Gold assay market disruptor Chrysos Corporation’s lacklustre sharemarket performance this year has supportive Australian stockbroker Shaw and Partners a bit flummoxed. It believes there could be tremendous upside in C79’s proprietary PhotonAssay technology and its equity value.
“Post the Barrick partnership inked in FY24 our confidence is building that it will be the standard for gold assaying globally,” the broker said in its latest note on ASX-listed Chrysos (ASX: C79).
“It is increasingly becoming a question of when, not if, in our view.
“Playing this forward, while our current terminal forecast assumes 265 units or roughly 43% of the addressable 610 units outlined in its prospectus, if we were to assume 465 units then based on the earlier NPV per unit analysis we could see a possible scenario where our assessed equity value could be A$13 per share.”
That compares with a current price around $5.30, putting Chrysos’ market value at circa-$600 million. The company’s share price is down more than 30% this year despite what Shaw sees as favourable tailwinds, including record gold prices and burgeoning alliances.
New unit sales to global laboratory services company SGS were “meaningful”.
“Despite its large geochemical testing business SGS has been a laggard among the large lab companies with respect to adopting C79’s technology,” Shaw said.
“Prior to the two most recently announced contracts it only had one unit located in Western Australia, whereas ALS and Intertek had deployed 6 units each, with ALS operating in both WA and Canada and Intertek in WA and Ghana.
“Barrick appear[s] to have brought in SGS to help it deploy PhotonAssay across its global operations.
“With C79’s focus increasingly on mine-site deployments, SGS becomes an increasingly strategic partner with a large existing base of mine-site customers.
“SGS … reported A$2.7 billion of revenue in its Natural Resources segment [in 2023]. In contrast, ALS reported $1 billion of revenue in its Commodities segment in the 12 months to March 2024.”
Shaw said record high gold prices and the prospect of lower global interest rates “should provide a tailwind for C79”.
“We estimate cycle upside could increase revenue per unit by between 11-30%,” it said.
“ALS’s recent trading update noted that geochemistry volumes remained patchy and that fluctuations have become more pronounced in July and August. Specifically, it called out volume declines in Australia and Latin American, and flat volumes in North America.
“C79’s guidance has been framed around revenue per unit remaining consistent with FY24, which implies no improvement in industry volumes. Our interpretation of ALQ’s commentary is choppy suggests flat volumes rather than declining.
“In any case, that portion of C79’s revenue that moves variably with volume is only 10%. This implies 90% of incremental revenue is related to deployment of units.
“Currently, C79 has 25 units that are contracted but yet to be deployed.
“These are now split over five counterparties – versus just two at the end of Q3 – including MSALABS, Brittania, SGS, Omni Group and Analabs. In addition, Barrick has signed a global partnership to roll out C79’s PhotonAssay technology across its global operations, including up to 13 units by end of 2025.
“We understand Barrick now has up to five units under this partnership; four with MSALABS and now one with SGS.”
