The company has explained this in a previous announcement, Goldx.
They are getting by on a short-term debt facility. They also, apparently, have the support of major holder Lind, which makes sense as this group would be sitting on a big loss if the company folded. (See the response to the company response to the ASX query, 'Response to ASX Query Letter', 8/12/2023)
As for why they haven't thrown in the towel after being in suspension for over a year? Well, my guess is it is because the management - whoever it is that is running the show at current - are feeling quite sanguine about the long-term prospects of Thomson's projects.
Over the past several months, as I've been reading the comments on these threads, it seems to me that some of those who have been watching from the sidelines here are not fully grasping the value of the assets that Thomson is currently sitting on.
To be fair, this misunderstanding is understandable.
Early last year, just before the extended suspension, Thomson initiated an ill-conceived, low-ball entitlement offer, at a proposed bargain-basement price of $0.002.
I think this is where root of this misconception lies. Trying to raise funds at the second-lowest level possible is never a great look for a listed company.
However, that $0.002 price tag that was proposed was not only not a good look, it was also quite unjustified. To put things into perspective, at the time, the last closing price for TMZ shares was $0.016 - exactly eight times higher.
Indeed, in the preceding decade, the TMZ share price had never really fallen below the $0.01 mark: the only exception was a few months after the 'Covid Crash', when it briefly fell below that level, on the back of a dump of a few hundred dollars. But to all intents and purposes, 1 cent had previously been the floor.
Thus, the offer price that was being proposed early last year was chicken feed.
So why was the offer price so low? The explanation they issued at the time sounded rather disingenuous, and doesn't really clear anything up: '...
to encourage maximum participation by existing shareholders...'.
Of course, at the time, the Thomson were facing complications with the Texas project. But in isolation, this doesn't really explain why they needed to raise money at such a massive discount to both the last closing price, and the long-term share price.
In my view, much of the calculus behind the cut-price offer isn't entirely rational, and thus is also somewhat complicated to relate.
At least part of the explanation lies in the fact that the former MD, Eoin Rothery, had something of a fixation with another mineral exploration company, Silvermines.
The signature assets of Thomson today, the Webbs and Conrad silver projects, were formerly owned by Silvermines, with Thomson entering into an agreement with Silvermines to purchase the assets in 2020. However, Thomson's involvement with Silvermines goes back many years before this transaction.
Understanding some of the rationale behind that strange rights issue in early 2023 requires some delving into the history of Silvermines.
Silvermines first listed way back in 2007, with their most notable projects at the time of their debut being a couple of silver projects, the first of which was the Webbs Silver project - controlled by Thomson today - as well as the Webbs Consol project, currently owned by a company called Lode Resources.
Over the next few years, Silvermines rode the surging silver price, with the share price hitting an all-time high in 2011. But that, of course, was as good as it got. As the tide went out on commodity prices after the boom years, Silvemines' shareholders started to bail out, and the share price started to spiral downwards.
By 2015, the Australian mining space had become a hope-free zone. The silver price plunged below US $15, with the Silvermines share price going in the same direction as the silver price. With nearly a billion shares outstanding - back then, a company with a billion shares was seen as a woebegone- things looked dire for Silvermines.
However, the then Managing Director of Silvermines, Charles Straw, was a canny operator. He masterfully played the 'silver card', enticing large numbers of silver-bugs to partake in a rock-bottom capital raising set at just 0.001, with the funds raised from the (very) large number of shares issued being employed to purchase dirt-cheap silver assets.
Initially, Silvermines used the funds raised to purchase the Conrad silver asset -the other notable silver asset held by TMZ today. However, Silvermines also noted in the prospectus of the 2015 capital raising that they were sizing up the major Bowdens Silver project, which would eventually become Silvermines' most significant asset.
The purpose of this detour is to illustrate that Thomson's proposed capital raising in early 2023 followed the template set by Silvermines in 2015.
Both companies had a similar share structure, with just under a billion shares outstanding. And just as Silvermines had their eyes set on the Bowdens Project in 2015, Thomson, at the start of 2023, had its own prize in view: The Mt Carrington silver and gold project.
However, while Silvermines managed to secure their target, fate had different plans for Thomson.
As shareholders well know, shortly after the proposed capital raising, Thomson found themselves mired in an extended trading halt, and while they were comatose, another company moved in, snatching their coveted price from under their very nose.
The corporate magpie in question was Legacy Minerals. On the 21st of March this year, the company revealed that they had acquired the Mt Carrington project. ('Transformational Acquisition- Mt Carrington Cu-Au Project', LGM announcement of 21/03/24).
The announcement was well received. The day before the announcement, the Legacy shareprice closed at $0.125 (circled below): at time of writing, the LGM share price is around twice as high.
View attachment 6378147So did Thomson shareholders miss out?
While it would have been galling for the Thomson management to watch Legacy swoop in and pick-off Mt Carrington, I don't think the ordinary TMZ shareholder should be shedding any tears. My feeling is that the low-ball entitlement offer that they had planned simply wasn't in the interest of shareholders.
The situation of Silvermines in 2015 was in no way comparable to that of Thomson in 2023. Both the times, and the commodity-price backdrop were starkly different, and thus the attempt to replicate Silvermines' corporate rebirth in the middle of last decade made no sense whatsoever.
Apart from that, Thomson didn't need to purchase Mt Carrington to be a viable company. Even now, Thomson controls a number of very attractive assets.
Take a look, for example, at the map below, which I've sourced from the Thomson website.
Thomson had a deep involvement with the Mt Carrington project over the years, and as the website hasn't been updated for some time, it is still depicted on the map showing their projects.
Based on the estimations below, Thomson's 'silver sisters', Conrad and Webbs, appear to be more valuable than Mt Carrington: 14.2 + 20.7 MozAg Eq, compared to 32.7 for Mt Carrington.
I'll leave Texas to one side, as it is more complicated on account of the liabilities associated with the project.
However, it seems fairly clear to me that Conrad and Webbs are on par with Mt Carrington.
In light of this, let's consider the market capitalisations of Legacy minerals, the recent acquires of the Mt Carrington project.
Legacy currently have a market cap just north of $26 million.
Thomson's market capitalisation, of course, is no-where close to that mark. With the Thomson share price in the freezer for nearly 18 months, the market capitalisation is stuck where it was in early 2023, $4.9 million.
Of course, in my comparative analysis, I've overlooked one key difference between the two: Legacy are cashed-up, with around $3 million currently sitting in their strongbox.
By comparison, Thomson's finances resemble a stricken ship, whose crew is desperately jettisoning various large, random objects in order to keep the vessel afloat.
But the point I am making is that, despite their travails, Thomson's core assets are actually quite attractive, based on the prevailing market conditions.
Webbs and Conrad could not be called 'top tier' silver assets, and thus are not comparable to the projects controlled by the likes of Silvermines and Investigator. That said, I think these twin assets are among the best 'second tier' silver assets you'll find in the Australian listed landscape.
Remember, the Webbs project was introduced to the Australian investment landscape in 2007, when Silvermines emerged as a listed company. At the time, the price of silver was well below the US $15 mark.
Likewise, back in 2015, when Silvermines acquired the Conrad project, the silver price was hovering around the US $15 mark.
Today, the US-dollar denominated silver price is over $27, and the Australian dollar is also weaker against the USD (both in 2007, and in 2015, it was north of the 0.70c mark, compared to circa 0.65c today). With this backdrop, second-tier silver assets like Webbs and Conrad look quite attractive.
But Thomson have got more going for them than Webbs and Conrad.
Of the minor assets, the most noteworthy is the Harry Smith project, which has the potential to be a nice little earner for the company.
Harry Smith is often overlooked, because the gold grades are not particularly spectacular, mostly falling between 0.5 and 2 g/t au.
However, in the mining game, the depth of the mineral resource is as important as the grade, and the shallow Harry Smith deposit is a stand out in this regard. You could dig up some of the gold with a shovel.
With gold hitting all-time new highs, I'm sure Harry Smith would be viable right now.
There is one 'elephant in the room' that I've glossed over so far: their one Queensland asset, Texas.
The liabilities associated with this asset of course nearly K'OD the company, on account of the excessive precipitation in the area over 2021 and 2022.
As I understand, the owners of the Texas asset are responsible for cleaning up contaminated water sumps at the site, and the heavy rain over those two years dramatically increased the volume of water at the site, which is why the management tried to pass off the assets to Warwick Gold at the end of 2022.
Fortunately, the rainfall levels at the Texas location haven't been problematic over the past 12 months or so.
But even in light of this issue, I believe there is potentially value to be unlocked in this asset.
I'm going out in a limb in saying this, and it goes without saying that Thomson would have been better off if they haven't purchased the asset in the first place.
However, I don't think the problem is the Texas project per se. Rather, the asset wasn't simply the right fit for Thomson.
In my view, Texas should be viewed as a high-risk, high-reward play. While it didn't make sense for Thomson to purchase the asset in 2021, it might have been suitable for a larger mining company, with an existing, cash generating asset, to provide a something of a protective buffer to counter the risks associated with the project.
Keep in mind, however, that while the 'risk' side of the Texas equation is relatively fixed, in the sense that it is influenced by largely unpredictable weather patterns, the 'reward' side fluctuates with the peaks and troughs of the gold and silver price.
In other words, Texas is highly leveraged to the prices of these precious metals. As the gold and silver price increase, the risks diminish relative to the potential rewards. Were there to be a sudden surge in the gold and silver price, with both jumping by another 30% or so over the short term, I suspect the market would percieve the risks associated with the Texas asset to be quite trivial, or at least relative to the value that could be wrung from it.
The Texas asset certainly tests my nerves, but if there were ever a 'good' time to be holding it, it would be when the price of gold and silver are on an upward track, and this does seem to be the case currently.
Indeed, if the suspension was suddenly lifted, I think you could argue that Thomson would be one of the best value mining stocks on the local bourse.
In closing, I'll return to one of the key points mooted above.
Whoever is now running the company needs to draw a line in the sand and move on from the proposed low-ball entitlement offer at the start of last year. As I've argued above, it didn't really make much sense at the time, and given the subsequent rise in the gold and silver price, it would look even more hare-brained now.
Apart from that, the whole logic behind the transaction seems to have been geared towards picking up the Mt Carrington asset, but with Legacy having pipped Thomson to the post, that ship has now well and truly sailed.
If Thomson manages to get back onto the straight-and-narrow, and I am optimistic about this, I think it could be set for a strong rebound. As suggested above, the closest analogue to TMZ on the ASX is proabably Legacy, which currently boasts a market cap more than five times that of Thomson.
But if the stock does get defibrillated, the one thing that could stymie a bounce-back would be a highly-dilutive, low share price capital raising.
So, boom or doom? Thomson is certainly a stock that like to keep everyone guessing.
In the meantime, Thomson shareholders continue to wait, with bated breath.
(20min delay)