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Date : 28/05/2023

Predictive Discovery (ASX: PDI): Striking Gold, But Is It Time to look For Profits? Predictive Discovery: A Golden Trajectory

In the fast-paced, high-stakes world of stock markets, the phrase ‘striking gold’ often depicts an extraordinary success story. Yet, in the case of Predictive Discovery (ASX: PDI), this took a literal turn. In April 2020, when the company reported a significant gold discovery at its Kaninko project in Guinea, its stock catapulted over 700% in a single day. As we navigate through May 2023, the project has confirmed a 4.2Moz gold resource. However, despite this golden opportunity, the company’s shares have been flat-lining recently. This raises the pivotal question – is it the right time to invest in Predictive Discovery?

Journey Through The Decade: The Highs and Lows

Predictive Discovery commenced its public market journey in 2011, focusing on numerous African projects. During this period, it weathered numerous challenges, including operational obstacles and a tragic incident involving a key partner. Despite these hurdles, the company remained steadfast.

The turning point arrived in 2020 when the Guinea project struck a metaphorical gold vein, leading to the discovery of substantial gold deposits and an extensive gold-rich zone over 450m. The excitement around this discovery translated into a meteoric rise in share value. By August 2022, the total identified gold resource had been enhanced to 4.2Moz from an initial 3.6Moz in October 2021.

predictive discovery shares prediction

Unearthing Treasures: The Bankan Project

The epicentre of this success story, the Bankan project, lies nestled within the Birimian Greenstone Belt in Guinea. This region has remained largely under-explored until recent years. The confirmed 4.2Moz mineral resource is segregated across two deposits within a few kilometres.

The project is undergoing a Scoping Study, anticipating completion by the end of the year. This could further consolidate the project’s viability and contribute to its long-term value.

Navigating Turbulent Waters: The Challenges Ahead

However, Predictive Discovery’s journey is not without its obstacles. These challenges primarily revolve around jurisdictional issues, commodity risk, and financial and exploration concerns:

  1. Jurisdictional Risk: 

While the mining sector is a critical contributor to Guinea’s economy, political instability has created uncertainty in the regulatory landscape. The location of the gold reserves within a National Park, generally a no-go zone for mining, adds a layer of complexity. To mitigate this, Predictive Discovery is presently conducting an Environmental Social Impact Assessment to secure a mining permit.

  1. Commodity Risk:

Predictive Discovery’s fortunes are intimately tied to gold prices, influenced by broader economic trends. Gold has traditionally served as a safe haven during turbulent economic times. However, this correlation wavers in 2022, with many investors shifting their focus towards battery metals.

  1. Financial & Exploration Concerns:

A substantial portion of the resource is classified as ‘Inferred,’ implying a lower level of certainty about its extent. Additional exploration is required to upgrade this classification. Financially, as of March 31, 2023, Predictive Discovery held $19.4m in cash reserves, enough for about a quarter at current expenditure rates. This suggests that additional capital raising may be imminent, which could dilute existing shareholdings.

The Investor’s Crossroads: Waiting for the Perfect Moment

From an investment standpoint, potential investors may want to adopt a ‘watch and wait’ strategy when considering Predictive Discovery. In particular, it may be prudent to wait until next year, allowing time for the completion of the ongoing Scoping Study and the potential acquisition of the essential permit.

The findings of the Scoping Study will provide invaluable insights into the project’s economic feasibility and potential return on investment. On the other hand, granting a permit will solidify the company’s legal standing to proceed with the development of the project. These outcomes will significantly reduce the associated investment risk, providing a more robust foundation for investment decisions.

The Bigger Picture: Long-Term Projections

But even assuming favourable outcomes on both these fronts, investors need to understand that the production of gold from the project is still several years away. Even with a confirmed 4.2Moz gold resource, the journey from exploration to extraction is long, filled with potential delays and challenges. As such, Predictive Discovery might not suit investors seeking short-term returns or those with lower risk tolerance.

At the same time, however, the company’s remarkable track record in resource identification and its significant holdings in a gold-rich region paint a promising picture for the longer term. The resource size indicates the potential for sustained production once the mine is operational, which could generate consistent returns for many years.

The Alternatives: Other Investment Options

Other options are available in the market for those seeking alternatives with near-term potential. One example is Leo Lithium (ASX: LLL), a company focused on lithium extraction – a critical component for the rapidly growing electric vehicle and renewable energy sectors. Lithium-focused companies have seen growing interest from investors as global efforts towards climate change mitigation and green energy continue to intensify.

Conclusion: Striking Gold or Fool’s Gold?

The tale of Predictive Discovery reminds us of the potential rewards – and risks – inherent in the mining sector. The company’s extraordinary find at the Kaninko project has certainly put it on the map. Still, the journey to fully realise the value of this discovery is fraught with challenges and uncertainties.

Whether Predictive Discovery will be a golden opportunity for investors remains to be seen. One thing, however, is certain: the company’s fortunes – much like the gold it seeks to extract – will continue to spark intrigue and debate in the investment world.

 

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