Introducing our latest and one of our largest holdings, Askari Metals. Askari Metals is one of the ASX’s latest and most promising junior copper-gold explorers. The company has an extremely low enterprise value of ~$2.77 million and the future is looking bright for this junior explorer.
Askari Metals (ASX:AS2) is an early-stage copper-gold explorer about to drill for high-grade copper-gold right next to billion-dollar copper-gold producer SandFire Resources.
|Date Added To Portfolio||Started Buying on IPO|
|Average Portfolio Price||$0.20 per share|
|Intended Hold Duration||12 Months +|
|Shares on Issue||30,156,000|
Askari Metals IPO
AS2:ASX was listed on the ASX on July 11th with an IPO price of $0.20 through lead manager Peak Asset Management. The share price ended the day up ~25% to $0.27. Since then the share price has then stabilised around the offer price of $0.20.
Askari has a market cap of $6.0M at $0.2, with an enterprise value of ~2.77million.
We expected the AS2 price to open strongly on IPO, but settle over the next few weeks AFTER the IPO. However, once the newsflow relating to their exploration season start we expect the price to start heading upwards in later 2021.
5 Reasons Prophet has Invested Significantly in Askari
- Great Locality of Projects in nearology to other major players, gives confidence in the tenements of Askari’s Projects.
- Lachlan Ford Belt Projects, right next door to DevEx Resources (ASX:DEV), which has a Market Capitalisation $73.88million! Whom recently upgraded the potential of their own copper-gold project in the area. The project also sits to the East of Sandfire (ASX:SFR) Resources ($1.2Billion Market Cap) Temora Copper-Gold Project.
- Drill Program underway at the Buracopin Gold Project (WA) with the Contractor already onsite, initial results shouldn’t be too far off.
- Extremely Tight Capital Structure and Very Low EV of only $2.77million
- Experienced Management Team
Locality of Askari Metals Flagship Projects
When we started purchasing shares of Askari metals, we saw multiple opportunities for a successful outcome at a very low enterprise value.
The company has five flagship copper-gold projects between NSW premier mining district the Lachlan Ford Belt, and projects in WA in nearology to other prominent names in mining such as Cazaly Resources (ASX:CAZ), Rio Tinto (ASX:RIO), Sandfire Resources (SFR:ASX) and Kalamazoo (ASX:KMR).
We see significant upside potential of Askari when comparing to other prominent mining companies that have projects in similar areas to Askari.
The company has 5-flagship projects, with four in Western Australia and a single project in NSW.
- Horry Copper Project [WA] – A High grade Cu-Au-Ag gossanous mineralisation up to 60 m long and 2.4 m wide;
- Callawa Copper Project [WA] – Rock-chips with up to 28.7% Cu At Surface supported by other surface rock-chip results of 9.4% Cu, 7.63% Cu and 2.68% Cu.
- Springdale Copper-Gold Project [NSW] – Significant historic production with grades ranging between 8g/t Au and 40g/t Au;
- Burracoppin Gold Project [WA] – PREVIOUS DRILLING ENDED IN MINERALISATION; SIGNIFICANT DRILL READY TARGETS;
- Mt Maguire Gold Project [WA] – Extensive gold mineralisation identified in previous drilling including 31m @ 0.84g/t Au from 20m including 1m @ 6.74g/t Au from 25m
Our opinion is that any of the above Project’s could be worth far more than AS2’s implied enterprise value of $2.77M if drilling can deliver.
Askari Metals, Springdale Project – Lachlan Ford Belt:
Askari’s Springdale project is Located in the Lachlan Ford Belt, one of NSW’s premier mining locations for Copper-Gold. The project exists along strike from DevEx Resources (ASX:DEV) Junee copper-gold Project.
DevEx has a market capitalisation of $72million at the time of writing, or about 10x the market cap of AS2. We see this as an indication of the large potential for this project.
The company on the 5th of August announced to the market that they have successfully received permits required for the exploration of the Springdale project. The Springdale project has yet to be subjected to modern mining exploration, however, the project has historical intercepts providing good background.
- 4.1m at 2.19g/t of Au from 65.8m of downhole drilling
- 8m at 0.99g/t of from 16m of downhole drilling
Whilst it’s important to remember the above are only historical results the permits pave the way for imminent follow up drilling. The company plans on conducting a ground reconnaissance survey and induced polarisation survey to identify future target zones.
Other notable explorers in the nearology to AS2’s Springdale project include:
- Sandfire Resources (ASX:SFR) Temora Copper-Gold Project.
- DevEx Resources (ASX:DEV)
Drill Program Underway at the Buracopin Gold Project
After listing Askari Metals was quick to appoint an established drilling contractor “OreDrill” to the team. Askari has a 2,000m drilling design to test the historical high-grade drill results and test the mineralisation below the line of artisanal gold workings, where results have returned as high as 71.39g/t Au.
Historical results from previous high-grade shallow depth drilling at the project look promising and include:
- 18m @ 5.64g/t Au from 0m (hole BF29)
- 14m @ 13.7g/t Au from 32m (hole BRB001)
- 9m @ 2.8g/t Au from 0m (hole BRC13)
- 2m @ 9.1g/t Au from 18m (hole BF33)
Initial drill results for the Buracopin project should be released to the market shortly as the drilling contractor was appointed back on 7th August. A set of good results would be a large catalyst for a potential share price re-rate and value uplift.
Future Potential Steps / Newsflow from the Buracopin Project:
- Reconnaissance Field Program Completion ✓ completed 22nd July
- Completion of Drilling Design ✓ completed 26th July
- Commencement of Drilling ✓ Started 28th July
- Drill Program Completed
- Assay Results from the inital drill program
- Additional exploration targets to be annouced
- Additional infill drilling
- Resource Proved
The above milestones are illustrative only however, should provide a good flow of news and results into the market.
Our opinion is that the Buracopin Project could be worth far more than AS2’s implied enterprise value of $2.77M if drilling can deliver.
Extremely Tight Capital Structure and High Copper-Gold Prices
Askari Metals has an implied enterprise value of only $2.77million. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet. Enterprise value is a popular metric used to value a company for a potential takeover. Hence, in our opinion the downside risk for this stock is low.
The spot prices for copper and gold are currently trading at close to 10-year highs, we expect this to continue as demand continues and supply to be restricted in key mining locations due to COVID.
As commodity prices increase, a discovery at any of Askari’s Projects becomes more and more valuable.
The Experienced Management Team
The team at Askari is top-notch with both the board and management team aligned and having excellent experience in copper and gold, exploration and mining!
Mr Robert Downey – Chairman: Mr Downey acted as General Counsel for a Canadian oil and gas exploration and production company with assets in Europe and Africa overseeing the dual listing on the TSX-V and AIM, the raising of £50 million and the subsequent takeover of the company by way of a scheme of arrangement.
Mr Gino D’Anna – Director: Mr D’Anna was a founding shareholder and
founding Executive Director of Atrum Coal Limited (ASX: ATU) which is developing the Elan Hard Coking Coal Project, located in Alberta, Canada. He also has prior experience in executive roles in MetalsTech, K2Fly and Atrum Coal.
Mr Paul Fromson – Company Secretary and CFO: Has worked on multinational joint ventures including the Boddington Gold Mine and Worsley Alumina Projects through to a significant gold producer and a variety of exploration companies on projects within Australia and overseas
Mr Brendan Cummins – Technical Director: Mr Cummins has over 25 years of global experience in the minerals industry as both a mine and exploration Geologist. He has significant experience as a mining exploration geologist and more recently has held senior positions in Cradle Resources (ASX:CXX) and Westoria Capital.
The four executives have the right experience in order to oversee the company and deliver for shareholders.
Director Transactions and Insider Ownership
The company director Gino D’Anna holds approximately 11.49% of the companies shares. This is something that in our opinion is extremely important for these companies as it aligns the success of the company to a direct outcome for the Director.
|3.53%||Kovig Investments Pty Ltd||1,500,000||A$307.5k|
|3.23%||Mining Equities Pty Ltd||1,375,000||A$281.9k|
It’s always great to see executives buying shares on market, which is exactly what AS2 director D’Anna has been doing recently, buying over 35,000 shares on-market for an average price of $0.209.
The lead manager for Askari (Niv Dagon) also bought in a significant stake on the market buying in over $100,000 dollars. Dagon is also a substantial shareholder in the company owning ~7% of the shares. This shows significant confidence in the company from a lead manager and shows that he can put his money where his mouth is!
|Date||Director / Insider||Type||Amount||Price||Notes|
|08/07/21||Gino D’Anna||Buy||+35,000||$0.209||On-market trade|
|16/07/21||Niv Dagon||Buy||+552,563||$0.20||On-market trade|
A substantial holding announcement made to the market on the 13th August showed Lead Manager, Niv Dagon, significantly increase his position in the company from 7% all the way up to 10.1%. We have also increased our position significantly since seeing this.
The ownership structure of Askari Metals has significant insider holding in the company. This is promising as it means the management teams and insiders are aligned with getting the optimum result for the company.
With significant insider ownership and insiders recently buying significant portions of shares on market, this has also given us the confidence to buy additional shares on market and increase our stake in Askari Metals significantly.
Askari Metals ASX Share Price
The Askari Metals Share Price has been quite volatile over the last little while, this is quite typical of any stock after their IPO as investors try to value the stock.
The Share Price of Askari Metals has a 52-week range of $0.175 – $0.27. However, the share rebased around the IPO price and we expect this to start to move upwards as the company commences exploration projects.
Prophets Take: Askari Metals ASX
Askari IPO’d with an Enterprise Value of $2.77million at the IPO price of 20c. This is extremely low and in our opinion represent a significant upside to investors.
Askari boasts a massive five 100% owned copper and gold projects, located in the lucrative Lachlan Fold Belt of NSW and WA. Most of these are in close proximity to large deposits and other mines. Previous drilling has identified high-grade copper and gold with significant exploration upside potentials.
We believe the world has entered a multi-year commodities supercycle. Mergers and acquisitions in the resource sector generally ramp up during this time and we are starting to see a few majors buy up junior companies that have drilled out decent assets.
We are already seeing the company executing exploratory drilling on two projects with permits already being approved for the Springdale Project in NSW. Drill results for initial drilling at the Buracopin and Horry project should be released to the market soon. If the initial drill results prove positive, we should see a substantial re-rate in the share price and significant value uplift.