The AIM-quoted base metals company that is focused on the development of the Namib Lead-Zinc Project in Namibia held a conference call to explain the terms of the proposed financing that was announced on 11 August, and on which we commented at the time. There seemed to be a small number of recurring themes in the many questions asked after the presentation by CEO James Beams. The main issues appeared to relate to shareholders’ concerns that the issue was being undertaken at a low price, with some disappointment that the CEO had not yet bought shares in the market and concern regarding the intentions of Greenstone, which is underwriting the issue.
RFC Ambrian Comment on North River Resources PLC (LON:NRRP) : We believe that the CEO patiently responded to all questions and that the main gist of the responses were: that the company is not alone in the mining sector in finding that it has a low share price; that the CEO intends to participate in the placing; and that the company considers that Greenstone’s underwriting of the proposed financing is a demonstration of support and an endorsement of the project by a major shareholder.
What appears to have been missed in the call were the attractions of the project. As presented in November 2014’s DFS, it was robust, with a post-tax IRR of 52% and an operating margin of 64%. We acknowledge that metals prices are now lower than those at the time of the DFS, but believe that on a like-for-like basis, the operating margin would still be more than 50% at current metal prices. We would also point out the very real potential for exploration at the project to add to the mining inventory at the operation, adding further value to the project.
