Rok Resources Inc. (ROK:TSX.V) is a Canadian mining company that has been exploring Mansur and Viewfield in Saskatchewan for lithium deposits. It has recently released a report claiming to have found a significant source of this material with a high flow rate capability, estimating a reserve of around 1.16 million tonnes. Rok has further claims in the energy sector via oil and gas assets within Canada.
In a May 2, 2023 research report, Bill Newman, CFA of Research Capital Corporation, gives ROK a Buy rating due to its recent lithium findings, stating, "Although the lithium project is at an early stage, the project represents a potentially significant free option for investors."
Review of Results
Newman presents the key points of ROK's latest reports.
ROK is invested in Hub City Lithium Corp., holding a 25% interest in the company that owns 192,000 net acres of mineral titles in Saskatchewan. On top of the Mansur and Viewfield project areas, Hub City is expected to test another drill site in 3Q23.
Preliminary results have shown high lithium concentrations in multiple zones, notably within the Duperow formation. Newman writes, "[O]ne zone . . . tested up to 259 mg/l, which appears to be the highest lithium concentrations ever recorded in a brine in Canada. Testing also confirmed high flow rate capability at a relatively shallow depth of 1,800 meters, which could improve the economics of the play."
The company's preliminary assessment infers that the 1.16 million tonnes of potential lithium weighted an average grade of 143.4mg/l but maintained a cutoff grade of greater than 50 mg/l. Even if analysts choose to be conservative by lessening those estimates, the company is still looking at an inferred resource of 517,548 tonnes.
A PEA (Preliminary Economic Assessment) is underway on the Viewfield project area, with expected completion in 4Q23. ROK is currently sourcing an extraction technology provider.
Structure and Predictions
In other positive news, ROK has decreased its net debt significantly by fully paying a term loan of US$52.5 million taken out in January 2023. The company achieved this payoff by leveraging non-core assets sales and cash flow. According to Newman, the company holds a US$22.5 million revolving credit facility and has begun to unwind certain commodity swap hedges.
Newman's research report also shares recent rating and target price information as well as current market data on the company:
- Rating: Buy
- Price: CA$0.36, with a 52-week range of CA$0.20-CA$0.55
- Price Target: CA$0.75
- Market Cap:CA$76.50 million
Newman expects a projected return of 108.33% for shareholders. ROK holds a decreased net debt of CA$10 million and an enterprise value of CA$86.5 million. The company holds 212.6 million basic shares with 352.8 million fully diluted shares.
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