RE: Assets14 Jul 2023 13:01
Edison's view: https://www.edisongroup.com/research/a-mispriced-miner/32481/
Cadence is a relatively small investment company in a sector that is dominated by large capital, and therefore will not be on the radar of many professional and private investors who follow mining. It is also relatively small in a corporate sense, so management is focused heavily on de-risking its assets and creating long-term value. It is in this context that the de-risking and growing investment stake in Amapá has probably been overlooked by the wider market, and led to the discount emerging.
In terms of catalysts, the progression of Amapá to full DFS status would lead to a reduction in the discount we apply (and the discount that is applied by the market). The costs and timing of this are uncertain, but the orebody is well understood given its prior operating status, so the progression will centre on licensing issues and further engineering studies. Cadence could progress this itself (and has recently secured mezzanine debt funding to achieve this if it wishes) or bring in potential partners at the asset level.
The development and progression of the Sonora lithium project is more uncertain given political uncertainty in Mexico (although we understand that Sonora is not affected by the changes in Mexican legislation given its licensing status, however the market is likely to continue to treat Mexican lithium assets with some caution). Our valuation of Sonora allows for this risk, so any progression to full operation by Ganfeng would be a clearly positive catalyst. The lithium market will need assets like Sonora in the longer term, and there is potential for this asset to be larger than the BFS metrics on which the takeover was made and our valuation is based.
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