Resource Investor comment on deal
https://www.resourceinvestor.com/pebble.asp?relid=40077&phrase=committee+bay
Explorer Could Soar on Monetized JV
By Ben Abelson
01 Feb 2008 at 06:17 PM GMT-05:00
CHICAGO (ResourceInvestor.com) -- When it comes to mineral exploration, finding a great deposit is only the first step. It’s turning that deposit into production – and convincing the market to buy in – that’s often the greatest struggle for junior resource companies.
With the news that it’s entered an exclusive negotiation to sell off control of its soon to be producing Coolgardie project, Committee Bay Resources [TSX-V:CBR] is about to find itself one step closer to success.
The C$27-million-market-cap company announced last week – to almost no market reaction – that it had entered into exclusive negotiations with JV partner Focus Minerals [ASX:FML] to potentially sell its 50% interest in the 1.6-million-gold-ounce Coolgardie Project in Australia. The two companies have spent the last several years developing portions of Coolgardie, and are set to begin production on the property during the second quarter.
While the consideration for the stake is likely to be both cash and equity (and no dollar value has been set), it seems certain that the deal (which has a very good chance of closing) is likely to put some serious momentum in Committee Bay’s shares. The property in question not only includes the aforementioned resource base, but the high grade Perseverance portion of the project that will enter production in just months, a fully-permitted and functional processing mill and a stable of prospective drilling sites.
If we put a $50/oz multiple on the 1.6 million ounce resource base, Committee Bay’s 50% stake would be worth US$40 million – or more than its entire current market capitalization.
It’s probably unlikely that the offering will go this high, for three main reasons:
1.
There’s a sense that Committee Bay is in need of cash, and potentially could be having difficulties funding its portion of the project;
2.
Committee Bay will still retain massive upside in the project, likely becoming one of Focus Minerals’ largest shareholders; and
3.
The 1.6 million inferred ounces at Coolgardie are not contained within a single area.
Still, with a recent company estimate of net cash flows from just the high-grade Persverance Project (the first section of Coolgardie that will go into production) of as much as US$29 million (given a gold price of A$900, about US$815), it’s not a stretch to assume that Committee Bay will receive between $20 and $30 million in cash and stock for its 50% stake in the entirety of Coolgardie.
Not only will Committee Bay be successfully monetizing a huge chunk of its current market cap, but the company will have capital to further its other considerable exploration projects.
Beyond Coolgardie, Committee Bay has also been drilling its 640,000 acres of land holdings in Nunavut, which currently have been found to contain a resource of 690,000 inferred ounces and is one of the largest, most prospective land packages assembled in the northern province. Any cash portion from the Coolgardie buyout (or future sales of Focus Minerals shares) could be used to fund continued exploration efforts.
Recently trading under C$0.30, shares of Committee Bay resources were already ludicrously cheap, but are made even more so when one considers the payout from Focus likely headed its way.