Lunnon Metals' (ASX:LM8) stock is trading at a discounted price-to-net asset value multiple of 0.4 times, with further gold discoveries and favorable nickel market sentiment identified as key catalysts for the stock, according to a Monday note by Euroz Hartleys.

The company continues to reduce risk around the development of its Lady Herial gold deposit at the Kambalda gold and nickel project in Western Australia, as recent tests at the deposit showed recovery rates of 91% for oxide material, 98% for transition material, and 96% for fresh material, Euroz Hartleys said.

On Monday, Lunnon Metals said results from the first round of reverse circulation drilling at the project confirmed high-grade lode structures.

It reported wide intercepts and high grades intersected within the first 35 meters to 40 meters below the surface, including 11 meters at 3.4 grams per tonne (g/t) grade of gold and 15 meters at 3.84 g/t grade of gold.

Euroz Hartleys assigned a notional value of AU$30 million to Lunnon Metals' gold rights across the Kambalda tenure but adds that further exploration success and gradual gold resource growth could lead to an improved valuation.

The firm believes the Lady Herial deposit remains overlooked in an over AU$4,600-per-ounce environment.

Euroz Hartleys maintained a speculative buy rating and AU$0.53 price target on Lunnon Metals.