I was rereading this 2015 article from the el1tetrader and was reminded how we had managed to avoid the 6 most common pitfalls that he had identified.
- Running out of cash. Not going to happen as BMN has been very clever in bringing in partners to develop each project. Ironically the exercising of warrants, possibly stimulated by shorters, has further improved the cash flow. And now we have revenue, not to mention stock equal in value to the bridging loan on Vametco. Debt financing now available. So point 1 not an issue.
- Poor exploration drilling results. Haha. Vanadium some of highest grades in world and 434 Mt combined resource with scope to grow resource base to > 500 Mt in term term (quote from presentation). Tin > 100,000 tons contained tin including 18500 tons JORC compliant, remainder from historical resource estimates. Coal 136 Mt thermal coal, scoping study completed 2014. Great drilling results so point 2 not an issue.
- Regulatory blocks or mining permits not granted. Vametco already a producing asset so fully approved for mining. Corporate structure of Vametco fully approved. Namibia licences in place. Existing mine although closed since 1990 due to falling prices. So point 3 not an issue. Planning to secure IPP with PowerChina. With only 20% of Madagascans having access to electricity this scheme should receive Govt support.
- Change in underlying commodity prices. Well here we have an interesting situation. Vanadium and tin prices have risen dramatically and thermal coal and iron ore prices have risen to. (I forgot to mention our iron ore/titanium/phosphate asset earlier. So many I lose track). Point 4 definitely not an issue.
- Unattractive project economics. Vametco operating costs at $17.33 / Kg V. Vanadium now selling at $27 / kg V. Big profit. Cost saving and increased production will make this even more attractive. Similar benefits from rising tin price with partner having to bear initial refurb costs to $2 million. Imaloto coal captured market to IPP. Not to mention profit from BE / VRFB which can utilise the economic benefits of vertical integration. Wow! So point 5 not an issue.
- Poor management decisions. Haha. Fortune is quickly establishing himself as an excellent strategic planner and his track record on financing the projects has been described as innovative by commentators. In my view the strength and experience of the management team are one of the company’s greatest assets. So point 6 absolutely not an issue.
No wonder the share price has made such a strong rally and it would seem plenty more to come. Remember the CEO indicating that we have only seen half the story!