Feedback from overseas investment markets is that there is almighty pool of funds looking for a home in the mining space.
There is little doubt that copper pushing through $US4/lb and gold dancing with record levels on a daily basis is helping build interest in mining assets.
But where to deploy, and what is available? It is a question that investors, financiers, corporates and end users are grappling with now.
Miners, developers and advanced exploration companies who have recently toured through the key overseas mining markets have been reporting the same thing – an elevated interest in hard mining assets.
If it is real, it has yet to be fully reflected in a meaningful way in market valuations.
So why not put the appetite for hard mining assets to test by offering a minority interest in a project as both a financing mechanism for its development and as a way to demonstrate a company’s market cap is underdone.
Ever-bustling Bill Beament of former Northern Star fame is doing just that at his new juggernaut, Develop (ASX:DVP).
Develop, which is a hybrid of hard mining assets and a mining contractor business, has just released a production restart study for its Woodlawn copper-zinc mine in NSW that came with a net present value boost of 37% to $658 million.
The NPV more than covers Develop’s market cap. Yet Develop also has its contracting business, its Sulphur Springs copper-zinc project in WA and its Pioneer Dome lithium project, also in WA.
Beament raised the prospect that options for financing Woodlawn could include potentially selling a minority interest to a strategic investor and/or traditional project finance, and offtake financing.
“The sale of a minority interest would enable us to recycle some capital and may provide us with a model which we can apply to our Sulphur Springs mine at the appropriate time,” Beament said.
But the more interesting bit from Beament was that Develop had already “received an elevated interest in Woodlawn”.
“We will now test this appetite more thoroughly. Completion of this milestone, which will be our major focus this quarter, will put us in the home straight for a production restart,” he said.
Say a minority interest of 20% was to be sold at a price that reflected the NPV, the market will be forced to re-rate the stock. That would be an achievement in itself. Then there would be funding benefits, and the capital recycling benefits.
If this appetite for hard mining assets is as strong as is being suggested – and Beament is clearly in that camp – Develop’s exploration of the benefits to be had from selling a minority interest at an NPV-based figure, or higher, could well catch on.
Sun Silver:
It’s a good time to be bringing a silver float to the market, with the metal taking off in tandem with gold prices, the latter of course now being at record (nominal) levels.
That’s just what Sun Metals has planned with a $10-$13 million IPO at 20c a share expected to lead to a listing on the ASX in early June. As already suggested, its timing is good.
Silver punched through $US27/oz in Thursday’s market, which represents a very handy 13% gain for the poor man’s precious metal since the start of the year. But the all-time record of $US50/oz (nominal) set in 1980 when the Hunt brothers tried to corner the market is still out there.
Where silver goes from here is anyone’s guess. Gold is rising in expectations of maybe up to four US interest rate cuts before the end of the year, with silver likely to be in lockstep with the yellow metal going higher (or lower).
But where it gets interesting for silver is the metal’s use in solar panels. Back in 2014 solar panels accounted for about 48Moz of annual silver consumption. That has since grown to 160Moz annually or 16% of the entire silver market.
The US alone has mandated solar energy to account for 30% of electricity demand in 2030 compared with its currently modest 3% share. It is a growth surge that is being mirrored in countries around the world.
The US is doing all it can through the IRA and other incentive packages to encourage growth in domestic sources of metals in technologies that the Chinese currently control. In the case of solar panels, the control levels stands about 90%.
Whether or not Sun Metals in particular is in line to benefit from the incentives on offer remains to be seen. But its Maverick Springs project in Nevada’s Carlin trend is as homegrown as they come.
The project comes with a 292 million ounce silver-equivalent resource. It can be thought of as 4Moz gold deposit grading 1g/t gold. Ignore the gold, and Maverick Springs comes with 178Moz of silver.
That puts it right up there with the current ASX-listed crop of silver plays, lead by Silver Mines (ASX:SVL) which has a market cap of more than $270m on the strength of its Bowdens project near Mudgee in NSW.
Sun Metals will be a welcome addition to the short list of ASX silver plays, all of which have being doing well in recent days as the silver price began to march.
At the IPO price, it will have a market cap of $22 million, or higher if the full $13m in subscriptions is pulled in. About half the stock on listing will be subject to escrow conditions, so it is going to be tightly held.
Former iron ore and lithium man Gerard O’Donovan, who originally hails from Blarney just outside of Cork, is leading the pending new addition to the ASX list of silver stocks as executive director.