SXG is a gold exploration company on ASX that I have been a shareholder of lately.
The company has just released its maiden EXPLORATION TARGET yesterday of 1mil oz to 1.6mil oz of gold equivalent (AuEq represents the credit of other minerals such as silver, copper, lead,...as part of the gold recovery/mining process). If we simply talks about gold alone, then SXG's current EXPLORATION TARGET is 0.74mil oz - 1.28mil oz of gold.
SXG's current sp = $1.03
SXG has 184mil SOI and 23.5mil options of different excercise prices of which almost all of them are in the money except 3.6mil options of $1.20 excercise price.
Fully diluted shares = 207.5mil.
(93.9mil shares are escrowed and will be issued to major partner around mid-2024).
As of today, SXG has not had an MRE. It has EXPLORATION TARGET only.
Current drilling is ongoing.
So, here is how BEZ and SXG in comparative sense:
- BEZ's MRE = 3.3mil Oz of gold. SXG's MRE = not calculated yet.
- BEZ's EXPLORATION TARGET = 4.9mil oz to 9.3mil oz of gold. SXG's EXPLORATION TARGET = 1mil oz to 1.6mil oz of gold equivalent, and 0.74mil oz to 1.28mil oz of gold (excluding other mineral credits which does incur extra cost to extract and process).
- BEZ has signed off-take agreement for 3mil oz of gold delivery with Quantum. SXG is still drilling and still needs to compile an MRE and at least 2 more years of work before locking some off-takes I believe.
- BEZ has signed USD $300mil (around AUD $445mil) funding deal as pre-payment for off-take agreement at zero interest rate. SXG is at least 2 years away from some kind of funding deal and at AUD $445mil scale it is a tough challenge.
- BEZ is expected to be able to move to production stage without any further dilutive CR. SXG has around $7mil cash on hand and with aggressive current drilling campaign is expected to do at least 1 CR this year and 1 for each of the next 2 years to be able to do more metallurgical work, Enviromental study, Feasibility study, DFS/BFS,....I think SXG will need at least $100mil for 2024-2026 before it can get into off-takes and financing deals. That means its total SOI will move to around 300mil shares from current fully diluted 207.5mil shares. That 300mil shares is only if it can land a funding deal similar to BEZ's USD $300mil deal. Otherwise it will need to do more CR like many other exploration companies do. And that means to be able to get into production SXG may end up with more than 500mil SOI eventually. We all need to understand that a deal like this USD $300mil deal is very unique and it does not happen often at all to most of other exploration companies on ASX. In other words, SXG will most likely end up with more than 500mil shares rather than 300mil shares before it may be able to move to construction and production.
How could BEZ be valued at $60mil MC with
- 3×times to 4×times more gold resource,
- At least 2 years ahead of SXG on the way to construction and production stage.
- Off-take agreement signed
- USD $300mil funding deal signed (4 deposit payments have been paid so far).
- SXG is currently valued at around $210mil (fully diluted SOI) with at least 300mil shares on issue in the next 2 years and possibly 500mil shares before it can get to production stage?
Shouldn't BEZ be valued at at least double what SXG is valued at TODAY? (SXG is valued at 207.5mil shares × $1.03 = $214mil TODAY).
Hmm, I know which stock I should stick with I think.
PS. I do not think we will see a gold exploration company can sign a USD $300mil funding deal like this BEZ-QUANTUM deal for many many years to come if ever. It is close to impossible.
SXG is not over-valued at all by the way. It is BEZ ridiculously undervalued.
