At the time of writing, shares of BMG Resources Ltd [ASX:BMG] are up by 16.67%, to 0.007 cents per share.
Why did BMG Resources Ltd shares do this?
As the company announced at an investor presentation last week, it appears a few investors are buying some shares, ahead of what could become a successful 2019. The company looks undervalued compared to other lithium explorers in Chile:
Source: BMG Resources
At current share prices, with around $1.5 million in the bank, BMG Resources has an enterprise valuation (market cap less cash plus debt) of roughly $0.5 million. That’s pretty cheap. The company’s project areas located in Northern Chile’s ‘Lithium Triangle’ stand at over 20,000 hectares.
Some would say the share price is pretty cheap for the potential up for grabs.
What now for BMG Resources Ltd?
BMG Resources has been relatively flat all year, until the latest market correction which began in September.
The share price has been pretty weak since that time.
Looking at the story, assuming the overall market holds up, things could turn around for shareholders early next year. Here’s the company’s plan over the next 6–12 months to turn its poor sentiment around:
Source: BMG Resources
BMG Resources intends to drill Salar West in the first quarter of 2019. BMG Managing Director, Bruce McCracken, told the market on 23 October:
‘The Geophysics undertaken at the Salar West Lithium project as part of our due diligence assessment has delivered very encouraging results in what is the world’s best lithium brine province.
‘This significantly mitigates exploration risk with the results confirming the strong brine potential across a broad area of the project. We are continuing to assess the detail behind the results in order to define drilling targets and undertake 3D modelling of the brine target zones.’
The early geophysics results are encouraging. But, as the saying goes, the proof will be in the pudding. If the company taps rich lithium brines sometime next year, the share price could explode higher.
Resources Analyst, Markets & Money
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