These 3 junior explorers are very close to actually making money
Link copied to
Most explorers will never make a single dollar of profit — that’s just the nature of this speculative end of the market. Emerald Resources (ASX:EMR), Alt Resources (ASX:ARS) and FYI Resources (ASX:FYI) are three juniors that are actually nearing construction and, ultimately, first cashflow from their respective projects.
And in a sign the market may not be as bad as it seems, FYI and Emerald have just raised substantial amounts of money towards development. Getting project finance is one of a junior company’s biggest hurdles.
WA-based FYI Resources is a low-cost, near-term high purity alumina (HPA) producer.
The ~$11m market cap company just scored an $80m loan towards its ~$290m HPA plant.
The cornerstone investment by $US3.4bn private equity group GEM Global Yield allows FYI to accelerate early development and makes it easier to attract the remaining finance.
FYI’s definitive feasibility study (DFS) for the integrated Cadoux kaolin and Kwinana HPA project, released today, forecasts a net present value (NPV) of $835m and internal rate of return (IRR) of 46 per cent over an initial 25-year project life.
Both NPV and IRR are metrics used to assess the profitability of a project – the higher the number is above 0, the more profitable it will be.
Good projects will always get the money, FYI managing director Roly Hill told Stockhead.
“Investors need to deploy cash to get a return; cash sitting in a bank is zero-sum reward,” he says.
“We have demonstrated that we have done the hard work, have completed extensive and detailed work, and are timing our development nicely to forecast growth markets.
“Funds and investors will gradually recognise these facts and accept that we are good active and responsible managers of assets – so we will be accordingly diligent with their assets (cash) as we work towards delivering on our strategy and produce a decent return on their investment.”
The $80m investment is especially rewarding in light of the naysayers who stated FYI will never get financing, Hill says.
The stock was up +15 per cent to 6c per share in early trade.
Near-term gold project developer Emerald Resources has locked in that substantial $US60m credit agreement with US-based Sprott, which follows the announcement of a $75m share placement in January.
“With the execution of the agreement and a clear path for financing, we look forward to achieving our goal of becoming the first modern large-scale Cambodian gold producer in Q2 2021,” managing director Morgan Hart says.
With gold prices flying to record highs it’s a great time to be a producer of any size.
Alt has now signed a binding deal with contractor Blue Cap Mining for the commencement of mining operations at the 36,700oz Tim’s Find project, part of the company’s Mount Ida and Bottle Creek Gold projects in WA.
Blue Cap will fund the mining operation and will be paid back when the cash from ore sales starts coming in.
Net profit generated by Tim’s Find will be shared as 34 per cent to the contractor and 65 per cent to Alt, the company says.
The stock nudged higher by ~5 per cent to 2c per share.