Been following the MXR story for about a year, and bought and sold this stock a few times. Have stayed away for the most part, given, the ~2.5bill shares on issue.
The Burbank Mill has a capacity to process 180,000 tpa, and it was purchased by MXR for $2m (that will be paid back of the 24 month period). This is an exceptional, given, that in Aug 2015, KDR was prepared just lease the premises and pay RMS ~$6 per each tonne the process. This would mean the Burbank Mill as purely rental asset with zero overheads has a capacity to generate over $1,000,000 in revenue. The profits from Toll Treatment should be above an beyond $1,000,000, as MXR would carry an element of risk (staffing issues, etc.).
KDR's announcement is below: http://kidmanresources.com.au/live/wp-content/uploads/2015/08/ASX-Announcement_Kidman-to-cut-sosts-with-deal-to-lease-Burbankss-Mill_20150804.pdf "Under the deal, Kidman has an initial one year lease with an option to extend by mutual agreement. Kidman will pay Ramelius $5 per dry metric tonne of ore processed and $1 per tonne of capacity utilised in the TSF."
In relation to Burbank Mill, it is right beside KDR's Burbank Mine (and right next to BARs MLs/ELs). KDR's Burbank mine is for sale. The last announcement made by KDR's last announcement in relation to the Burbank Mine Sale outlined: "the Company and Resources & Energy Group Limited (ASX: REZ) have been continuing discussions in relation to the proposed Sale of the Burbanks Mine with a view to reaching a mutually acceptable outcome. However, the transaction is unlikely to proceed under the original terms and the Company is continuing discussions along with other interested parties to progress a potential transaction."
The asking price price that was set by KDR at the time was only $4.5mill, and they were quite generous terms.
The REZ $2.5 million convertible note to be issued to KDR will be on the following terms: • Term: 3 years • Interest rate: 5% per annum • Conversion price into ordinary shares of REZ: 20c • REZ has the right to repay the note in full within 12 months at its face value of $2.5 million. In the event of repayment the conversion rights into ordinary shares of REZ will lapse. The cash payment of $2.0 million will be made in the following instalments: • 1 payment of $100,000 upon execution of a formal agreement; • 1 payment of $400,000 to be paid at completion occurring; and • 3 equal 6 monthly payments of $500,000 each commencing 6 months following completion.
At $0.002, MXR has a MC of 5.7m, and a long-term liability of 2mill (due to the Burbank Mill purchase). It would equate EV of $7.7 mill. If the Burbank Mill was to run at ~75% capacity, it is likely to generate over ~$810,000 in profits (purely based as rental asset, not a Toll Treatment processing facility). That is a P/E of less than 10.
If the purchase of KDR mine is on the cards (and on similar terms of REZ), then there is a tremendous upside to MXR shareholder. From KDR’s website “Kidman Resources has re-established the operations of the Birthday Gift underground mine and recently announced a maiden Indicated and Inferred JORC resource of 99,000 ounces at 5.7gpt.”
180,000 tpa x 75% of nameplate capacity x 5.7 gpt x 90% recovery = 21462.18 oz per annum. Depending on the all in costs and prevailing gold price, MXR could potentially pay for the purchase of the Burbank Mine in a year:
$100 margin – ~$2.14 million
$200 margin – ~$4.3 million
$300 margin - ~$6.45million
$400 margin - ~$8.6million
You get the drift.
Hopefully, if this eventuates hopefully MXR aims for a high margin business based on current known.
DYOR.
MXR Price at posting:
0.1¢ Sentiment: None Disclosure: Not Held
