Thor Mining likely to need more cash for 2014 - analystsNovember...

Thor Mining likely to need more cash for 2014 - analysts

November 26, 2013 - 15:30 GMT Location: London

Australia-focused explorer developer Thor Mining will require further financing for its spending in 2014, according to analysts at Progressive Equity Research.

“Thor ended its financial year to the end of June 2013 with net cash of £188,000 [$304,466],” they said in a note on Tuesday November 26.

“Along with the [existing] financing arrangements, we have assumed that the spending on exploration and development necessitates further financing during our forecast period to the end of Thor’s financial year in June 2015.”

Development will begin at Molyhil, Thor’s flagship tungsten/molybdenum project in Australia's Northern Territory, in 2014, the analysts said.

“We have assumed a level of borrowings necessary to fund the level of spending during the two periods which produce operating losses of about £600,000 to £800,000 in each financial year with capex of £1.2 million per annum,” they said.

“Importantly, our estimates effectively exclude any impact from Molyhil, with an assumed zero balance from the development demands and the existing off-take agreement as Thor looks to conclude a further agreements for the remaining 25% to 30% of production.”

Thor also has prospects at the Spring Hill gold project, also in the Northern Territory, and the Dundas gold project, in Western Australia.

“At present, we assume that Molyhil has no impact on revenues or costs. We shall update this when further details of any agreements are made public,” the analysts said.

“Using those assumptions, but without assuming further equity issues, Thor would end [the 2014 financial year] and [the 2015 financial year] with net debt of £1.7 million and £3.6 million respectively.”

This is represented in the analysts’ forecasts by small positive cash balances and assumed borrowings to fund costs.

There is no guarantee, however, that Thor will reach the level of investment that the analysts have assumed, as it could choose to spend less, and nor is there any guarantee it will be able to find further debt or equity finance, although both could be viable options.

“We note the company’s success in raising funds already in its current financial year,” the analysts said.

“In addition, Thor has exciting and highly attractive project assets with clear opportunities for the involvement of third parties in farm-ins or joint ventures. There appears to be significant value in Spring Hill, for instance.”

Thor has the potential to raise funds from the markets, to borrow more, to realise value from existing assets, or simply to spend less, the analysts said.

It could look at these options individually or in some form of combination, they added.

There are numerous risks associated with the company, meanwhile, as with any early stage developer, including the possibility of a lack of skilled workers and fluctuating commodity prices, the analysts said.

“Mining, processing and transportation costs depend on many factors, including commodity prices, capital and operating costs in relation to any operational site,” they said.

“Exploration and development activity is subject to numerous risks, including failure to achieve estimated mineral resource, recovery and production rates and capital and operating costs. Success in identifying economically recoverable reserves can never be guaranteed,” they added.

It is also possible that the companies in which Thor has invested will not be able to gain the necessary permits and approvals for the development of their projects.

The companies in which Thor has an interest might also be required to carry out clean-up operations on any contamination from their activities, or to take part in site rehabilitation programmes, which could vary from country to country, according to the analysts.

“The ability of the Group, and the companies in which it invests, to continue to secure sufficient and profitable sales contracts to support its business [is also a risk],” they said.

Thor’s shares were trading at 0.376 pence on London’s Alternative Investment Market as of 11:34 GMT on Tuesday.

Claire Hack
[email protected]
Twitter: @clairehack_mb

Source: http://www.metalbulletin.com/Article/3283195/Ores-and-alloys/Thor-Mining-likely-to-need-more-cash-for-2014-analysts.html