same regional fault system.
Highlight drill results from Miner Mountain include:
- 0.95 per cent copper and 0.55 grams per ton (g/t) of gold over 100 metres in the Cuba zone.
- 1.08 g/t gold over 88 m in the South gold zone.
With multiple drill targets to be explored at each zone supported by recent mapping, trenching, soil samples, and magnetic and induced polarization surveys, and copper demand expected to soar over the coming decades, management is optimistic about positive news flow in the near future.
Shareholders beg to differ, having tanked Sego Resources stock (TSXV:SGZ) by more than 90 per cent since optioning Miner Mountain in 2007, including 37.5 per cent since 2019, offering you a chance to own a piece of the project at peak pessimism with strong reasons for conviction.
Paul Stevenson, Sego Resources’ chief executive officer, spoke with Lyndsay Malchuk about a new review substantiating the potential of the company’s South Gold Zone target. Watch the interview here.
Join the discussion: Find out what everybody’s saying about these underpriced mining stocks on the Rock Tech Lithium Inc., Vista Gold Corp. and Sego Resources Inc. Bullboards and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Rock Tech Lithium Inc., Vista Gold Corp. and Sego Resources Inc., please see full disclaimer here.
(Top photo of drilling north of Vista Gold’s Mount Todd project in Australia: Vista Gold)