Disclosure: Denarius Metals Corp. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Subsequent to Q3-2023, DMET has improved its working capital deficit from $21M to $3M through the sale of its 29% interest in Aguablanca, and a C$4.6M equity financing.
Price Performance (1-year)
Four polymetallic projects, including two near-term producers (Aguablanca and Zancudo. 3.7 Moz in AuEq or 2.2 Blbs in CuEq across four projects
Located in the Middle Cauca gold belt, one of Colombia’s most prolific gold districts. Inferred resources totaling 1.1 Moz AuEq, at a high-grade of 8.1 g/t
Zancudo Gold-Silver Project, Colombia – 100% Interest
Following the approval of its Environmental Impact Study for the project, DMET is targeting production to begin by the end of this quarter.
Excellent infrastructure including access to underground mine development, national power grid, and water. A 2023 PEA retuned an AT-NPV5% of $206M, and a very high AT-IRR of 287%, using $1,800/oz gold
Low initial CAPEX. 10-year underground operations. Management is planning a drill program
Aguablanca Polymetallic Project (21% Interest) / Lomero Project (100% owned), Spain
This project hosts the only known nickel-copper deposit in Spain. Located 88 km from DMET’s Lomero project
Earlier this month, DMET decided to sell a 29% interest in Aguablanca, reducing its ownership from 50% to 21%. This decision was driven by delays in receiving approval for a water concession application, which was crucial for dewatering and preparing the underground mine for production. These delays hindered the company's ability to settle the remaining $16M payment associated with the initial 50% acquisition. As a result of the sale, the company no longer has any outstanding payments, while maintaining a 21% interest in the project.
A major advantage of the Aguablanca project is its 5,000 tpd processing plant, located approximately 88 km from the company's flagship Lomero project. Despite reducing its ownership interest, the company will maintain its role as operator of the project, and be responsible for resuming operations. The company has also preserved its ability to process material from future operations at its Lomero and Toral projects at the processing plant.
Management expects the water concession application to be approved in the next few months, allowing the company to secure the financing required to resume operations at the project later this year.
An Environmental Impact Statement/EIS, and a mining license are in place. Awaiting a water use permit to begin dewatering the open-pit for underground access
As the project has a well-maintained 5,000 tpd processing plant, a 2023 PFS estimated a low initial CAPEX of $6.1M
The study returned an AT-NPV5% of $83M, and a very high AT-IRR of 213%, using $7.3/lb Ni, and $3.5/lb Cu, vs spot prices of US$6.9/lb Ni, and $4.3/lb Cu
The PFS was predicated on the project utilizing just 50% of the processing plant’s capacity. The remaining capacity is allocated for processing materials from Lomero, thereby expediting and reducing the cost of bringing Lomero into production.
Lomero hosts a similar tonnage resource dominated by gold and copper. A PEA is expected in the coming months
Upcoming Catalysts
Multiple catalysts. Advancing all four projects simultaneously
Financials
Subsequent to Q3-2023, DMET has improved its working capital deficit from $21M to $3M through the sale of its 29% interest in Aguablanca, and a C$4.6M equity financing
Can raise up to C$30M from in-the-money options and warrants
FRC Valuation
DMET is trading at $47/oz vs the sector average of $62/oz (previously $49/oz). Our comparables valuation increased from C$0.86 to C$1.06/share due to higher sector valuations
Our DCF valuation (Net Asset Value) increased from C$2.43/share to C$2.55/share, primarily driven by Zancudo advancing closer to production
The tables presented here summarize our valuation on each project
Our valuation is highly sensitive to metal prices
We are reiterating our BUY rating, and adjusting our fair value estimate from C$1.65/share to C$1.81/share (the average of our DCF and comparables valuations). Upcoming catalysts, including the release of the Lomero PEA, Zancudo production commencement, and Aguablanca water concession approval, could significantly boost DMET's stock price. As these milestones are achieved, we believe the market is likely to recognize the intrinsic value of the company's assets.
Risks
We are maintaining our risk rating of 5 (Highly Speculative)
Commodity prices
Exploration, development, and permitting
FOREX
No guarantee that the company will be able to advance all of its projects simultaneously
Access to capital and potential for share dilution
