first clue - the cash at end of quarter was less than $2m. 2nd clue - deal with QIC for $20m which will expand and add value to the project, requires the company to have $5m in cash at all times.
Given the company has been saying their approach has been to ramp up production over a period of time which means adding resources and capacity as we go, there was a fair chance they needed some more cash. Mining has high risk and it doesn't always go to plan. They have always had a low cash position.
Its pretty easy to be a critic, but you need to look at the comparisons. Tungsten is a hard mineral to mine, but there will be rewards for those who can make it work.
1. Almonty - lots of debt, less quarterly production that EQR and the Korean flag ship 3 years behind, used up most of their debt facilities and continually raising small amounts.
2. G6 - quarterly losses are bigger than ours. Now looking ore-sorting. Good grade but can't get the recoveries. Last quarter about 40%. They need cash, expect a raising from them soon. Changed strategies to shorten the open pit and going underground. Not sure about going underground with Bass Strait above.
3. Tungsten West - 200m pounds already spent on it and still awaiting permits. Had 3 goes to start in recent years.
4. Tungsten Mining - large deposits in WA and Watershed. Not much happening. Large capex required and low IRR.
EQR plan - start with low grade stockpile, get equipment and team in place. Empty pit and open pit mining, ramp up production and add capacity along the way. Next phase is to improve the deposit reserves with drilling program and investigate underground utilising existing tunnel. This plan hasn't changed. What hasn't gone to plan? A part from weather events. The grade in part of the pit isn't as high as expected. Given the water in the pit they could drill parts and had to rely on old drill results. This hasn't generated the cashflow expected, so we are back to plan B. They have indicated the grade improves as you go down, so the production and changes made should improve the production in the coming months and quarters.
We would all love a plan to work perfectly, but that's not reality and the performance over the last year is not what the company is trying to achieve. They have been making continual improvements with production every quarter. As investor, that is the bet.
Can they make improvements to be profitable? That is what we as investors have to decide. If you don't think so, then sell. If you think they can, this is cheap (reason why I've put in more today).
And BTW, I want a management team that can be adaptable and look at opportunities that present, that may not have perfect timing. IE. Saloro. We now own the biggest tungsten mine in Europe that is adding ore sorting capacity and recoveries are improving. We are expecting an update on Saloro soon
The tungsten price improvement we are witnessing should see cashflow increase at a time where others don't have capacity to increase production NOW. Unfortunately, tungsten does have a major military application and the reality is there is growing need.
Patience is a virtue! Have a good weekend.
EQR Price at posting:
5.6¢ Sentiment: Buy Disclosure: Held
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