ORE's debt is minimal in its own right - a handful of millions outstanding at Borax.
On the other hand SDJ has sizeable debts -
Firstly there is some 50m USD in an overdraft facility that is backed by the SBLCs. In effect, this is money owed back to ORE and TTC, and it will flow back to ORE/TTC just as quickly as SDJ pays down the overdraft and no longer requires the faciliyt
Secondly,(as at April) there is 176.8 mUSD outstanding in the long term (10 yr) finance facility with Mizuho Corporate bank. It sounds a lot until you consider the interest rate- approx 4.5%. The interest rate coverage ratio is just fine...
It raises the question of what is an appropriate gearing position for a resource company - normally I would say as low as possible given commodity price volatility and the short life of so many mining projects. In the case of Olaroz though, we have a project that extracts just 15% of the available resource over a 40 year period - this supports a higher valuation multiple and, at the same time, permits a less conservative approach on debt. The price volatility risk is appreciable - ask GXY holders of a handful of years ago - but I guess the reason we're all here is we see the signs of (please excuse my use of this well worn and ill fated phrase) "stronger for longer". I am comfortable with the current debt level in these circumstances and believe we'll see it at a much more conservative position in very short order.
ORE Price at posting:
$4.87 Sentiment: Buy Disclosure: Held
