Spoke with Alex last night for a good hour. I prefer to speak and see the management team before making large investments.
He reminds me of Fabian Baker at KRM, in which is also a core holding of mine. Both are young, hungry and very intelligent.
Some notes on BGD, and i am sure most of you know this information, all public:
1. Alex was working debt distress back when WPG was running Challenger. And before purchasing the assets, did 1 year DD with his partners. So they took the assets knowing them very well and seeing the mistakes the previous operator made.
2. Challenger itself has had huge under investment mainly on the drilling/exploration side.
3. Sunk costs with the infra, plant/equipment, 200km drilling etc would cost today near 200m
4. Alex and his partners took this private and restructured it, so there was no covenants, debt or obligations before taking it public.
5. Sunk costs were circa 20m and 4.5m in enviro bonds for private holders. Pre IPO raising was 8m between 40-48c, average price mentioned 45c. IPO 15m 25c. So you are buying at 43m sunk costs company for circa 34m MC. So you buy it cheaper today, thanks to poor Gold sentiment.
6. 50% escrow until 2023 June, T20 own 75% and T50 90%. So EXTREMELY tight. Alex himself is 25% and top holder. VERY rare for a jnr. Most are lifestyle players or sales men.
7. Moving offices to SA. Government very supportive and been giving alot of incentives. They have received grant 380k and anticipate a possible 1m further incoming.
8. Drilling costs currently circa $200/m which itself is reasonable, but looking to cut to 150/160$/m. Means 11m cash plus incoming grants, Tax refund (circa 2-3m) should last 18-24 months.
9. Drilling commences in March 20km, 50/50 on Tarcoola and Tunkilia. Testing targets as per preso area, steps outs to increase jorc etc. Very excited as they have done alot of work and believe they can substantially increase JORC within the 5km strike.
10. Looking for a H2 JORC upgrade - target upside is 250-500k, depending drills.
11. This slide is important, they believe if their work is correct, a possible repeat system of multi million ounces at Tarcoola exists. This is cream.
12. I asked what the overall strategy was and Alex hoped they could drill out 2.5m/oz mineable. This is without finding a repeat structure, just ounces within the 5km strike at Tunkilia and Taarcoola.
They would have two plants, Challenger mine is working order with 5-10m capex to get it operational. Use the high grade material from T/T only 70km away 3g/t+ and have a large plant for the rest. Output if we had the ounces with successful drilling etc would be 200koz annually for 10yrs. I don't think any of it is unreasonable as Challenger itself right now can do 60koz+ @ 1400aud AISC. Alex is swinging hard, wants a big return.
That is the advantage when the MD owns 25% of the company and his partners the same.
13. Ozzie Gold +2500, When Challenger was in play last it was sub 1600. Also no drilling/exploration etc. BGD have NO intention of restarting mine. They are purely focused on building ounces to produce 200koz annually.
Gold price is going alot higher too.
14. Marketing/Promo/Broker runs will soon start, and the name will get out there. Along with their strategy and new look team.
15. lastly the chart, soaking sub 23c on the weekly, great buying for LT investors ahead of drills in March.
Reckon once this breaks, it doubles to pre ipo price of 45c+.
With a small EV 25m odd, huge spend from previous owners, quality infra/plant/equip, supportive government, excellent team that is young and hungry, drilling possible large targets with good upside, 50% escrow for another 18 months and starting the news flow cycle in March until years end.
Risk to reward is A+ last saw it on KRM at 04-05c zone before it doubled.
