Loncor Resources (LON), the Toronto-based emerging gold miner, is a captivating investment opportunity for investors looking for exposure to an African precious metals company in the early stages of its growth phase. Loncor, which trades on the TSX under the ticker LN and on the NYSE AMEX under the symbol LON, is currently focusing its efforts on extracting gold from its holdings in the Democratic Republic of the Congo, or DRC.
Loncor has a market capitalization of $165 million, no debt on the balance sheet, and $32 million in the bank. Loncor Resources’ relative multiple, (price over net assets valued) a very important metric in the mining industry, is 0.2x. This is the lowest valuation among its competitors and it implies a rock bottom valuation relative to the industry.
Additionally, with a net asset value of C$14.09/share, I strongly believe that Loncor is extremely undervalued at its current market price and believe the company should be considered as an addition to any metals and mining portfolio for both institutional and individual investors alike.
According to a May 9 report issued by the Metals and Mining Equity Research Division of GMP Securities, “We are initiating coverage of Loncor with a 'Buy' recommendation and a target price of C$6.50 per share. We believe Loncor offers the investor exposure to one of the last untested archean greenstone gold belts in the world with the potential for both low tonnage high grade underground deposits and larger scale open pit bulk tonnage operations.”
Furthermore, “In our opinion Loncor represents one of the most prospective gold exploration companies in Africa, with its exposure to one of the last remaining unexplored greenstone belts and a management team with proven experience in making world class gold discoveries and developments in the region.”
Additionally, according to Michael Cooper, President of Toronto-based Cooper Financial Research, an equity research firm that specializes in emerging African precious metals company research, “Loncor Resources’ management team has significant experience with mining operations in Africa. The best example of this notion is the company’s CEO, Peter Cowley, who is a geologist with extensive mining experience."
In fact, according to Loncor’s website:
“Peter Cowley is a geologist with 40 years international experience in the minerals industry, mainly in Africa. Peter was president and CEO of Banro Corporation from June 2004 to 2008, where he led the exploration program that delineated 11 million ounces of gold along the Twangiza-Namoya gold belt. Prior to joining Banro, Peter was managing director of Ashanti Exploration, where he oversaw the exploration of the Geita mine in Tanzania which resulted in 17 million ounces being delineated. He holds M.Sc and M.B.A. degrees and is a Fellow of I.M.M.M. Peter is also a director of Cluff Gold PLC and Banro Corporation.”
In addition to Mr. Cowley, another important Loncor executive to note is Simon Village, who sits on the board of directors of Loncor Resources. According to Tomas Sipos, vice president for corporate development at Loncor:
“Mr. Village brings a unique perspective and a history of success to Loncor Resources. He was formerly a managing director of the World Gold Council and a principal of Exchange Traded Gold, a company responsible for developing and managing a series of direct physical gold investment products that have revolutionized the dynamics of the gold industry.”
Moreover, “Previous to Mr. Village’s work running mining companies, he was a managing director with HSBC responsible for global mining based out of London. During his time at HSBC, he became the head of HSBC's South African Securities business. Mr. Village holds a degree from the Camborne School of Mines and brings over 20 years of gold industry and investment experience to the company.”
In addition to Loncor’s strong management team and strategic owners in Newmont mining, the company’s most important selling point is the holdings it has amassed over the Ngayu Archean greenstone belt. According to David Wargo, an analyst at Toronto-based GMP Securities, “At its main project Ngayu, the company has amassed a significant gold land package of 4,600 km, covering over 80% of the Ngayu Archean greenstone belt, situated in Orientale province in the northeast DRC. Ngayu is one of the last remaining untapped Archaean greenstone belts in Africa.”
Moreover, “Using a risked DCF of our 5.2 million ounces (of gold) resource estimate for Makepela, we have derived a target price of $6.50/sh. We believe that there is significant upside to our valuation both through moving the project(s) forward and through the addition of Yindi and other targets on the belt.”
Thus, Loncor Resources is a very compelling investment opportunity at its current price and should be strongly considered by both institutional and individual investors alike who want exposure to the African precious metals industry at a significant discount.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.