I watch a lot of small cap resource stocks and some have seemingly done everything right but the sp's have performed terribly over the last couple of years regardless.
PMT discovered a very large, high grade spodumene lithium deposit that is as good as many producing deposits but due to the much lower lithium price, the market cap fell from around a billion dollars to $170mill and the sp has dropped from over $2 to just 30c. To me that seems overdone if past forecasts for a lithium deficit building from around 2029 are correct. The market can be very short term focused with small caps.
RNU also has a great looking project (graphite) and attracted government financial support but a weaker graphite price and price outlook has seen its sp fall from 36c to 5.4c.
These are big falls for what look like very good, large scale projects.
Minbos's sp has also fallen significantly and the TSP price also corrected but there are two important differences. Minbos still has attractive margins at the lower TSP price which had stabilised and then increased from its lows and its capex needs are a small fraction of the capex for those other two projects. It is a very small capex for any resource project and around half has already been paid or held in cash following the SWF investment and with major plant components paid for several years ago and now on site.
With under US$25mill left to complete the project, and a project with strong margins at current commodity pricing, the capex requirement seems much more attainable but we still need to satisfy the IDC offtake requirement.
For such a strongly needed project for Angola, you would think a solution should be achievable and it should only be a matter of when.
At end of December, there was $13mill in cash. Enough to complete stage 1 construction and fund overheads for around 6 months.
The sp decline is pricing in a lot of risk. Whether that's justified or not will be more clear over the coming months. No news for another month or two would likely see the recent low retested. Positive funding news should easily see the sp back above the recent 9.5c high very quickly.
