We are initiating coverage of USAU with a Buy rating and $3.00 price target.
We believe USAU provides investors with a unique combination of existing asset value and early-stage exploration exposure. Additionally, we believe the company's technical team has a proven track record and that the company
has an asset portfolio with the potential for a significant discovery.
- Keystone is the story. Although Keystone is an early-stage exploration asset with no existing resources and only uneconomic gold showings thus far, we view it as the flagship asset of USAU. We base this belief on the project's location and scale, which are discussed in detail later in this report.
Based on this view, we believe investors should assign significant value to this asset. For our valuation of USAU we assign a value of $25 million to the Keystone asset.
- Copper King is the value basis. While we view Keystone as the future of USAU, Copper King represents the tangible value today. The project has an existing PEA, demonstrating robust project economics. Additionally, we believe the asset has some exploration potential, which the company is currently targeting with a small, four-hole drill program. If the company is able to show exploration success at Copper King, it could drive significantlyimproved project economics, in our view.
- A unique structure for investors. We view USAU as a unique opportunity for investors because assets like Keystone are rare and generally not the flagship asset of a public company at this early stage. Generally, assets at this stage are either held inside large companies, are privately owned, or are in the form of Canadian listed stocks that do not meet most U.S. investors' investment strategies, in our view. Additionally, we believe the Copper King asset provides downside value protection for investors.