May 25, 2024

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Analysis : Arizona Metals (AMC.V) plans $28 million CapEX for two main projects

Arizona Metals Corp owns 100% of the Kay Mine Property in Yavapai County, which is located on an amalgamation of patented and Bureau of Land Management claims (“BLM claims”) totaling 1,300 acres that are not subject to any royalties. The Company also owns 100% of the Sugarloaf Peak Property, in La Paz County, which is located on 4,400 acres of BLM claims. The company primarily explores copper, gold, zinc, and silver deposits.

Kay Mine Project highlights:

  • approximately 1,330 acres of patented and unpatented claims covering and surrounding the past-producing Kay Mine
  • The Kay Mine Project claims are not subject to any royalties
  • The Company completed its Phase 1 drill program at the Kay Mine Project in the second quarter of 2020 that further improved the understanding of the geological model of the Kay Mine deposit, and identified several new high-priority drill targets
  • The Phase 2 extension drill program is anticipated to be done in the second half of 2022

The management team has stated that they have no current commitments for capital expenditures on the Kay Mine Project. They also provided the following table that summarizes the expenditures by the Concern on the Phase 2 expansion drill program to June 30, 2021, and the total estimated costs to completion of the drill program.

Table Description automatically generated

Sugarloaf Peak Project highlights

  • There are no current gold resource evaluations on the Sugarloaf Peak Project however there are two historic conceptual resource opinions of “about 100 million tons containing 1.5 million ounces gold and 60 million tons at a grade of 0.02 ounces per short tonne”.
  • In August 2020 they announced the start of their Phase 1 drill program at the Sugarloaf Peak Project that completed in December 2020
  • In June 2021they announced that the metallurgical testing on drill holes completed in the 2020 Phase 1 drill program demonstrated gold recoveries averaging 76%, from surface to 111 m. Column testing is currently underway, with results expected by the end of 2021.

Table Description automatically generated

The business currently has approximately $27.1 million in cash with only $ 2,265,602 in liabilities (Accounts payable and accrued liabilities). From the two tables above, we can see that the Key Mine project will need $21.3 million, and the Sugarloaf Peak Project will require $74,000. The business so far has needed approximately $1 million for operational expenses that are unrelated to Exploration and evaluation expenditures. These other expenditures are mainly Salaries and benefits, Office and general, Professional fees, Business development, and Share-based payments (ignore what management, accountants, and some analysts say about this expense it is an expense not a non-cash charge in my humble opinion).

So, what we know is that the remaining costs for their projects would be approximately $21.393 million, and they will require between 1 to $2 million for operational expenses that are not related to the exploration. the business will also need to pay off his short-term liabilities such as accounts payables of which they currently have a total of $2.2 million. utilizing only the cash they have in their coffers now; this would leave them with a net positive cash position of just above $2 million.

Obviously, things can change from management expectations for example they might need to expand more on the Sugarloaf Peak Project or expend less on the Key Mine project changing the cash needs of the business as they complete both Phase twos. But for now, the company will not need to reach out to the capital markets unless things dramatically change for them.

The hope is that these projects will produce cash flows that are larger than the planed 28 million dollars and expenditures providing the firm with projects that are NPV positive with a high IRR(Internal rate of return).

 

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