Lion One Metals Ltd

Unleashing the Lion

Lion One recently announced aggressive plans to explore its recently consolidated property, with the aim of demonstrating its potential to host an expansive alkaline epithermal gold system, analogous to the nearby Vatukoula (7Moz Au) deposit. The company is back-stopped by the robust, high grade (739Koz at 9.5 g/t Au) Tuvatu gold project in Fiji, which steadily continues to be advanced to production. We are revising our valuation to better reflect the significant potential we think could be revealed as drilling ramps-up.

  • Build and explore. The company intends to run an aggressive drilling program designed to demonstrate the district-scale exploration upside of the high-grade Tuvatu gold system. In the meantime, the company continues to steadily advance its fully permitted high-grade Tuvatu underground gold project.
  • Potential exists to deliver a major deposit. Epithermal alkaline gold systems form some of the largest gold deposits on earth and include Vatukoula (7Moz Au) just 40km to the northeast, Lihir (10Moz Au) operated by Newcrest Mining and Porgera (20Moz Au) operated by Barrick. Work done to date suggests Tuvatu sits within a major alkaline gold system and has potential to grow materially.
  • Next steps expected to deliver growth. Plans this year include geophysics to better define structures as well as property wide geochemistry to prioritize target areas. We expect an ambitious drilling program that is planned to include step-outs within 500m of Tuvatu and scout-drilling on more distal targets. As the program advances through 2019, the market should begin to appreciate the multi-million-ounce gold potential of the Tuvatu gold project.
In our view the market is undervaluing Lion One. Lion One currently trades at 0.38x (peers 0.52x). This valuation is easily underpinned by the high-grade Tuvatu gold project, currently under development. Lion One could re-rate as it continues to move Tuvatu towards production and as it begins to demonstrate the project’s significant exploration potential. We believe Lion One is worth C$1.35/sh (new fair value est.), based on 0.70x our NAVPS8% estimate of $1.93 (was $1.86 using a 5% discount rate). We believe the company’s renewed focus on drilling could surface significant value and have revised our estimates to reflect this exploration upside. This was partially offset by other model updates (page 6). Upcoming catalysts include: 1) Exploration updates (Ongoing) and 2) Project development updates (Ongoing).


Lion One Metals Ltd.

Exploration Potential Mirrors 7 Moz Neighbor

Impact: Positive

We recently had the opportunity to visit Lion One’s (TSXV:LIO, ASX:LLO) Tuvatu project in Fiji. The key takeaway is that the company may be on cusp of demonstrating the significant exploration upside inherent within its 20,000 hectare property. The high-grade Tuvatu gold deposit (739koz grading 9.5 g/t Au) within the Navilawa caldera shares geologic similarities to the operating Vatukoula gold mine (7 Moz Au) and other giant epithermal deposits within the Pacific Ring of Fire, like Newcrest’s Gosowong deposit (6 Moz Au – Figure 5). These similarities along with the work completed to date suggest there is significant “Blue Sky” potential at Tuvatu.


Lion One Metals Ltd.

Lion One Metals: Ready to Roar

Initial Estimates

We recently took the time to dig deeper into Lion One Metals Ltd. (TSXV:LIO, $0.54) and are publishing our initial estimates. We came to the conclusion that Lion One is an undervalued gold developer on the path to production and we believe it currently trades at a discount based on the current project plus there is substantial exploration upside that could be game-changing for the company and its share price. Key reasons we like Lion One: 

  • Despite project financing and permits in-hand, Lion One trades at a discount to peers
  • Significant exploration upside not reflected in current valuation
  • Start small approach reduces risk for Tuvatu
Given that Lion One’s Tuvatu project is fully-permitted with project financing in place, we believe that the discount to peers is likely to close as the company ramps up construction and releases a steady stream of exploration results.


Lion One Metals Ltd.

Ongoing Exploration Work Yield’s Success; New VP Ex Added

Impact: Positive

Lion One has hired a new VP Exploration and provided an exploration update from the company’s fully-permitted Tuvatu Gold Project in Fiji. Importantly, the targets highlighted are on the existing mining lease and would be additive to the current mine plan.
  • After discovering a new mineralised lode, follow-up work has identified >20 mineralized veins covering 1,000x900m at the Jomaki-Ura Creek prospect
  • Anomalies at the Tuvatu South target have pointed to the possible extension of the main mineralized zone at Tuvatu by 1km, which will be further assessed through underground exploration drilling
  • A new VP Exploration, Darren Holden, has been hired by the company to lead exploration activities at the company’s near-mine and regional exploration targets. We view this addition favourably based on Darren’s previous work and success
Overall, these results confirm our view that the Tuvatu project has substantial exploration upside and we expect the resource to grow materially over time. Lion One currently trades at C$78/oz, a modest premium to peers (C$53/oz); however, after our site visit we believe a further premium is warranted because the project is permitted, essentially funded to construction and has significant exploration upside.


Lion One Metals Ltd.

Debt Financing In-Place; Tuvatu Construction Expected to Ramp-Up

Impact: Very Positive

Lion One has entered into an indicative term sheet with Sinosteel Equipment & Engineering Co. Ltd. of China and Baiyin International Investment Ltd to secure debt Financing for construction of its high-grade Tuvatu Gold Project in Fiji.

  • Favourable terms includes an EPC (Sinosteel) and gold doré off-take (Baiyin) financing facility totalling US$40M with an option to increase by $10M, which includes a term of 5 years at 7.5% and a 2.25% NSR on the first 350koz Au produced
  • PEA (2015) outlines initial capital investment (excluding working capital) for Tuvatu at US$48.6M
  • With exploitation permits in-hand and C$21.6M (US$16.6M) in cash, the company is well-positioned to continue on the path to construction and production 
Lion One currently trades at C$78/oz, a modest premium to peers (C$53/oz), however, after our site visit we view that this premium does not properly account for this project’s permitted status, essentially financed nature or the significant exploration upside that we see.



Lion One Metals Ltd.

Site Visit: Small Project with Big Potential

Impact: Positive

Recently, we visited Lion One’s Tuvatu Gold Project in Fiji and were generally impressed with this permitted high-grade project.

  • On the path to production with permits in-hand
  • Start small approach, makes this a financeable & buildable project
  • Current resource does not reflect the significant exploration upside
Lion One currently trades at C$62/oz, a modest premium to peers (C$49/oz), however, in our view this premium does not properly account for this project’s permitted nature or the significant exploration upside that we see. 

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