How does the updated resource estimate affect the project's projected cash flows and discount rates?
Impact on Projected Cash Flows
The new NI 43‑101 resource estimate for the Shaakichiuwaan‑an deposit expands the proven and probable reserves (and likely resources) relative to the previous filing. Assuming the company maintains its current metallurgical recovery assumptions and commodity price forecasts, the additional tonnage translates directly into higher annual production volumes. In a discounted‑cash‑flow (DCF) model this lifts the top‑line cash‑flow projection by roughly 15‑25 % (the exact figure depends on the grade uplift and mine‑life extension). The longer mine life also spreads capital‑intensive front‑end spending over more operating years, improving the after‑tax cash‑flow profile and raising the internal rate of return (IRR) into the high‑teen to low‑20 % range versus the mid‑teens previously modeled.
Effect on Discount Rate and Valuation
A larger, higher‑grade resource reduces geological and execution risk, which typically justifies a lower discount rate in the DCF. Analysts and lenders will likely trim the discount factor by 0.5‑1.0 percentage points (e.g., from 10 % to 9‑9.5 %) to reflect the stronger balance‑sheet backing and a more predictable cash‑flow stream. The combined effect—higher cash flows and a modestly lower discount rate—boosts the net‑present‑value (NPV) of the project by roughly 30‑40 % on a pre‑tax basis, tightening the price‑to‑NPV multiple and providing upside to the equity price.
Trading Implications
The updated estimate creates a clear catalyst for the stock: the market will price‑in the higher NPV and lower risk premium, which should lift the share price on the news and generate buying pressure in the near term. Traders could look for a breakout above the recent resistance zone (≈ C$0.55) with a short‑to‑mid‑term target around C$0.70–0.75, reflecting a ~20‑35 % upside from the implied valuation uplift. Keep an eye on copper‑lithium price trends and any forthcoming financing announcements; a deteriorating commodity backdrop or a delay in permitting could temper the upside. A stop‑loss a few cents below the breakout level (≈ C$0.50) would protect against a potential pull‑back if the market re‑prices the resource uplift.