While I'm not privy to the inner working of the company, my personal view that Thomson will escape the suspension quicksand, though exactly when is anyone's guess.
My feeling is that the environmental authority fees owed to the State of Queensland that were mentioned in that ASX query letter shouldn't rank as a real bogy for shareholders . Although it would have been preferable for the company to have addressed this matter in an announcement, the omission suggests to me that the management may have believed they could avoid drawing attention to it.
If they thought that the matter was significant enough to end up flooring the company, they surely wouldn't have just brushed it aside so casually. But apart from that, in that last announcement they mentioned they were set to pay the outstanding balance by the 8th of December, and as we haven't heard anything in the more than three weeks since, in this instance, 'no news' can probably be taken to be good news.
It would be a darn shame if the company was brought down on account of a lousy $145,000 of unpaid fees.
As we enter 2024, I see two primary challenges facing the company: the first, and most obvious task at hand will be getting the company shares out of the freezer, and the second relates to the complexity surrounding the capital raise issue, exacerbated by the involvement of Lind
It is hard to believe that the initial, abortive attempt to raise capital was almost a year ago now.
The proposal to raise capital at a share price at just 0.002c back in February last year was something of a revelation for most shareholders, to put it mildly. The issue price was at such a steep discount to the prevailing market price you'd have to assume that Lind must have had them over the barrel.
Thereafter, Thomson's shares commenced their extended suspension, and when Lind finally did end up stumping up some funds in early September, they managed to undercut even the previously proposed bargain-basement issue price, getting in for as little as 0.001 c a pop.
This invariably creates something of dilemma for the company: are they going to offer the same terms to the remainder of their shareholders?
While some shareholders might understandably be keen to get hold of a stack of TMZ shares at a tenth of a cent, over the long run, issuing large numbers of shares at low prices is a sure-fire way of destroying the value of listed companies.
Offering the equivalent terms to the broader shareholder base would substantially dilute the value of all pre-existing TMZ shares.
But perhaps more to the point, it would just look bizarre: why is a company, which is sitting on some promising-looking silver and gold assets, raising capital at the lowest price possible, at a time when the silver price is soaring and the gold price, in Australian dollar terms, is touching record highs?
You have to scratch your head, in wonderment as to how the company ended up in this predicament.
If I am going to take a step back, and try to tease out what went wrong, ultimately, I think it boils down to a failure of strategy.
I don't really think that the management of Thomson have been incompetent, or lazy (the one possible exception being the former chairman, David Williams, who, in my estimation, wasn't much more than a seat-warmer).
Rather, I think the Thomsons problems stem from the silver strategy that the company embarked upon back in 2020.
I understand why Australian exploration companies are drawn to silver. Silver has a cult-like following, and any exploration company chasing the semi-precious metal is probably going to catch the eye of some of the silver fans. And of course, more interest generally translates to more investors, and investors are the life-blood of junior mining stocks.
A comparison of two of Thomsons asset sales about a year ago starkly illustrate the curious allure of silver assets.
On the one hand, TMZ found a buyer for their Texas silver project in David Catsoulis' company Warwick Gold, who agreed to pay $3.5 million for the asset ('Sale of Texas Project', 6/12/22)
By way of contrast, just over two months later, Thomson mentioned that they had sold their Bygoo tin project for just $600,000. ('Fully Underwritten Entitlement Offer', 15/02/2023).
What I find interesting about these asset sales, is that in terms of quality, Bygoo was almost certainly the superior asset of the two. I remember speaking to one geologist late last decade who told me that he considered Bygoo to be one of the best undeveloped tin projects in the world.
On the other hand, while Catsoulis seems convinced that there is value in the Texas project (see below) the project has clearly been more trouble than it is worth. I certainly wouldn't rank it as a top-tier silver asset, simply on account of the hassle it has caused.
To be fair, the price TMZ received for Bygoo likely reflected a firesale price, whereas it seems that the deal with Warwick was probably months in the making. But at the end of the day, the divergence between the prices the company received for these two assets is so stark, you'd have to assume that the high price paid for the Texas project at least partly reflects a 'silver premium' that is baked into the price of such assets.
Even as far back in 2015, when the silver price was in melt-down, Silvermines was able to attract plenty of support from retail shareholders, seemingly keen to tip money into the venture and thus keep the company solvent.
The management of Thomson were watching with interest from the sidelines, as is evident from a Silvermines announcement at the end of the same year. In December, 2015 Thomson executed a farm-in deal with SVL in relation to some of their tenements ('Silvermines Executes MOU', SVL announcement, 8/12/2015). So it would seem that Thomson's pivot to silver was some five years in the making.
I think the fundamental problem with this strategy is that while there is significant investor interest in silver, numerous players in the small mining space have already seized upon this enthuiasm. Boab Metals, for example, made their move into the silver space in 2018, and Manuka Resources followed suit a couple of years later.
As a consequence, I just don't think that it is possible for a small exploration company to nab a top-notch quality silver project today. The projects that remain attainable are either second-rate or problematic.
Essentially, I reckon Thomson have missed the boat on silver. A tiny exploration outfit such as TMZ should be focused on buying the best value-for-money propositions, and at the moment, silver assets just don't fit the mould.
Obviously, I don't think makes sense for TMZ to ditch the Webbs/Conrad projects, which seem to offer promise. While these silver projects are small, they could become valuable at a higher silver price (particularly if the USD silver price climbed above the $40 mark, and I tend to the view that this will happen within the next three years).
However, if Thomson manages to beat the current suspension, I think the company would be wise to reconsider the strategy that they've been pursuing over the past four years. In 2024, I very much doubt that the best value local projects are going to be found in the silver space.
Mind you, I suspect that David Catsoulis might disagree with the above statement.
Last week, it was reported in the Australian that the buyer of the Thomson Texas asset claims to have found $2.3 trillion dollars worth of silver and other precious metals at the project. (I don't have access to the original article, though elements of the report were reproduced in other publications- maybe Kippax might be able to paste the text from the article, assuming he is still a subscriber)
Unfortunately, Queensland’s Mines Department refuses to accept and process the application for him to mine.
Needless to say, I am a little sceptical of Catsoulis' trillion-dollar claim. But I certainly hope he is right.
Keep in mind, that as per the Texas sale agreement of December 2022, Warwick gold are required to pay Thomson a 1% smelter royalty on all silver, gold, copper and zinc extracted from the site.
1% of 2.3 trillion = 23 billion.
Let's hope David Catsoulis' latest venture proves more fruitful than his previous efforts.
(20min delay)