GLR27 Jun 2019 22:01
I must admit, at a £2m valuation, GLR is looking quite cheap, especially now that they have 95% of Star-Zinc and have Kashitu on the doorstep of Kabwe…
I’ve always thought of it being overvalued in the past, when Kabwe production was so far away and uncertain. But if JLP can deliver production from Kabwe this year, it bodes well for GLR having near term potential revenues. Now that the SP has hit rock bottom it no longer looks overvalued.
If CB is right about 12,000 tonnes per year equating to $15m in revenues, it must mean roughly a 60/40 split in terms of sales between GLR and JLP. Zinc is around $2622 a tonne, let’s say they get around 80% of that price if it’s only concentrate and not metal, that would be $25m per year. Take off 40% ($10m) to JLP, which leaves GLR with $15m. Take off $2m in costs for the year, that leaves $13m profit before tax and before the Zambian Government get their 5% share. Hopefully BMR will also benefit from the extra income generated by the Zinc, via the Kabwe Royalty.
A deal will be done between JLP and GLR for off-take of the ore. The question is on what terms? I don’t think it will quite be in JLP’s favour, but not far off.
The main risks are another placing, but this would probably be minimal. Potentially they might get a sale of their Phosphate asset, it in which case they might not require a placing. The other risk is Kabwe production being delayed, or GLR’s mining licence not being granted this year, and this will push back those much needed revenues and eat up valuable cash reserves. On a positive, they seem to be reserving cash quite well, they even paid BMR in shares recently, apart from £50k cash which was paid last year, and also paid broker fees in shares. If they can get money coming in this year, they will be able to finance drilling and mining at Kashitu, and once up and running will bring in even more cash from Zinc sales.
If these figures being bandied about by CB are realistic, I dare say the SP will be multiples in the short term, and might even be a more lucrative investment compared with JLP. On a positive note for BMR, they now own almost 6% of GLR and should benefit nicely if/when the GLR SP grows overtime, and they are also looking to re-list by the end of 2019. Although I usually shy away from African resource stocks these days, I might be tempted to buy some GLR and hold for 6 moths at least.
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