A “Further re Joint Venture Update” announcement from Bluebird Merchant Ventures (BMV) isn’t the resolution of its South Korea gold projects position with Southern Gold (ASX - SAU) – and the shares, albeit still up from a 2.5p offer price recommendation, are currently lower in response at 3.9p. So what’s happening here now?
Bluebird states that it “has made an Offer of Settlement to Southern Gold as required under the Joint Venture Agreements and is hopeful that a commercial solution will be achieved in a speedy manner”. This follows an independent valuation for 50% of the projects of $11.05 million, with the joint venture ‘settlement figure’ 90% of that: $9.945 million (currently circa £7.25 million). With that a discounted pre-construction value, less was hoped for and Bluebird notes that advancing to gold production is now needed to realise value in both companies' interests. Therefore, although delay is an annoyance, there does look a good basis for it to be negotiating.
At 3.9p, the Bluebird market cap is £15.5 million and there isn’t a significant equity raise in the works, since this is Standard Listed that would require a prospectus, and there is non-dilutive financing potential. Those are also with already South Korean project funding partners who recently provided a further tranche of funding and are stated to “remain committed to the non-dilutive funding process to bring about production in South Korea”.
That all provides confidence that the company will get there – and there is then vast potential to add value. With the projects former mines, the path to production should be swift and the company has previously stated “the estimated average cash cost per ounce (C1 level) is USD 576 per ounce. This is based on both mines over the initial 3 years of production… Over a 3 year period gold production will largely grow organically from 10,000 to 30,000 ounces per annum” – even 10,000 ounces at a, for example, $1,000 per ounce margin is $10 million and there is eventual potential for much more than even 30,000 ounces per annum. As such, the shares - which we own and consider have the potential to double and more on funding and production progress (a £31 million market cap, equating to circa $42.5 million for example) - are still a risk/reward buy.
Filed under: Bluebird Merchant, [email protected], Remote Monitored Systems, Haydale, Bidstack, HotStockRockets
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