I know this is a long thread, but it seemed the best place to...

I know this is a long thread, but it seemed the best place to put it. PacPartners has done a comparison.

COMPANY	G6 Metals Limited (G6M) EQ Resources Limited (EQR)		Date: 5th Dec 2024
MCAP / Share Price	G6M | Suspended from trading EQR | $111.9m f.d.; $0.050/share
RECOMMENDATION	G6M | Not formally covered EQR | Speculative BuyPrice Target $0.083/share				High Risk Rating
EVENT	G6M recapitalisation with a peer comparison
This report: G6M_EQR_PAC_05Dec2024Link to full EQR re-initiation report 4th Oct 2024: EQR_RR_PAC_04Oct2024
G6M - Group 6 Metals Ltd – Recapitalisation Plan in context 1.G6M has been suspended from trading since the 27th September 2024 as it sought to recapitalise its King Island Dolphin Tungsten Mine. 2.Last traded price of $0.02/share capitalised G6M at $25.1m. 3.Previous year’s price high was $0.19/share. G6M’s price has trended down as the market had been gradually discounting a tough production outlook and eventually, the need for balance sheet remediation.

An emerging recapitalisation plan for G6M Group 6 Metals Limited reported on 4th December that it has reached agreement with its senior secured lenders, subordinated lenders and some of its larger unsecured creditors to undertake a substantial recapitalisation. Recapitalisation Plan aims to reduce total debt ~A$67.2 million and trade creditors being converted into equity. Senior lenders, subordinated lenders and certain unsecured creditors’ post recapitalisation ownership of issued ordinary shares is expected to be ~97.02% with existing shareholders significantly diluted. The Recapitalisation Plan provides an additional A$23.75m in funding from the existing senior lenders, to support a complete review of the business, and the implementation of a transformation plan. New facilities of up to A$17.8m will attract a loan term to April 2027 at 12% pa interest rate. In addition, existing shareholders will be able to participate in the recapitalisation at first opportunity. The proposed structure is subject to regulatory and shareholder approvals expected for early 2025. An independent expert report will be supplied for shareholdeers prior to vote. 1.G6M’s aim is to strengthen the balance sheet, lowering debt servicing levels, and providing necessary liquidity to review, plan and execute an operational improvement program. 2.The recapitalisation plan is also provides funding for capital improvements on the processing plant necessary to drive profitable operations. 3.The plan includes changes to the existing board and executive management team – with the Chairman, the MD/CEO, CIO and two Non-executive Board Members leaving and being replaced.

Causes of problems at G6M 1.Slow completion of the new processing plant with cost overruns. 2.Inability to boost planned throughput a primary driver resulted in slower than expected cashflow rampup. 3.Crucially, low tungsten recoveries combined with the above, caused major financial stress. This came despite having good grades at 0.5% WO3 and most recently rising ore grade as fresh and higher-grade ore was uncovered to enable mining >0.7% WO3 grade. G6M’s grades compare favourably to many international peers as well as EQR’s Mt Carbine and Saloro Spain operation’s primary ore grades of 0.2% to 0.25% and much lower for dumps reprocessing.

Metal Recoveries to saleable concentrate – are crucial 1.Dolphin Mine’s high-grade tungsten reserve is finely disseminated WO3 Scheelite mineral is not simple to process and recoveries in the last couple of quarters were only in the 42% to 46% range. Recoveries remain too low and the recapitalisation in part is to try and boost recovery of payable metal. 2.This compares to recoveries at EQR’s Mt Carbine Mine’s recoveries of 75% to 80%. of and Saloro Spain operation’s now >60% recovery (going to ~65-70%) from <50% prior to EQR’s acquisition in MarQ2024. 3.Rising throughput and recoveries saw EQR in the September Qtr 2024 on cash received/cash outlay basis post its first operational positive cashflow (see below). Dolphin Project’s Mined grade – as per G6M Quarterlies. Grade is good and improving as hi-grade fresh ore benches are now uncovered for near term mining. Source: G6M Quarter reports

G6M – plans to boost annual production run rate well beyond recent 578 tpa WO3 run rate. G6M’s Production of WO3 concentrate has been struggling with plant and ore feedstock variability and low WO3 recoveries. G6M’s annualised production of WO3 at Dolphin on SepQ’2024 (i.e. Q1’25FY) was ~578 tonnes pa of contained WO3. 1.With added sorting, process optimisation and more hi-grade fresh ore this run rate is planned to improve significantly. The recapitalisation plan will assist these necessary improvements. 2.More production is required to absorb substantial fixed cost component of the Dolphin operation, that also carries the cost penalties of island logistics. For a sense of comparative production scale that Dolphin mine may aspire to: 1.EQR’s SepQ24 Mt Carbine production annualised was 1,041 tonnes production. This is to increase later in 2025 on doubling of process capacity at Mt Carbine. 2.EQR’s SepQ24 Saloro Spain production annualised was 1,118 tonnes production. At Saloro – current 60% recoveries ate sett to rise to the 65% to 70% range, and increase output a further ~10%.

Comparing SepQ24 Operating cash receipts and costs G6M – negative $6.3m in net operating cash in SepQ’2024. 1.Remedial action is planned for output/revenue, cost rationalisation and finance cost reduction. EQR – positive $1.2m in SepQ’2024. 2.Higher Saloro production and cashflow in DecQ ongoing; 3.At Mt Carbine has added strip ratio over next few months. Later in 2025 – we expect a big lift in output and cashflow.

INVESTMENT RISKS

See review P.18 of the Linked full report for enumeration of investment risks and also risk mitigation efforts. EQR and GSM is a minerals exploration development and production companies. Commodity project development groups have key risks which include, but are not limited to: 1.At this stage both companies have yet to establish enough cash generating capacity to sustain all its efficiency, capital spending and expansion capital programs. 2.Both companies delineated Reserves provide modest mine lives. There is no guarantee that additional exploration will cost effectively find significant new tungsten mineralisation at sufficient grade to add to Resource endowment. 3.Tungsten is a critical material though is still a volatile priced commodity. China controls the majority of Tungsten output globally and its industry policies can cause price volatility, both up and down. 4.Pit production and plant improvements and/or expansion may be delayed or underperform management expectations. 5.Capital – equity and/or debt may be unavailable particularly due to commodity price weakness, project-specific or general market conditions. 6.Safety and environmental performance are key for ongoing licence to operate.