Interview with James Anderson, CEO of gold Developer, Alt Resources (ASX: ARS) Alt Resources is an ASX-listed mineral exploration company. It was incorporated in April 2014 to acquire up to a 70% interest in projects held by GFM Exploration Pty Ltd. As part of its JV with GFM, Alt Resources is exploring gold assets in south-east Lachlan Orogen, New South Wales. The company is aiming to raise capital to fund exploration drilling at the Paupong and Myalla Projects. Alt Resources' former flagship project is Paupong, a Greenfield discovery comprised of gold-bearing quartz and sulphide veins, breccias and stockwork. However, the company has recently shifted focus and the new flagship project is the 360km² Mt Ida Gold Project, with 600,000oz of gold and 4Moz of silver. The company is close on a PFS and a maiden ore reserve statement.
Strategically, Alt Resources is trying to buck the trend set by most gold explorers, by forging a clear, accelerated path towards production via a mining service agreement with Blue Cap Mining. The duo will develop and mine the Tim’s Find deposit within Alt Resources' wider Mount Ida gold project in Western Australia.
The company was originally focussed on expensive copper-gold porphyry but made a pragmatic corporate decision to chase a gold project in the "tier-1" mining jurisdiction of Western Australia. Why does Alt Resources want to get into production quickly rather than focussing on expanding the resource via drilling? Anderson sees the classic model of building up as large as a gold resource as possible as flawed, and driven by big funders who want to make a larger margin. A smaller capacity gold project, with a reduced tonnage and CAPEX, but a higher grade with a substantial NPV, is the path Alt Resources has chosen. Rather than building an on-site plant to process 3Mt, the company has opted for a perhaps more sensible 750,000t. While the company will only produce 40,000oz gold, the company will generate "A$18-$20M free cash every year." The main reason behind this profitability is the mineralogy of the Mt Ida Gold Project's ore body. It is open-pit: an oxide. This de-risks the project significantly and could fund Alt Resources to make further acquisitions and push the share price up for gold investors.
What are the details behind the deal with Blue Cap Mining? Blue Cap made the deal to help transport some of Alt Resources' ore to process it (around 80,000t) in a 65:35 cash split. Blue Cap has agreed to help Alt Resources with its short-term, small-scale mining operation, with the intention to get involved in something bigger. The gold is sold to a refinery and Alt Resources receives the residual once everyone has been paid. Anderson expects to receive A$5.5M to add to the A$1.5M from Blue Cap and A$2M in the bank as of last quarter. The burn rate A$900,000 per month, which is significant. Will a feasibility study (+-20%) allow Alt Resources to garner additional financing from the market?
The crew was taken off-site in mid-March due to the COVID-19 crisis, so the burn rate has been reduced and the timescale has been stretched out. Luckily, Blue Cap's fleet is less restricted by quarantine, so July could be the start month, and by the end of September, Alt Resources could have its share of the A$7.5M with a maiden resource and FS. It's highly likely Alt Resources will look towards a debt funding scenario for Mt Ida; thus, the A$5M isn't necessarily earmarked for anything. With cash generation the priority in the short term, why wasn't it planned what this capital would be allocated for?
Anderson is confident that his company is in a great position to grow. Strong infrastructure, good assets, meaningful JVs and a potential A$50M valuation in the near future are all reasons that investors may consider Alt Resources as an investment opportunity.
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3:05 - Company Overview
4:10 - From the Beginning: Business Plan and Switch to Gold
7:20, 16:26 - The Asset: Why Choose This One? What's There?
13:02 - Get-Into-Production-Quick Model: Why Choose This Path?
19:14 - Deal with Blue Cap Mining: Terms & Benefits
23:18 - The Numbers: Cash Position, Burn Rate and Allocation of Money
26:56 - Timing of Deliverables and the Future for Alt Resources
29:48 - Becoming More Than A Business: Positioning in the Market and Growth Potential
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