First glance market appears to be trending to the risk side of the equation given the upside has been transparent for the past few months, though obviously, a strong drill-result would change that. I'm here for the long-haul and a strong supporter of Graham and his team. My thoughts
Reward side 1) strong in-flight and planned drilling program. No other junior/explorer has this level of activity 2) targets are in strong potential areas: copper, nickel, gold 3) targets now focused on Australia - strong probability of being able to move quickly; though I'm very excited by the CDF program and hope this gets back on track 3) AGM notice appears that Graham and fellow directors committing to be for next four years - with options issue 5) Positive statement about reducing director/management fees to manage cashflow by issue of options, am all for this
Risk side1) Cash flow challenge ahead? $2mn COH, estimated cash outflows $1.3mn next quarter - leaving about 1.5 quarters of burn rate. There is some receivables mentioned, though no certainty on value or timing. Graham and team have been exceptional about cashflow and capital management. So I'm not seeing this as a dire situation, though would love to see this is touched at the AGM.
A few options (a)slow cashflow - options instead of payments, being done and slow/pause selected projects (b) raise capital - reasonable potential, though would like to see this avoided given the last capital raise wasn't so long ago and a decision for 2nd round wasn't allocated/taken, (c) take on debt, low potential, really not ideal/needed, (d) acquisition by s32, reasonable potential, challenging to value, would hope it is reflective of option valuation ~7.2c?, (e) provide clarity on estimated range of SAA funding to provide certainty this is under control (e) best outcome, is we hit pay-dirt. There's $1.2mn of projected spend. That's quite substantial for early stage targets. Looking forward to seeing the plan for this at the AGM. , 2) Management / key consultants leave - Always a challenge for juniors; there was a slightly higher underlying risk profile than this time last year, though given COVID-19 + in-flight projects + options, tend to think this is derisked for now
DYOR as always.
AQD Price at posting:
2.5¢ Sentiment: Hold Disclosure: Held
