The junior explorers are swinging into watch-the-pennies mode. Apart from those in the uranium space, the juniors face a cash squeeze as sentiment sours across a broad range of commodities early in 2024.
Short of putting away massively dilutive equity raisings, many are set to go in to hibernation mode, which will only put further pressure on depressed share prices.
It is not a problem for all of the juniors. Those with a cash kitty beyond a standard two-year outlook for an active explorer can expect better than average support for their exploration programs, as well as a steady procession of new opportunities being presented to them by the cash-starved.
It is a situation that Kin Mining (ASX:KIN) finds itself in courtesy of some neat investing in Dacian (ASX:DCN) when Raliegh Finlayson’s Genesis (ASX:GMD) had Dacian in its takeover sights, and a latter sale of 610,000 ounces of in-the-ground gold from Kin’s Cardina project near Leonora/Laverton to Genesis.
The value of the share consideration for Kin’s 7.34% Dacian stake, and the cash and shares consideration for the 610,000 ounces, currently stands at about $77 million, which is more than Kin’s market cap of $72 million.
Apart from the cash and liquid Genesis shares coming to hand, Kin retains two-thirds of the gold resource at Cardinia and its Mertondale projects to the north, both of which come with exploration upside that the company now has plenty of cash to pursue.
It also recently added a bit of a wildcard to its portfolio – the discovery of high-grade VMS-style base metals mineralisation at Cardina East. Follow-up drilling at the “exciting new discovery” is imminent.
Clearly executive chairman Rowan Johnston and the company have a lot of thinking to do about the best way forward beyond continuing to grow and monetising Cardina/Mertondale and following up the VMS discovery.
Johnston is slotted to present at the Resources Rising Stars “Summer Series” conference in Brisbane on February 1. Other not-so-well cashed up presenters will no doubt be full of ideas for him.
CZR Resources (ASX:CZR):
CZR is another on its way to cashed-up explorer status thanks to the proposed sale of its 85% interest in the Robe Mesa iron ore project in the Pilbara to China’s Xinjiang Jiangna for $102 million.
The sale price represents 43c a share, which is interesting given CZR last traded at 34c, and because the company also has its Croydon (gold along strike from De Grey’s Hemi deposit) and Buddadoo (vanadium-titanium in WA’s mid-west) to continue on with.
CZR was last mentioned here in November when it was trading at 22.5c a share. The suggestion then was it was undervalued based on the financial metrics for a development of Robe Mesa and failing that, the potential for Rio Tinto to bid for the company or the asset.
CZR’s Robe Mesa is actually an extension of Rio’s Mesa F orebody. Suggestions that Rio would have no interest in CZR’s ground because it wants a higher grade future looks to be bit of nonsense as it has pattern-bomb drilled up to the CZR fence line.
And in the wake of its Juukan Gorge disaster, Rio should be looking to control what goes on in its own background, albeit across the fence line.
None of that means Rio will seek to outbid the Chinese for CZR’s Robe Mesa. But there are good reasons to think it might.
The sale to the Chinese will be a test of sorts for Australia’s foreign investment policy as the deal is subject to approval from the FIRB and ultimately, the Federal Treasurer, gentleman Jim Chalmers. The Robe Mesa project is boutique stuff in Pilbara iron ore terms. But who knows nowadays?
Assuming that Robe Mesa does get passed on to the Chinese, or Rio at a higher price, CZR is clearly going to be one cashed up explorer. And that is something few juniors on the ASX can pin their name.
As an aside, Mark Creasy owns 53% of CZR and is involved in sale talks with the Chinese for his 15% stake in the project. It is noted that his wife Annie Guo sits on the CZR board which unanimously supports the sale of CZR’s 85% project stake.
Magnetic (ASX:MAU):
A pre-Xmas poll on stocks to watch in 2024 highlighted Laverton gold explorer Magnetic (MAU).
Led by founder and managing director George Sakalidis of former mineral sands fame, Magnetic performed strongly in 2023.
It last traded at 90.5c for a market cap of $216m. Argonaut, which has a $1.80 price target on the stock, and others reckon there is more to come in 2024.
Magnetic’s drilling along a section of the Chatterbox Zone some 15km or so from Laverton has already delivered a resource of 1.23Moz grading a handy 1.69g/t across a number of deposits.
The main deposit is Lady Julie North 4 (LJN4) with its 852,000oz at a better grade still of 2.02 g/t, making it the highest-grade open-pit deposit in WA of scale.
Interesting enough for sure. But the real game-changer for Magnetic, and the reason the company has captured the market’s attention, is the potential for LJN4 to get bigger still.
Drilling for more of its high-grade and seriously thick stacked lodes below the existing known resource is underway, with results likely in the near-term.
Come next month, Magnetic plans to start bringing things together with the release of a scoping/pre-feasibility study for development of the broader Laverton project.
There will be no surprise should the study point to a project with 100,000ozpa production potential for the long term.
Whether any future development on that sort of scale will have Magnetic’s name on the front gate remains to be seen. Laverton, like Leonora to the east, is ripe for consolidation.
There are three big mills within trucking distance owned by others that could do with a feed of the sweet grade ore LJN4 could offer up.
Sakalidis is alert to all that and 18 months ago appointed Jefferies to run a data room on the Laverton project, with toll treatment/sale/takeover all possibilities.
The February study could be the trigger for some action from one of the interested parties. In the meantime, the prospect of thick and even higher grade results from the deep drilling program will continue to enhance the project’s stand-alone credentials.
