Value enhancing takeover of Lat66
SunMirror has expanded into Finland, announcing the acquisition of Latitude 66 Cobalt Oy (“Lat66”). Lat66, which started operations in 2017, is an Australian-Finnish mineral exploration company with a first mover project portfolio of more than 9,000 square kilometres within the most prospective greenstone belts in northern Finland, making the company one of the largest tenure holders in a region with high statistical probability of major discoveries, according to company information. Lat66 is developing a cobalt-gold mine in the Juusasuo mining area of Kuusamo and a cobalt-copper mine in the Haarakumpu area of Posio. Of particular value, in our view, is K-camp, the largest cobalt resource in Europe not owned by a mining or processing major, the fourth largest known cobalt deposit in the EU, and the second largest not yet mined, based on company information.
We view the acquisition of Lat66 positively as it provides diversity for SunMirror outside the existing lithium and gold activities in Australia, adding another mining friendly jurisdiction as well as promising resources to its existing portfolio of assets. With the acquisition, SunMirror will eventually be able to supply the European economy with cobalt, sourced from sustainable and stable jurisdictions in compliance with applicable laws, regulations, and ESG requirements.
We believe the market should continue to price in SunMirror's existing resources and their long-term growth potential. We maintain our Buy rating for the shares of SunMirror and increase our fully diluted price target to EUR 194.70 per share from EUR 174.30 following the acquisition of Lat66. We value the equity of the Dusseldorf Stock Exchange-listed company using a sum-of-the-parts valuation based on a Net Present Value (NPV) entity model, in-situ values, and peer group multiples. We did not model any future acquisitions. Our valuation is primarily driven by royalty schemes the company intends to generate from Cape Lambert North, for which we calculated an equity value of EUR 101.70 per share (base-case-scenario). We value Moolyella with EUR 50.80 per share, Lat66 with EUR 30.40 per share, and Kingston-Keith with EUR 8.30 per share. Higher grade potential at Kingston-Keith and Moolyella represent further upside to our price target, in our view.
Founded in 2010, Sphene Capital is a German based pure-play research house offering state-of-the-art research and evaluation services to European small- and mid-caps by avoiding typical conflict of interests of traditional investment banks.
As a general rule, analysts of Sphene Capital strive to understand companies better than any other analyst or investor before publishing their initiation reports. Therefore, the comprehensive initiation research reports comprise of 50-80 pages, including an extensive analysis of the value chain of the IPO candidate, its unique selling proposition, an elaborate analysis of suppliers and clients, a thorough SWOT analysis, a commercial due diligence (i. e. market and competitive analysis), an integrated financial forecast model and a profound company valuation (both DCF methodology and peer group multiples). Before publication, each of Sphene Capital’s research report will be double-checked by a fellow research colleague (“Four-eyes-principle”), ensuring highest quality and avoiding careless mistakes.
After initiation of research coverage, Sphene Capital publishes regular updates of 12-30 pages following relevant news flow from the issuer or major peers, f. ex. after acquisitions or after publication of quarterly results.
Due to Sphene Capital’s extensive experience in equity and bond research, the team has established longstanding contacts to all relevant market players, i. e. institutional investors, family offices and high net-worth individuals as well as journalists. To each of these groups, Sphene Capital’s research analysts have regular contacts during analyst and management roadshows or via daily phone calls. Finally, analysts publish articles in selected stock markets magazines and websites in which the analysts help issuers to improve their popularity on the German capital markets.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.