Analysts at Argentum Research have taken a closer look at the shares of Canadian gold explorer Formation Metals (WKN A3D492 / CSE FOMO) and consider the company to be significantly undervalued. They have therefore assigned a “Sector Outperform” rating and a 12-month price target of CAD 0.70. Based on the current price of CAD 0.385, this implies upside potential of around 82%!
Formation Metals impresses with potential for a major deposit
Argentum believes that the company developing the N2 gold project in Québec, Canada, will be able to demonstrate the potential for a large gold deposit with significant (precious) metal occurrences through its ongoing drilling program.
As the experts further explain, N2 is part of an Archean orogenic gold system within the relatively underexplored Turgeon Belt in the north-central part of the Abitibi Subprovince. Accordingly, the project features multiple mineralized zones extending over a strike length of at least 2 kilometers and containing mineralized quartz veins within a felsic shear system.
As Argentum further explains, Formation is well on track to complete the targeted 30,000 meters of drilling after commencing work at N2 in 2025. According to the analysts, impressive drill results have already been achieved, including multiple intervals with gold grades of more than one ounce per tonne. An initial resource estimate is expected as early as mid-2026, and Argentum believes it could already contain more than 1.5 million ounces of gold—with the potential to grow significantly further.
N2 gold project could deliver more than 1.5 million ounces, according to Argentum
In their development model, the experts assume an open-pit mine with three development phases. Capital costs for the first construction phase in years one to four are estimated at CAD 170 million to achieve mill throughput of 360,000 tonnes per year and annual gold production of 20,000 ounces at AISC (all-in sustaining cost) of USD 2,093 per ounce. Argentum then estimates a further CAD 60 million in phase two (years 5–8) to double mill throughput to 720,000 tonnes per year and gold production to 40,000 ounces per year. In this scenario, AISC would be only USD 1,988 per ounce. The third phase for years nine to 18 would entail additional costs of CAD 200 million, with processing plant capacity of 1.8 million tonnes per year and annual gold production of 101,000 ounces, as well as AISC of USD 1,933 per ounce.
Argentum analysts see economic advantages in such a three-phase development. Assuming a long-term gold price of USD 4,000 per ounce, the mine is expected to generate an after-tax net present value—discounted at 12%—of CAD 335 million (CAD 937 million at an NPV5%). The experts estimate the after-tax internal rate of return (IRR) at 27%. Argentum also believes that the exploration potential of the future mine in the current gold price environment could further improve the project’s economics.
Formation Metals: Three-phase model with strong economic leverage
Accordingly, the analysts rated Formation Metals as a “Buy” and set the price target at CAD 0.70. They derive this from a 0.6x blended multiple applied to (i) 50% of the company’s fully diluted, fully funded after-tax NAV12% and (ii) 50% of an EV/oz in-situ valuation of 1.2 Moz at US$50/oz (adjusted for balance sheet items). Formation Metals (WKN A3D492 / CSE FOMO) is considered to be in a strong position to advance its strategy and demonstrate a deposit of significant scale at the N2 project.
Argentum Research sees the ongoing 30,000-meter drilling program as the next potential catalyst for further share price movement. Formation is focusing on demonstrating additional mineralization in the shear zones that define the N2 deposit.
The full research report in English is available at Research Coverage | Argentum Research
