Joel’s Resource Report – a golden investment period?

Joel’s Resource Report – a golden investment period?

At the time of writing the writer holds shares in all of the companies mentioned

Morning All,

A couple of weeks ago, I covered Simec Atlantis. Last Friday, it came out with an RNS stating that it has a (non-binding):

“exclusive debt financing agreement with leading South Korean financial institution Hana Financial Investment Co., Ltd (“HFI”) to work together to fund 100% of Phase 1 (110MW) of the Uskmouth conversion project through a senior secured loan to SIMEC Uskmouth Power (“SUP”)”.

I’m all in favour of debt financing, to minimise dilution (assuming the project isn’t over leveraged). The market cheered the news and as a result my Portfolio has promptly taken out all-time highs again – I hope everyone is making money!

Whilst not having the massive blue-sky potential of Simec Atlantis, there’s another company which I think could do well in the current environment: TSX-listed TriStar Gold.

They recently raised over CAD$9 million and have a current undiluted market cap of circa £50 million.

TriStar has a low cost project in Brazil which makes it attractive even at significantly lower gold prices:

(Source: Tristar)

The project is highly profitable at $1250 gold with reasonable Capex.

At $2000 gold, the project looks significantly more interesting, post-tax NPV $792 million with a post tax IRR of 109% – my calculations – which are based on the following:

(Source: Tristar)

TriStar therefore trades at less than 10% of its theoretical NPV which I believe is an acceptable valuation for me to buy in, given dilution risk and potential newsflow over the coming months.

Share structure

TriStar has a good split between shareholders, institutions and retail:

(Source: Tristar)

Newsflow Milestones
1. Exploration Drilling (Q3/Q4 2020)

Tristar’s recently completed fundraise will be used for an aggressive drill campaign which begins next month. My belief is that TriStar will hit gold and this will start to show the potential scale of the project. The PEA only includes one of multiple targets:

(Source: Tristar)

TriStar CEO Nick Appleyard recently caught up with Crux Investor:

(Source: Crux Investor)

2. Mineral Resource Update (expectation – Q4 2020)

TriStar’s project has arguably been validated by the fact that were able to sell a 1.5% royalty on the project to Royal Gold for $8 million. No Royalty company hands over that much cash without some due diligence!

This has funded the PFS and 20,000m of drilling to upgrade the resource categorization. This will be used for an updated mineral resource estimate due in Q4.

3. PFS (expectation – Q1 2021)

Tristar will release an updated PFS in Q1 of 2021 utilizing the updated mineral resource.

Future (Q2 2021 onwards)

Following the PFS, Tristar will need to look at funding options – Royal Gold have the option to purchase a further 1% royalty based upon resources at the time of calling the option, which could fund a BFS/DFS.

If not, I believe TriStar would have significant interest in an equity raise – especially if the gold exploration campaign is successful.

Alternatively, management have indicated that they’re interested in realising value for shareholders – perhaps TriStar will become a takeout target.


Many pre-revenue gold exploration companies are trading at valuations which are not of interest to me. But Tristar have a high-quality project which I believe will ultimately be brought into production given the project’s quality. With multiple news catalysts over the next 6 months and a gold bull market, I think that TriStar is worth considering.

TriStar management also get a tick for shareholder communications – I emailed them last week and received prompt and helpful replies to my questions.  A perhaps lower risk option would be Brazilian gold producer Serabi Mining which has the benefit of a similar market cap and production although their cost of production is significantly higher than TriStar’s.

Till next week!



Wordpress (1)
  • comment-avatar

    Serabi SRB ticks the box for me. Already producing, had their most profitable period over last 2 quarters, but share price held back by concerns that COVID would massively affect production, which has not been the case. Expect it to play catch up.

  • Your Cart