Argonaut is launching it’s 2015 Best Undeveloped Projects Book on Tuesday 8th December 2015 at 5.00 pm, Level 31 Allendale Square, 77 St Georges Terrace Perth. Contact your Argonaut Advisor if you would like to attend the launch.
We have completed our annual review of the best undeveloped metals and mining projects owned by ASX listed companies. Companies that were identified with the best undeveloped projects in our 2014 edition outperformed their respective peer groups and relevant indices, with many being acquired, financed or partnered in the past year. The selection criteria for Argonaut’s 10 Best Undeveloped Projects for 2015 include:
1. Development stage between scoping study and pre-commercial production
2. An Internal Rate of Return (IRR) exceeding 25%
3. Profitable through all market/commodity price cycles
4. A high likelihood of achieving >$100m valuation within 24 months
Key themes that have emerged in 2015 include the continued underinvestment in exploration despite cheap drilling rates that has led to fewer discoveries. This is largely the result of low commodity prices. Positive impacts include a declining Australian dollar, lower fuel costs, falling capital and operating costs (including labour rationalisation), competitive EPC/EPCM tenders and reduced lead times to develop projects with a cost/time benefit. Funding availability remains restricted to quality, low risk projects.
Mature mining projects dominate the landscape: Many of the projects reviewed in this paper will play an important role in future mineral supply chains. Maturing mines require ongoing exploration to replenish reserves, however the timeline to discovery and development has led to mine life erosion. For example, based on Reserves the average gold mine in Australia has a mine life of only four years.
Positioned to fill new demand: Our selected undeveloped projects are positioned to replace ageing assets and also fill demand in emerging commodities such as graphite and niobium, based on advancements in materials technology (i.e. batteries and alloys).
High margin, low risk: Fundamental to our selection criteria is high margin, tolerable risk projects with expected near term development and the capability to provide strong financial returns to the companies that own them. The quality of these projects enhances financing options, expedites development and increases M&A appeal.
Able to endure commodity price cycles: These companies have delivered feasibility studies that demonstrate profitability despite the volatile commodity price markets. As sentiment and commodity prices improve, these projects are positioned to gain a first mover advantage and deliver strong financial returns for stakeholders.
Selection criteria: Argonaut’s ‘bottom-up’ fundamental approach identified projects that met its strict selection criteria. This process was commodity, management and jurisdiction agnostic. Argonaut has undertaken site visits to eight of the 10 projects.
Argonaut’s 2014 best undeveloped projects: The 11 projects selected by Argonaut in 2014 generated a total equity return of 10% versus -23% for the ASX Small Resources index. Three of the companies that own these projects were subsequently acquired (Mutiny, Orbis and Sirius), three secured funding or strategic partnerships (Syrah, Cradle and Peak) and one went into production (MZI Resources).
Who made the 2015 Best Undeveloped Projects List? The Top10 selection follows a comprehensive review of over 300 projects undertaken by Argonaut to identify the highest quality projects owned by ASX listed companies that are not in commercial production. Argonaut is convinced that this list will again outperform all relevant indices in the short and medium term. You need to contact your Argonaut Advisor to find out who and why! The 2015 Best Undeveloped Projects Book will appear on the secure client portal on the Argonaut website prior to Christmas.