@zacko92 - Looking at your other investments, I do not question your "risk appetite".
But I also think it is relevant to compare the level of risk and the potential reward.
So let's "compare the pair", shall we? I picked AKO as you note this in your footer as "
AKO - Hidden gem with enormous potential for new iron ore district".
| | CLE – Cyclone Metals | AKO - |
|---|
| 1 | Market Cap | $82M | $18M |
|---|
| 2 | Main Project | Iron Bear | Bekisopa |
|---|
| 3 | Location | Canada | Madagasca |
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| 4 | Iron ore province | Existing | “New iron ore district” |
|---|
| 5 | Resource | Large - 16.7 Bt
(billions not millions) | Small - 194.7 Mt
(millions not billions) |
|---|
| 6 | PFS | No – expected late 2025 | No – expected March 2025 |
|---|
| 7 | DFS | No – planned completion in 2027 | No – no plans to complete DFS |
|---|
| 8 | Cash at bank | $2.65M – December 2024 | $0.65M as December 2024, raised $1.293 before costs in January 2025. |
|---|
| 9 | JV Partner | Vale contributing US$18M to fund next stage of development | None – uncertain how to fund next stage after PFS release |
|---|
| 10 | Plan to get to decision to mine or buy out | Yes | None – uncertain how long it will take to complete DFS and then funding to reach a decision to mine |
|---|
| 11 | Dilution to get to decision to Mine | 75% plus some funding for corporate overheads | Unknown – uncertain on how to fund corporate costs, DFS and then construction, so uncertain what percentage of a mine the current shareholders will hold. |
|---|
| 12 | Mine economics | Nothing recent released.Expecting 8Mtpa to 20Mtpa as minimum start up. CIA’s Kami project is 9Mtpa with NPV of US$1,140M (pre tax) using US$120/t for 65% Fe and US$3,103M using market pricing. Assume at least double NPV if CLE does 20Mtpa start up and could ramp up higher. | Five year mine life with first year production at 0.5Mt, peaking at 2.0Mt in year 4 for a total of 5.5Mt over five years at average 60% Fe.Scoping study suggested NPV of US$125M (pre tax) using iron ore price of US$100/t for 62% Fe. |
|---|
There is risk in any junior resource company.
However, to me CLE has a compelling plan on providing a pay out to shareholders (either Vale buy out or sell on market) within a three year period at many multiples of the current share price with the biggest risk being whether Vale will continue with their investment. However, given Vale's experience, existing mines in the area and future need for high grade magnetite for green steel, I consider that risk to be lower than average.
In contrast, AKO does have a PFS soon to be released, but has no plans on how to get to a DFS and then funding for a decision to mine. There is no timeline on when to get to a decision to mine. Assuming they get to a decision to mine, then there is a two year pay back period and I assume reasonable returns in year 4 when they get to peak production of 2.0Mtpa. And assuming they get to a decision to mine for an NPV of US$125M, how much dilution might there be along the way, such that existing shareholders might only share in half or less of that NPV. The pot of gold for AKO to me could be what they do with surplus cash from the mine and will they be able to start up a bigger mine with a longer mine life than five years - but surely that has to be even more uncertain that what the NPV of Iron Bear might be.
To me, at its current market cap, CLE has one of the best risk v's potential/probable reward ratios that I have seen.
My suggestion is to forget whether the NPV will be US$1B or US$10B - and accept it is likely to be in that range, and then look at all the usual risks of a junior resource stock (access to power, rail, port, JV funding) and consider the risk v reward potential along with the likely plan and timeline to get there.
