Another stock to put on watch is HVY as in..Microcap HVY developing garnet mine - first non-binding MoU offtake is in
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,750,000 HVY shares and we invested $50,000 in the HVY royalty agreement deal at time of publishing this article. The Company has been engaged by HVY to share our commentary on the progress of our Investment in HVY over time.
We are increasing our Investment in micro cap stock Heavy Minerals (ASX:HVY).
This morning the ~$4.7M market capped HVY announced its first non-binding offtake MoU.
The offtake is for 15,000 tonnes per year of HVY’s future garnet production for 3 years at its WA project.
According to the announcement, that’s ~ 10% per year of forecast yearly production.
A rough, back of the napkin estimate is that could equate to ~$10M per year revenue for 3 years to HVY.
(our rough estimate is based on 10% of the average yearly forecast revenue, which we worked out from the 2022 HVY scoping study to be ~$100M per year, by dividing the life of mine revenue of $1.59BN by the 16 year estimated mine life - so it’s a pretty rough calc. Also this is a non-binding MoU too, which needs further negotiation - and commodity prices are inherently volatile.)
AND we may see additional deals signed in the coming months which gives us more of an idea on pricing and potential revenues for HVY...
HVY mentioned in today’s announcement that it was engaging with “Garnet Distributors in North America and Internationally”.
(Source)We are Invested in HVY because of its tiny market cap relative to its advanced feasibility study garnet project economics.
The scoping study based on HVY’s resource had a $253M NPV, on a CAPEX of $110M.
(a pre feasibility study is now underway which will firm up these numbers)
A later stage garnet producer next door to HVY is capped at ~$100M and trades with an enterprise value of >$200M.
We are increasing our Investment in HVY because we think it could successfully develop a profitable garnet mine over the next few years.
We first Invested in HVY back in July 2023 at 10c.
We then bought into the HVY royalty agreement in December.
And now we will be further adding to our HVY position by taking up our maximum allocation in the HVY SPP at 8.2c.
HVY is looking to raise a very modest $750k at 8.2c per share from existing shareholders and the offer is open until 5:00pm (AWST) on Friday, 15 March 2024.
HVY shareholders can see the updated SPP timeline here. The instructions on how to participate are here.
In our view, HVY’s share price has been tracking sideways for 6 months because the market has been waiting for HVY to announce further funds have been received from the sale of a royalty on its future production.
The first $500k from this royalty deal was signed on, received and announced in December 2023 (we put cash into this).
This money was put towards starting off the PFS, which has now commenced.
We think if the market sees more royalty funds come through, then the funding question over HVY will be removed and the HVY share price should re-rate from its current ~$4.7M market cap.
This is why we are now increasing our position in HVY.
We will be taking up our full SPP allocation of $30k.
