The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
3) If the results from Red Star look good this summer, will the company have the capacity to run 2 start-up projects at one time?
Answer: First point is that we are drilling Red Star this summer. Assuming this programme is positive and generates a suitable mineable Resource, then we would definitely move Red Star forward as fast as possible. However, there is the possibility that Red Star is very large indeed, and continues up to Horseshoe, which would make the project very large and more complex. One option is to keep Red Star as a small scale underground mine, entirely on patented land, and since Red Star would share quite a lot of capital with the Open Pit mine, the additional capital required to start-up Red Star may actually be quite modest. If we could do that, it may be perfectly feasible to build them both at the same time. But first we need the Resource. Our financing will also be on a project by project basis. Financing for all the other projects will be separate. We will be building the company in manageable chunks, and minimising the issue of additional shares.
4) With the announcement on Redcastle with First Cobalt, are you looking to do a similar type of deal/JV on Bighorn?
Answer: Our property is directly contiguous, on the same rock and we have a lot of chemistry with First Cobalt. Our Bighorn property is about 25 miles north, and so a separate project. We have had people suggesting deals at Bighorn, but we are waiting. Nothing is going to happen in the short term, but we expect Cobalt prices to continue to rise, so it would pay us to hold on to Bighorn.
5) How are we progressing with relationships with US institutions?
Answer: In the last round of financing, EAS Advisors brought in some new American shareholders, and so our US base is expanding, and as we grow, we are becoming more attractive for US Institutional market. We are working closely with EAS and are confident our US base will grow in a big way in due course.
6) Are you planning to upgrade the listing in the USA?
Answer: Yes, we are planning to upgrade, and it’s a question of timing. Once we are producing and generating revenue an upgrade to NASDAQ would make sense. A listing on the main board here in London may make sense as well.
7) Do we expect our business to be impacted by the recent comment that President Biden will look abroad for metals for the electric revolution?
Answer: This was a remark which was taken completely out of context, and has subsequently been corrected. The trillion dollar package now in place means they will not be able to choose where they get their metals from, and indeed, if anything, they may well accelerate the permitting process for metals produced domestically.
Notes from 1st June 2021 Company Webinar
These notes were those I made from today’s webinar, hosted by Marcus Edwards-Jones and Richard Wilkins. They are not verbatim, but I believe carry the message. They are also not an official document but are supplied as a summary from an independent shareholder.
1) With the strong metal prices is the company looking at forward selling some capacity as an option to finance our projects?
Answer: We have looked at off-taking as part of the debt financing, amongst other possibilities, but we are not planning to forward sell part of our production. We believe metals prices will continue to rise, and so will resist anything which locks us in to current prices.
2) Can you give details of our relationship with ExGen, and the financial agreement between us for royalty payments? Will ExGen always remain a 20% partner in Konnex?
Answer: The relationship with ExGen is clear, positive and cordial, and we are close to them. Jason Riley their President is one of our directors, and our Dennis Thomas is one of theirs. Financially, it is our responsibility to fund everything till we have the BFS, then Ex-Gen should join in the funding at 20%. If they do not join in, then they dilute themselves according to a formula. They also have a 2.5% Royalty.
Out of curiosity I went to the company and asked them what would be the results of the economic model, if we inputted today’s approximate metals prices. The results are amazing. With a basis of Gold $1900/oz, Copper $4.50/lb, Silver $28/oz, and Zinc $1.30/lb, we would have pre-tax NPV (at 7.5%) of $193 million (post tax $177 million), and a pre-tax IRR of 101% (post tax 92%).
Can you think of any other project with such a fantastic return, and which itself is designed to throw off cash for the rich projects in the deep. That’s akin to allowing us access to the pot of gold at the end of the rainbow!!
Question 2. From myself. About the roles of the new director and advisor.
Response: Both came across as very good additions to the board, with Harry in particular describing the geological importance of the region, and how he was excited to be on board with this opportunity. He particularly mentioned the prospectively of our deposit, and made very positive words, as a geologist, on this basis. He commended the BoD on their approach, and said it is a very attractive way too develop the small open pit mine before moving to the high level deposits in the deep. Catherine explained her responsibilities a little, particularly in governance issues, and looking forward to her anticipated responsibility of working with Lennie, our ESG coordinator.
Question 3 from Ben. In resolution 7 you are asking permission to issue 23.3m new shares, a possible increase of 20%. What can we read into this regarding the structure of capital raises to build the Empire open pit mine? What is the attitude of the board to raising finance for our projects through equity?
Response: As an AIM company we have to seek authority each year to issue shares. The standard requirement is 20% general authority and 10% for cash. In practise, many companies ask for much more, as we have done in previous years. This year we have just asked for the standard requirement, which we feel sends a very strong signal that we are not intending to issue equity next year. Richard Wilkins stated that the company has sufficient funds in the bank to cover all operating and holding costs plus corporate overheads to take us through to 2023, when we will be in production and generating money. He made it very plain that we were not intending raising cash through an equity issue and further, the company intends financing the construction through debt. One way they are considering is to offer redeemable shares as indicated in the motions. This is not considered as an equity raise, as the issue is considered akin to a loan, with interest being offered, and are redeemable but not convertible.
Question 4 (from Julian). Are you planning to upgrade the listing in the USA?
Response: In short, yes we have a plan to upgrade, and we know this is of interest to US investors.
Here follows my notes from the AGM, noting that these were taken at speed, and therefore did miss some of the detail:
All votes passed with near to 100%. This ended the formal part. This was followed by a brief update from Ryan McDermott, who mentioned the following:
• Everything is running to plan in Mackay.
• We are on course to deliver the Operating Plan in late June which is the main permitting requirement
• The following is planned for the drilling:
o The electromagnetic survey is already well under way
o The first drilling rigs (for site surveys) arrive June 3rd
o The Core drill rigs arrive 15th June for Red Star and Horseshoe canyon
o The RC drill rig arrives mid-July to complete the work
o The Geophysical work will most likely be presented in mid-July as it needs substantial interpretation.
Then came the questions.
Question 1 from Mark. What returns does the Empire project PEA model show at current metal prices?
Response: Using roughly current prices, we have pre-tax NPV of $181 million (at 7.5%), and IRR of 106%.
You said that the news had not moved First Cobalt's share price today. Parroting the words of John Cleese, even a million volts would not have moved its share price today, as there is a holiday in Canada!
I think the key message is we get good potential upside and First Cobalt manage the risk & project. That’s a win-win. Several other key points from my perspective.
1) We pretty much recoup our outlays from day 1 (my understanding is that we have spent a total of just over $150,000 on claiming the Redcastle property)
2) In essence, First Cobalt must spend a minimum of $3m over the next 5 years AND deliver a NI43-101 compliant PEA. If the PEA takes longer and/or costs more than $3m, the additional expenditure is also down to them, not us, whilst we reap a share of the profit
3) This deal allows us to focus on Empire (we would not have spent time/money on Cobalt for some time anyway), whilst still having some potential revenue from the Cobalt.
Now some more background I am aware of:
• I understand that Redcastle is in difficult terrain (Bighorn is much easier, with direct approach roads), so it made sense to pass to First Cobalt, who only have to extend their Iron Creek works to gain access. We would have had to have created infrastructure, and particularly roads and processing facilities, which are expensive.
• If we had delayed doing anything, we may have lost this opportunity to do a deal with First Cobalt.
• Don’t forget, First Cobalt are committed now to spend money on exploration, and if they find Cobalt, and mine, we will take a share of the profit.
• There is another carrot dangling behind, which is the Bighorn property.
Hi Spudton, and anyone else interested in joining the Telegram group, here's the link https://t.me/j o i n c h a t/I5hNdxg-LUTkNvtljGWq1A noting to remove the gaps
Yes, Spudton, but if you posted there liked you posted here yesterday "Agree, 40p is a key indicator as it sits on the downward trend of peaks. Probable retraction to support at 36p if there's no news in the pipeline" was anything to go by, where you must surely agree you gave a fairly negative message, before researching if there was indeed any news, I can understand. It's not fair to give negative messages when you do not know. It's always better to research before you post, and I applaud you for asking the question here.
Good morning Tranter. You asked about my company in Kazakhstan. No, I was with Petrokazakhstan, in the oil refinery. When I joined the company sp was $9, and 4 years later, it was sold by the Canadian owners for $55. I was lucky enough to have some options, and that was my start at investing, and understanding the potential for investing in the right company to make money. Sadly one of my wrong ones was indeed Max Petroleum, and I remember very well the woes of the drill bit stuck in the hole. (not forgetting the corrupt practises which had preceded that).
Hi British Mike, I think you will be quite pleased with the company philosophy. First, from my conversations, I believe the intent is to return dividend back to the shareholders as early as possible. There will be a webinar in a few weeks time when financial matters like this can be addressed, so I suggest you put the question then. Second. The metals come out in palates, the precious metals together, and the base metals together. After that, yes, there is some additional cost, but I am sure that the company have already looked at this issue. Can I suggest you take a look at the detail in the economic model, plus in the analysts reports, and come back to us after your review.
Good morning Ides. I think we need to clarify a very important issue. You wrote "however having studied Hardman's report I see the plan is to raise funds via debt and another small placing next year". This was a comment by Hardman, and is not contained in any plan. Indeed the company have stated several times that they now believe that they have sufficient funds to take them through to production. I hope that makes you sleep better!
Good evening Ides of March. That's not a strange question at all, and I am very happy to answer.
I have known several of the board over about 20 years, when I was in management of an oil refinery in southern Kazakhstan, and they were starting up and running a gold mining company in Uzbekistan. We used to meet on a social basis in Tashkent. They got the company off to a decent start, and when the profits started rolling in, the financial police descended, and the company was taken away from them. That's the reason they are particularly keen that this business is set up in safe, secure environment, like Idaho. There was never any reproach against any of the directors from those days, and there are several investors from those days who are also invested here, which I guess speaks for itself. So, I have known them for this period, and like them, and trust them. I offered to facilitate the webinar, and that's stuck. I would be more than willing to step down at any time in the future, when I have passed my sell by date. I have not been paid anything to do this, and have no connection with the company aside friendship.
They are not wanting to "drive the share price up", just to provide good PR. I think that your scepticism is wide of the mark on this occasion. I do talk with them a lot, as a friend, and I am happy to share my knowledge, within market constraints, of course.
Please do not hesitate to ask any question, and I'll see if I can answer. Alternately, please do call to them directly, for they are a genuinely friendly bunch of guys. Happy Holidays!
What I personally like about Phoenix is that the goal is not the open pit copper mine, on which the economic model is based. For me, my motivation is in the deep reserves, the gold in Navarre Creek, the Red Star high grade silver, and the other opportunities, and which are not properly priced into today’s share price, in my opinion. This is where the company’s real fortune will be made. I have bought in early, as I know the company have a sensible stepwise approach, never biting off more than they can chew. The price today is indecently low for the Empire Open Pit mine, whilst it is ridiculous when you consider that buying now will acquire you a free ticket into all these other opportunities. The news given in the webinar reinforced that for me. Richard Wilkins has talked of this company being worth £1 billion fast, and I believe him. Our share price would then be the order of £5 – 10!!
I have talked with the company and we are planning the next webinar, which can include financial questions, for towards the end of the month.
But the reason I am here, and I know many of the other investors, is for the potential from our other zones around Empire, including Navarre Creek, The Cobalt plays, Horseshoe, Windy Devil, and above all the potential in the deep resources. Focussing on just the last one, in terms of geology, when this area was volcanically active, the seams to the surface are the manifestation of a deeper, larger reservoir below, feeding those lava vents. This is the Copper/Tungsten/Molybdenum Porphyry. But porphyries do tend to be large, indeed very large. A small company would normally have difficulty to finance this, since the costs of drilling deep are very large indeed. For obvious reasons, finance cannot normally be taken for exploration, so this exploration would normally have to come from investors pockets. And that is the reason why so many similar companies fail. They simply run out of money. We are taking a different route. We have an eminently financeable and very profitable open pit mine, which will throw off cash, which will be used on turn to facilitate the exploration work for the deep resources. That should allow this work to be accomplished without the need to call on investors again. As Dennis put it, “The intention is to make this company evolve in a practical, logical, financeable way without getting swallowed up in ambition. We are doing this in a way we can afford.”
And that’s good enough for me. I know the team well, and I like them. I think the new additions last week bring substantial value to the company, and I trust the team. They have their pensions wrapped up in this, and they do not intend to fail. I support them.
Now let me offer my opinion for the share price, for that is ultimately the reason why we are all here, and start with the Analysts, and whose opinions are generally based on the company’s economic model for the Empire open pit mine. They have assigned a value of 64p to 95p (WH Ireland), 60p – 139p (Hardman), and £1.07p (Halgarten). All these are for lower copper prices than we are seeing today, and generally exclude the other opportunities to a greater of lesser extent, and are for pre-start-up. WH Ireland state “the valuation for a company generating on average over $20m/yr (higher in the early years) of post-tax cash flow would be considerably higher”. I point out the obvious that the pay back is now much much higher with present copper.
I just wanted to post my own opinion of the Webinar and offer a few extra comments.
First, the company asked me to help organise this webinar with a focus on technical issues. I was happy to assist, and enjoyed it, as I find Dennis and Ryan easy communicators.
I’m going to re-order what they said, and put this into an explanation for why I continue to have confidence with my investment in Phoenix Copper.
The starter mine at Empire is advancing well, with all issues under control. There are 2 identified principal issues of risk. The first one, the ESG (Environmental, Social and Governance) process is under way, and is being professionally managed, with no issues anticipated. The second, metals pricing, has gone our way, with Ryan describing himself as doing somersaults with present copper prices. With Biden’s Clean Energy Revolution happening, two of our key electrification metals, copper and cobalt, will be more and more in demand, so we can expect the prices to continue to rise. Pay-back is currently looking better and better.
The abundance of local mines show crucial evidence that the area is rich in minerals (the old timers did not waste their time, as metals were far more abundant in those days, going for rich seams), and they only scratched the surface. Technology has also moved forward, so the surface oxides, and hence low cost materials, which could not be processed in previous years, are now easily recoverable, indeed eminently so.
The Empire open pit mine is relatively small, but one which is easily financeable, and easily developed. That suits us, a start-up company, perfectly. We now have everything in place to proceed through design, engineering, construction and start-up. And we have the financial means to achieve this, without going out for additional funds. We are anticipated to start throwing off cash from this project in late 2022 and beyond. This is a fantastic and attractive project on its own.
The webinar yesterday went very well. My full notes can be accessed on the Telegram board, whilst here below are my key takeaways of quotations from the dialogue. I will post the link to the full webinar when it is available, which should be this morning:
• Metals price (for miners) is always a risk, but I am doing somersaults with copper at over $4/lb.
• The Rocky Mountains host some of the largest metals deposits in the world. We’re in the right zone.
• We have increased use of US media to spread our news releases. Hopefully the news is starting to get out there now.
• Biden’s clean energy revolution will require copper and cobalt, and if it can be provided from the USA it makes absolute sense.
• With changing economics (compared to historic mining), what they left behind can today be considered rather considerable. A prospector today is looking for old mine workings, and we see the area as very prospective.
• (for Red Star) …the whole (silver/lead) strike length may go up to 3kms, maybe more. This is a series of mineralisations in multiple veins. This is very prospective.
• The Empire open pit starter mine allows us the opportunity to get in at a relatively small scale compared to what the porphyry would be, and allows us to finance the investigation of the system, giving us the ability to investigate the underlying sulphides, indeed the whole Empire system, in an affordable manner.
• The intention is to make this company evolve in a practical, logical, financeable way without getting swallowed up in ambition.
• We do not know a small porphyry
• Catherine Evans (new director). We are looking on her to help us build our US shareholder base
• Harry Kenyon-Slaney. “The Special One”. Over 35 years in senior executive management in large mining companies. He will be a key individual both short and long term.
Here are the questions for today's webinar:
Project Development
1) What overall risks exist in the run up to production next year and how are we mitigating against them? Plus:
a) Is there a possibility weather is a risk, delaying the project?
b) Can the mine operate all year round?
c) Is there any risk at all (financial / political / environmental) of losing the non-patented land holdings?
2) Can you offer a timeline of news events shareholders can look forward to, broken into the next 3, 6 & 12 month windows?
3) What gives you confidence that we are in good shape for ESG requirements?
USA Matters
4) Can you give an example / indication of success of other projects along the Rockies, in relative proximity and similarity to Empire?
5) Can you talk of any efforts being made in the US to gain traction with institutional investors?
6) What will be the impact of Biden’s Clean Energy Revolution on our prospects?
Exploration and Geology
7) Initial exploration defined Red Star to be a 350 metre long single vein system. How long do you now think the Red Star deposit extends? And is it still considered to be a single vein system?
8) Can you describe the existing mines, and how much of the potential ore they may have extracted?
9) Thinking about the deeper sulphides, in the recent podcast Ryan mentioned historical shafts down to 1600ft. Would we be able to re-use the original workings, or would we need to start from scratch? Is there a cost benefit of doing so?
10) In 2017 the company extended the claims area to include Windy Devil. What was the reason for doing that?
11) We are of course all interested in the porphyry which is found at depth. Did any of previous mines reach that system, and how confident are you that we will find the fabled porphyry, and that it will be large?
Other
12) You have yesterday named a new director and a new advisor. What do they bring to the company, and what are their roles?
Yes, sorry, I'm pretty busy today. The recording will be at 4pm today. I'm posting the questions in my next message, just FYI. I'll work on writing up a transcript of key points myself from my notes, this evening, to post tomorrow morning. I understand the company (who are organising the event) are intending posting the link to the webinar tomorrow. We have Dennis Thomas (VP PR) and Ryan McDermott answering the questions below, with a group of 5 investors able to ask follow-up and clarification questions. Questions below:
I just looked him up. What a catch this man is. He has almost 40 year experience in the mining industry, mainly with Rio Tinto. A geologist by training, he has led some of Rio Tinto’s businesses. He began his career as an underground geologist with Anglo American on the gold mines in South Africa, and forty years on he is one of the best-respected technical brains in mining. He is now the Chairman of gem diamonds, and a few months after his appointment as chairman, they started doubling its number of diamonds over 100-carats. He has that skilful touch. I understand that at one time he may have been associated with Bingham, Rio’s largest copper mine in North America. Let’s hope he brings the same skills and good fortune to us. But someone with that experience and knowledge is going to be added value plus plus.
Just think of the wealth of knowledge that Mr Kenyon-Slaney could bring to us. Knowledge and relationships for the disposal of our products, the same for how to build metals recovery facilities in that region, environmental management know-how, and more. If you read this, welcome Harry! A very warm welcome too!!