Bargain of the Day: $7m Standard Uranium (STND.V) has $31m in cash and commitments

I’m going to run through a list of assets that the $7m market cap explorer Standard Uranium (STND.V) has in its portfolio right now, and you can stop me when you think I’m making things up or it’s just too bananas to follow without laughing.

Let’s go.

11 projects around the prolific Athabasca Basin, including:

Sun Dog
Davidson River
Harrison
CBSW
Rocas
Ox Lake
Corvo
Brown Lake
and 3x East Basin

That’s $630k per project, based on the present market cap.

Decent value? Sure, but we’re just getting started.

Holding projects means nothing if those projects aren’t being actively worked, so STND has outlined plans to explore seven of those properties in the remainder of this year, with five of those being drill programs.

How are they paying for all that?

Welll, they’re not. They have four joint venture partners that are working with them – and paying them and giving up shares – for the right to explore and option their properties.

These include:

Aero Energy (AERO)
Mamba Exploration (priv)
Summit Fusion (priv)
Atco Mining (ATCM)

How much are they being paid for all that?

Quick math:

$4.26 million in cash and operator fees
$2 million in consideration shares

That’s $6.26 million coming in, to a company with a $7 million market cap.

Back of a cocktail napkin numbers here, but if you take the money coming in away from the market cap, you’re left with $740k… or $67k for each project in their portfolio.

But wait – there’s more:

The company also had $830k cash in hand as of the filing of their last MD&A document, so if we factor that in, the company has amassed $90k in present and future cash over and above its current market cap.

Which means those 11 projects are actually costing shareholders a whopping.. negative $8k each.

That’s what you might call an arbitrage, friends.

Of course, anything can go to zero if there’s enough negative sentiment, but if all STND did was wait for cash to come in from its JV partners, and did no actual work at all, at any time going forward, it should conceivably be a wash.

LIMITING DOWNSIDE RISK

The key to resource investing, for me, is to limit your risk. Upside will always be unicorns and rainbows, but if you can limit downside, you should be able to at least hold your initial stake while holding out for the lottery win.

Of course, any time you’re sticking drills in the ground and hoping to hit something, there’s going to be risk. Nothing is ever a sure thing, least of all in mining.

But if, while you’re doing that drilling, other companies are paying you money and tossing you stock for the right to drill your land, AND you have 11 dice rolls in the game instead of one, your downside is a lot less dependent on the whims of the magic 8-ball.

Throw in the chance that one of those properties will have a neighbour that pops off, radically increasing the value of your land, or the chance commodity prices will jump at some point over the coming years, and your downside is further narrowed.

But there’s one more piece of this puzzle that, when you factor it in, makes the insanely low STND share price something to look deeply at:

$24.8 million in expenditure commitments

While you could buy the whole damn company for $7 million right now, STND has commitments from its partners to spend a whopping $24.8 million in exploration costs on its properties between now and 2027.

If any of those partners don’t hit the prescribed budgetary mark, the properties revert to STND in full, to continue exploring or selling or optioning as they see fit.

The combined commitments, cash payments, operator fees and consideration shares amount to a GLORIOUS $31.06 million over three years – good for over 4x the current market cap.

That’s BEFORE any drilling, which could conceivably increase the value of said properties;
That’s BEFORE the potential increase in value of the consideration shares they’ve earned;
That’s BEFORE any increase in the value of uranium prices over the next three years, or valuation increases based on nearby exploration;
That’s BEFORE they go out and grab more land, something they’ve done at an astonishing tilt over the last year, since STND management made the decision to pivot toward project generation.

Let me be very clear, I like the STND crew. I think they take pride in good work, and they’ve groound out wins consistently in the last few years despite having to come back from a poor drill season back when they were all in on a single project a few years back.

When it would have been easier to pull up stakes and call it quits, they doubled down on themselves, worked all the angles, turned one property into eleven and found partners to match their belief.

If human resources are important in resource exploration, STND is undervalued from the outset. But when you include the properties they have, the work being done, the partners buying in, the cash coming in, the stock coming in, the work being paid for, and you put it to that minute market cap, this has all the hallmarks of a screaming deal.