Crest Corporate Broking has valued Metals One (MET1 ) at 6p per share, following news that the company plans to acquired the remaining stakes in Lions Bay Resources that it doesn’t already own. 

“The company plans to exercise its option to increase its stake in LBR from 30% to 49.99% by converting US$5 million of the existing loan facility into LBR shares,” said the broker.

“Then Metals One will acquire the residual 50.01% held equally by Lions Bay Capital Inc. and Salamander Consulting through two independent share-for-share deals,” continued the broker. 

“Consideration for the residual interests totals £6.5 million, which will be satisfied by the issue of 500 million new Metals One shares, at 1.3p, together with 125 million warrants exercisable at 3p for three years.” 

LBR’s assets include a Newcastle cogeneration plant with a 6 MW steam turbine independently valued at a US$39.6 million replacement cost, and its proposed acquisition of the Barbrook gold mine, which has a 2.1-million-ounce historic gold resource, an existing processing plant and infrastructure. 

“We have modelled a three-year ramp-up in production levels reaching a high of 60,000 ounces before levelling off at 50,000 ounces per year,” said Crest, in reference to the proposed Barbrook operation. 

There were some caveats, though.

“Completion of each transaction remains conditional on definitive agreements, due diligence, conclusion of the Barbrook business-rescue process and Section 11 consent, shareholder and regulatory approvals, including a Takeover Panel Rule 9 waiver, a competent person’s report of the Barbrook assets and no material adverse change,” continued Crest. 

“The revised structure replaces the earlier proposal under which Lions Bay Capital was to acquire 100% of LBR. Metals One intends to advance up to a further US$15 million to support the Barbrook acquisition. The transaction simplifies ownership and positions Metals One to capture the full upside from the near-term restart of the Barbrook Gold Mine and the Newcastle cogeneration plant. Near-term catalysts include finalisation of definitive agreements, the Barbrook CPR and mine-financing package, court resolution of the business-rescue process, and shareholder approval. We value Metals One using a sum-of-the-parts method. This gives us a valuation of £106.7 million or 6.1p per share, an upside of 366% on the current share price.

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Crest’s 366% upside is a mouthwatering amount for investors to contemplate. Worth noting that there is a 25% completion risk discount applied to the US$228 million valuation for Barbrook, and a further 25% applied for development risk, so if and when the transaction goes through there might be a potential further upward revision from Crest. On the other hand, the broker does caution that its valuation for Barbrook should be used as a “guide” only, as many of the variables are unknowable at this stage. Either way, there’s clearly a lot on offer at Metals One these days, especially with gold still firm at over US$4,000, and there’s no doubt that getting the Barbrook assets fully under the company’s control will be a transformative moment.