The Investor Presentation effectively confirms that we will likely only have 1 drilling event in 2020....in about 6 months - the Q1 2020 Charlie 1 appraisal well targeting 5 primary prospects over 2 plays, and 2 secondary prospects within 1 play. And we are fully funded to that up to a cap of US$23m (~A$34m). This presumably covers ice road, and ice pad, well drilling, and completion and (vertical) flow testing of certain zones if warranted by well logs.
A success dependent horizontal drill and flow test from this bore is expected in Q1 2021 (18 months away) and no doubt our 30% WI will then need to be funded. Given it is still an appraisal, the "explore with equity" realities of life would suggest we need to raise equity capital for that, and hopefully with a considerably enhanced SP from today. Perhaps not unrealistic if C-1V is a successful drill.
Ongoing HRZ assessment is unfunded beyond dwindling cash in the bank, and it appears still requires further analysis of historic well samples, as well as specific acreage delineation, so as to enable a 'hard FO' or data room to be opened. While C-1V will sample HRZ material to feed into this process, there appears to be no viable plan for a 2020 drilling event focused specifically on further exploring or appraising the HRZ asset.
YG appears to be on a timetable of a Q1 2021 drill, to be funded by an FO and with an enabling process that we are as yet uninformed as to the status of. WB is on a back burner evaluation to determine whether we (the consortium) drill further....with May 2021 being the next deadline for a decision there (given current lease expiry date). Worth noting that cash for further drilling would be a challenge for all consortia partners...for varying reasons.
We will probably have about A$3m give or take, in the bank at the end of this quarter. We have company running expenses, annual land lease payments etc to pay for. We have costs of HRZ evaluation and running (eventually) a a data room the re to pay for. We have analysis costs at WB to pay for. We have a data room and FO process at YG to pay for We have debt to service, even if the amounts outstanding are more than offset by monies owed by SoA. So short of an unexpected settlement of all SoA debt in coming weeks, the need for cash will become more acute by year end, IMO. Likely, the BoD will raise sooner rather than later and then let the lead into C1V spud soak up the overhang.
Seems like the funding plan is"
FO for C-1V (completed to a cap of US$23m)
CR for C1-H (to fund our 30% WI contribution requirement - contingent on C-1V success)....likely in mid to late 2020
FO for HRZ appraisal/delineation but interim cash required to buy time for further analysis prior to formal FO commencing)
FO for YG appraisal, but interim cash required to fund land rentals and data room till then.
Interim cash required to keep lights on, pay land rental costs on IW, maintain staffing to support work on HRZ, YG and WB, service debt.....and also for contingency or to take advantage of options and opportunities that may present themselves.
Interim cash requirements listed above , up and until the timeframe that C1-V is completed and tested, is likely to be well beyond cash currently available in the bank.
Given this stark reality, I concur with the views of many, that CR is likely sooner rather than later. But the challenge is avoiding 'death by a thousand cuts'. A challenge made tougher by our SP and our SOI. Would not be surprised to see an imminent (say) A$12m raise at 1.5c, taking SOI to 7.4b fully diluted. Then the required post C-1V success CR in 2020 (touch wood) not only be done at multiples of this number but potentially also tackle the high SOI. Consolidating in the face of a mega discovery would be immensely preferable to consolidating in the realms of where we currently reside. Contemplating the C-1V failure scenario is not on today's agenda. Not for me at least,
All IMO and GLTA.
88E Price at posting:
1.5¢ Sentiment: Buy Disclosure: Held
(20min delay)