Worth Watching: Venturex Resources Limited (ASX: VXR)
The company has 2.625 billion shares on issue and, at the last traded price of $0.006, a market cap of $15.5M. It has traded between $0.014 and $0.004 over the past twelve months. At 31 March 2017, the company had cash of $2M and no debt. It spent $3.6M on operating activities for the 9 months to March, of which $0.64M was spent in the March quarter.
The company currently has an underwritten entitlement issue underway, closing on 3 August 2017. The offer is 2 new shares for every 7 held. A maximum of 750M shares will be issued to raise $3.75M, resulting in a total of 3.375B shares on issue. The issue is priced at $0.005.
The shareholder base is robust. Prior to the current entitlement issue, Regent Pacific, a Hong Kong based investment group held 22.5%, Northern Star Resources Limited, an Australian gold miner, held 13.6%, and Henghou Industries (Hong Kong) Limited, a Hong Kong industrial company, held 6%.
The experienced board comprises Chairman Anthony Kiernan, Executive Director Anthony Reilly and Non-Executive Director Darren Stralow. The previous MD, John Nitschke resigned earlier this month at the end of a two-year contract. His duties have been taken on by Anthony Reilly and Geology Manager Angus Thomson.
The company holds four base metal projects in the Pilbara region of Western Australia, of which three host resources:
Sulphur Springs 13.4Mt @ 4.0% zinc & 1.5% copper
Kangaroo Caves 3.55Mt @ 6.0% zinc & 0.77% copper
Whim Creek 7.2Mt @ 2.3% zinc & 1.3% copper
A “Value Engineering Study” on Sulphur Springs was completed early in 2017. Based upon a 1Mtpa underground operation the study showed a pre-tax NPV(8%) of AUD338M and a 52% IRR.
Venturex’s market cap is only 4.6% of the Sulphur Springs NPV. This seems very low, especially considering the robust share register.
The company has owned the project (previously named the Panorama Project) since 2011. It was purchased from CBH Resources Ltd, who in turn purchased it from Sipa Resources Limited in 2004. Prior to Sipa, the project was majority-owned by Outokumpu.
Now, all of these companies were confident that the project could be developed. But still it sits there, decades after discovery and after numerous feasibility studies. Previous problems have included low head grade, low tonnes per vertical metre and high mining costs.
It seems that the market may also be skeptical of Venturex being able to develop the project, after six years of ownership. For a re-rating, I suspect we would need to see a takeover offer, development financing in place, or a robust joint venture or sale. Nonetheless, VXR is definitely worth watching as it could well surprise on the upside.