$5 million placement: on 27th Nov 2023, BTR announced a share placement. The proceeds combined with the expected cash flow from the Selkirk JV in early 2024 will see the acceleration of exploration activities and the completion of the Pre-Feasibility Study for the Menzies & Laverton gold projects restart.
Selkirk Production JV: mining operations are progressing ahead of schedule and with some upside at the Selkirk Deposit within the Menzies Gold Project. Haulage and processing at the Genesis Minerals (ASX: GMD) Gwalia processing plant is scheduled for Q1 2024 with 50% project cash flow to be generated in Q1 2024. We estimated BTR share at $4.0 million.
Link Zone JV: we undertook a similar modelling for the shallow, mainly oxide maiden mineral resource announced for the Link Zone on 15 Nov 2023, estimated to generate up to another $4.9 m (BTR share) sometime in FY2025.
Scoping Study: on 6th Sep 2023, BTR released the results of a scoping study combining the development of the Menzies (Lady Shenton + Yunndaga deposits) and Laverton assets (Cork Tree Well + Alpha deposits). We see this study as a stepping stone, demonstrating to the market some enviable characteristics, which should remain as the mineral resource and mining inventory increase. These metrics are: low initial development capital $22 million, low technical risks, and a high profitability index in excess of 4x.
Low Upfront Capital/Higher Market Valuation: in the current inflationary environment, the low upfront capital combined with the existing treatment infrastructure offers a lower risk to reach production. This also translates in better recognition by the market as indicated by a higher Enterprise Value/Recovered Resource multiple compared to peers with high capital expenditure to develop their project (and who are thus less likely to be developed, comparatively). Accordingly additional recoverable resources should effectively receive higher market valuation.
Financial Modelling: we assumed that the development capital for the Menzies and Laverton projects would be financed by a combination of debt ($32m, possibly private debt), an equity raising of $12m in FY2026 (600m shares at $0.02) and the free cash flow generated by Selkirk and Link Zone.
Recent Capital Items Acquisition: concurrently to its November 2023 placement, BTR realised some outstanding savings on capital items, purchasing the 52-ensuite rooms camp for $420,000 (replacement value of $4m+) and six CIL adsorption tanks for $110,000 (replacement value of $1m).
Shareholders Support: the recent placement showed the continued support of US family office shareholder and the introduction of the Collins St Asset Management for a combined total commitment of $3.5 million. This institutional/HNW support should assist development funding in the future.
Increased Valuation Catalysts: the news flow over 2024 is expected to be intense and includes cash flow from Selkirk gold production, ongoing results from greenfield exploration as well as infill and extensional drilling, resource updates, completion of the Pre-Feasibility Study and the potential discovery of lithium bearing pegmatites at the Menzies project.
Laverton + Menzies Projects valuation: using a A$3,000/oz gold price and a 25% risk discount, we value those projects at $93m or $0.031 per share.
BTR valuation: in a macro context again favorable to gold, we assumed a flat gold price of A$3,000/oz throughout our modelling, offering further price target leverage to the A$ gold price. We also assumed a modest capital raising of $12.0 million (600 million shares at $0.02) sometime in FY2026 to assist with exploration and project evaluation. Our BTR valuation amounts to $95 million or $0.032 per share. The risks to our valuation are on the upside considering renewed investor interest in gold, further exploration success, which could be easily and quickly monetise (cf. Selkirk, Link Zone) and a potential lithium pegmatite discovery.
