Dragged on for a while and wanted to get it off my plate, so a bit rushed, even though a lot of info is included (hopefully haven’t missed anything).
Numbers:
MC: $38M Cash: $5M
EV: $33M
Major Shareholders/backers:
Mr NST.ax, Bill Beament, owns almost a quarter of VXR through NST.ax and the Precision Opportunities Fund.
Also, now that NST.ax is taking over/merging with SAR.ax, and Bill is moving from Executive to Non-Executive Chairman, he’ll have a bit more time on his hands and might play a bit more with his other toy (VXR).
Northern Star Resources (NST.ax): - ~$12B MC
- owns 18.5% of VXR
- have a Director on VXR Board (one of Bill’s Key Management Personnel at NST.ax: their Chief Development Officer is the VXR Director)
- average NST buy-in price into VXR is 19c, so need it to about double from here just to break-even (haven’t gone back & tracked this 19c entry - got from HC!), but NST going from <$10M MC to $18.5B once takeover/merger of SAR.ax is finalised; Bill knows a bit about making and creating money
Precision Opportunities Fund: - Fund run (and part-owned) by NST.ax’s Executive Chairman/Chief (Bill Beament)
- owns 3.8% of VXR
Directors: - VXR Chairman is also Chairman of ~$6B SAR.ax (& $700M PLS.ax)
- SAR.ax & NST.ax just announced a mega-merger – about to become a top 10 gold producer in the world
- own 3.1% of VXR
VXR’s Sulphur Springs Project: - located in the Pilbara, Western Australia (one of the best mining regions in the world)
- $100M spent getting project to this stage
- 120,000 meters of drilling completed
- DFS completed
- near-term producer
- high-grade deposit (17.4Mt @ 3.2% CuEq)
- main (Environmental) Approval (main handbrake for a long time) received a few months ago
- +10yr, initial mine life
- Life-of-mine revenue of $2.6B+
- Life-of-mine Free Cash Flow of $800M+
- Average Annual Pre-tax Cash Flow of $80M
- $76M of carried-forward tax losses available to be used up
- NPV of $444M
- Capex of $210M
- current JORC resources: 17.4Mt @ 1.3% Cu, 4.2% Zn, 0.2% Pb, 17 g/t Ag, or
- current JORC resources: 17.4Mt @ 3.2% CuEq @ 8.8% ZnEq @ 285 g/t AgEq
- resources are from VMS deposits at 2 prospects (~7.5km from each other) at the project (6 more look-alike prospects = potential for project to grow to 4 times the current size (VMS deposits occur in clusters))
Project Manager - Brad Walker: Venturex’s development strategy for Sulphur Springs is being overseen by the Company’s Project Manager, Brad Walker. Mr Walker has extensive engineering and management experience in mineral processing, site construction, commissioning and operations. His recent engagements includeoverseeing the construction of the Gruyere gold mine in Western Australia, Perseus Mining’s Sissingue development and Resolute’s Syama Expansion Project.
Belt-scale Potential along VXR’s Panorama Trend: - current endowment >17Mt (Sulphur Springs and Kangaroo Caves)
- potential to go resources to 4 times the current amount through 6 more look-alike prospects
- typical of a VMS project where deposits occur in clusters
- 2 deposits defined so far
- next one on its way (Breakers)
- others to follow
Further Expansion Ongoing while progressing towards production:
Breakers Prospect: - next VMS prospect to be defined into a deposit at the Sulphur Springs project
- drilling last year confirmed VMS-style mineralisation over 1km strike
- 2019 results: 18m @ 7.75% Zn, 2.03% Pb, 0.25% Cu and 22.8g/t Ag from 155.0m
- follow up drilling about to commence at Breakers:
XA8 Prospect: - same project (at one end of the project grounds) but different mineralisation style
- highly prospective to host nickel-sulphide style mineralisation
- drilling in 2018-2019 intersected 17m @ 0.66% Cr, 0.33% Ni & 6m @ 0.2% Cr, 0.1% Ni
- 2 holes to be drilled in the current drilling program along with Breakers
- free hit with potential big upside if it hits:
Results from the last significant Sulphur Springs drilling campaign: - some holes have multiple mineralised sections like, for example, hole SSD099 has:
-- 29.9m @ 9.02% Zn, from 169m +
-- 36.5m @ 3.33% Cu, from 204m (incl. 6.8m @ 8.43% Cu from 217m)
Cross sections related to those results:
Current deposits open in all directors with potential to grow significantly:
Hopefully Sulphur Springs keeps growing, Golden Grove style (on top of the other 6 look-alike prospects):
Valuations – from Peer Comparisons:
PEX.ax: - Paid $17M cash a few months ago to purchase 50% of the Mallee Bull deposit (located in NSW, Australia)
- Mallee Bull deposit JORC is of 6.76Mt @ 1.8% Cu, 31g/t Ag, 0.4g/t Au, 0.6% Pb, 0.6% Zn
- Mallee Bull deposit JORC is of 6.76Mt @ 2.9% CuEq
- Mallee Bull contains 196,040 tonnes of CuEq
- PEX paid $17M for 50% of 196,040 tonnes CuEq (98,020 tonnes) ($173.43 per 1 tonne CuEq)
- VXR has 558,540 tonnes CuEq
- 558,540 tonnes CuEq x $173.43 per tonne paid by PEX = $96.86M (VXR valuation)
- $96.86M VXR valuation = 25.3c share price for VXR
Plus:
- Mallee Bull likely not a mine by itself as too small (one third of size of Sulphur Springs)
- no Scoping Study or PFS or DFS done on Mallee (a lot less advanced than Sulphur Springs)
- so, based off this transaction the valuation of $96.86M is a bare minimum
- you’d give Sulphur Springs a big premium on Mallee Bull for being a much bigger, very economical/robust project, and much more advanced with DFS/near-term production (compared to nothing for Mallee)
- so, I’d value VXR/Sulphur Springs at a minimum of double of the Mallee Bull price, easily ($193.7M or 50.6c VXR share price)
- Mallee Bull is a small deposit/likely not a mine, compared to a much bigger and very economical Sulphur Springs project) + PEX would’ve bought it as it was good/bargain buying
AML.ax: - $83M market cap currently (+$20M debt, so $103M, like-for-like)
- was $155M market cap (+$20M debt, so $175M, like-for-like) a few months ago
- Scoping Study completed & results nowhere near as good as VXR’s DFS
- a lot further behind VXR with no PFS, let alone DFS
- used $6.8k+ for Cu price in Scoping Study (VXR used only $6.3k in DFS) and economics still better on VXR
- if AML can currently be worth $103M & nowhere near as good and as advanced as VXR, then VXR should be minimum double that ($206M market cap or 5+ times higher than current market cap)
ADT.ax: - $344M market cap
- $500M+ market cap a few months ago
- higher EqGrade than VXR
- slightly higher contained resource than VXR
- just completed its PFS and starting on DFS
- not as advanced as VXR (DFS completed, financing next then construction)
- project in Bosnia compared to Pilbara/WA for VXR
- has its advantages and disadvantages versus VXR but gap between the two should be a lot closer (ADT is valued at 10 times higher than VXR and was 15 times higher a few months ago)
EM2.ax and NWC.ax: - explorers valued at $72M (100% project basis) & $44M respectively
- both exploring/projects in the USA
- no JORC resources yet
- have NI 43-101 resources (EM2) and small high-grade historical resource (NWC)
- no Scoping Study, PFS or DFS done yet
- VXR should be valued a lot higher than either of these
- a lot more time to go, a lot more money to spend & assuming they get a resource up as good as VXR’s, and then do the studies, then they should be valued at what VXR should be now (multiples from here)
- VXR could/should be in production by then, with more proven resources, etc.
So, PEX, AML, ADT, EM2, NWC valuations all look about right for where each stock currently is and all have their potential upsides – VXR is the one that needs to move a lot to get to somewhere where it looks like fair value (per above comparisons/valuations; anywhere from 2 to 5 times the current valuation, without any further news).
Valuations – from Research Reports (risked/discounted):
From one of the research reports; estimated financials (shows the numbers that we’ll be looking at in the first few years of production and increasing further):
- $40M Revenue & $11M Profit in year 1
- $215M Revenue & $79M Profit in year 2
- $258M Revenue & $85M Profit in year 3
- $263M Revenue & $92M Profit in Year 4 - current VXR total company valuation is $33M (food for thought/comparison)
Financing:
Before the main/Environmental approval started taking years to come through, financing was pretty much locked in and VXR were spoiled for choice for financing:
- $100M term sheet sign with Trafigura (US$180B+ annual revenue) (repayment via copper & zinc concentrates production)
- $30M through Northern Australia Infrastructure Facility (NAIF) fund
- banks lining up for their share
Current financing comments: - “Company continues to engage with several parties for a strategic equity or project investment. Due diligence and proposal discussions are ongoing and the Company will update investors in due course”
- “With the strong increase in the copper price over the past several months, and positive outlook, we are very encouraged by considerable renewed interest in project equity proposals following confirmation of the Ministerial approval for the Project and the strengthening in the copper price”
Once financing is sorted à it’s Construction time à and then Production.
Copper Price Charts (great run in 2020 and price currently at almost 5-year highs):
Current Activities & Upcoming Activities/Newsflow:
Sulphur Springs:
- progress financing
- then construction
- then mining
Breakers Prospect:
- about to commence drilling - drilling last year confirmed VMS-style mineralisation over 1km strike - following up last year’s results (18m @ 7.75% Zn, 2.03% Pb, 0.25% Cu, 22.8g/t Ag from 155.0m)
- potential to turn into a third deposit at the project
XA8 Prospect:
- about to drill a couple of high-impact holes
- previous drilling intersected a different mineralisation style(at one end of the Sulphur Spring project)
- highly prospective to host nickel-sulphide style mineralisation
- drilling in 2018-2019 intersected 17m @ 0.66% Cr, 0.33% Ni & 6m @ 0.2% Cr, 0.1% Ni
- free hit with potential big upside if it hits
In summary:
- EV: $33M
- Cash: $5M
- spent $100M on project to get to this stage
- 120,000m of drilling completed
- ~25% of VXR is controlled by Mr NST.ax (Bill Beament) through NST.ax and Precision Opportunities Fund
- major, multi-year, handbrake released recently after getting the main (Environmental) Approval for the project (which means financing can now progress and then construction)
- VXR currently priced like an explorer with a couple of good drill hole results
- should be priced a lot higher for what it is; a near-term producer
- very profitable project economics ($2.6B+ revenue, $800M+ free cash flow, $400M+ NPV)
- potential to increase resource size to 4 times the current size from further prospects at the project
- comparisons to peers indicate that VXR valuation should be up to 5+ times higher than current, without any further news
- valuations from research reports indicate that VXR should currently be valued at up to $300M+ - first few years of production (and increasing) look like this:
- $40M Revenue & $11M Profit in year 1
- $215M Revenue & $79M Profit in year 2
- $258M Revenue & $85M Profit in year 3
- $263M Revenue & $92M Profit in Year 4
- current VXR total company valuation is $33M! (food for thought/comparison)
VXR chart looking good too, after breaking long-term downtrend and volume picking up significantly:
Way too cheap here and should do nicely from the current $33M valuation, for a near-term producer.
Cheers,
GB.
VXR Price at posting:
10.5¢ Sentiment: Buy Disclosure: Held
(20min delay)
