Pacifico Minerals soars 150% YTD on the back of decent financial and project economics

mining stocks

Exploration company Pacifico Minerals Limited (ASX: PMY) is primarily involved in the exploration of mineral tenements in Australia and Latin America. Currently, the company is focused on the development of its 75 per cent owned Sorby Hills Lead-Silver-Zinc project which was acquired last year.

With Sorby Hills, it can be rightly inferred that the company is exploring the right commodities at the right time with prices of both silver and lead witnessing positive momentum in the last few months (as depicted in the figure below).

Stock with 150% YTD return

PMY’s stock has done extremely well in the recent times, soaring by 66.67% in the last three months (as on 9 October 2019). On a year-to-date basis, PMY’s stock has provided a substantial return of 150%. Currently, the stock is trading at $0.009, with a market cap of $28.88 million on 10 October 2019 (2:55 PM AEST).

Decent Financial Position

For the year ending 30 June 2019 (FY19), the company reported revenue from continuing operations of $104,877. The summarised operating results for FY19 are as follows:

Both Australian and Colombia segments demonstrated a profit turnaround.

During the year, the company incurred a loss of $3.34 million and reported a basic diluted Loss per share of 0.22 cents.  At the end of FY19, the company had current assets of $2.37 million and current liabilities of $1.05 million, taking the total current ratio to 2.244x. As at 30 June 2019, the company had total equity of $6.35 million.

During FY19, the company spent $1.95 million of cash as expenditure on mining interests (up from $1.1 million in FY18), showing enhanced focus on the mining operations of the company.

The company reported $0.9 million as payments to suppliers and employees, taking the total net cash outflow from operating activities to $2.83 million for the year. Further, the net cash from investing activities was $3.29 million while net cash inflow from financing activities was $7.32 million.

At the end of FY19, the company had cash and cash equivalents of $1.98 million, representing 150% uptick from FY18 cash balance of $0.79 million

Recently on 2 September 2019, Pacifico Minerals announced that it had received firm commitments for a placement to raise $4.6 million before costs via issue of 575 million shares at an issue price of $0.008 per share.

The raised funds, strengthening PMY’s financial position, are intended to be used for following purposes:

  • Conduct Phase III drilling program at Sorby Hills Project,
  • Complete the PFS at the Project,
  • Advancing the DFS work program,
  • General working capital requirements.

Sorby Hills demonstrating strong project economics

Sorby Hills was discovered in the 1970’s by Elf Aquitaine in their search for petroleum in the onshore Bonaparte Basin. Sorby Hills has subsequently been held by both junior and major resource companies, but it would seem none with the true conviction to develop the deposit into a profitable mine.

Pacifico acquired advanced Sorby Hills project in 2018, well surviving the difficult year for the junior resource sector with a challenging market sentiment and an uncertain global political and economic environment.

Below are some of the merits associated with the project:

  • Large global resource – Global Resource to 29.98Mt of 4.7%Pb equivalent including 10.85Mt of 5.0%Pb equivalent in Indicated Resources;
  • Outstanding existing infrastructure – Existing sealed road to transport concentrate from site to the facilities at Wyndham Port, 150km away;
  • Granted Mining Leases and Western Australian Environmental Protection Authority approval in place;
  • Great metallurgy– Recent metallurgical testwork confirmed rougher flotation testing with sulphidisation up to 96% Pb (lead) and 95% Ag (Silver) recovery on Fresh composites;
  • Key Government Approvals – The WA Environmental Protection Authority (EPA) believes that the Project can be managed in a manner that avoids significant or unacceptable environmental impacts and risks.

Pacifico advancing rapidly with the drilling campaign at Sorby Hills

Soon after the acquisition of Sorby Hills, in 2018, the company completed the Phase I drilling campaign at the project and reported following notable drill intercepts:

  • 9.0m at 8.3% Pb equivalent (7.6%Pb, 32 g/t Ag) and 1.1%Zn from 37m – B Deposit hole AB033;
  • 9.7m at 9.1% Pb equivalent (7.5%Pb, 68 g/t Ag) and 1.1%Zn from 76m – CDEF Deposit hole ACD019;
  • 20.0m at 8.6% Pb equivalent (7.3%Pb, 56 g/t Ag) and 0.4%Zn from 11m – CDEF Deposit hole ACD046;
  • 11.7m at 13.2% Pb equivalent (10.8%Pb, 105 g/t Ag) and 0.4%Zn from 75.7m – CDEF Deposit hole AF005;
  • 12.3m at 6.5% Pb equivalent (5.5%Pb, 42g/t Ag) and 0.23%Zn from 90m – I Deposit hole AI011;
  • 10.0m at 7.8% Pb equivalent (6.6%Pb, 53 g/t Ag) and 0.9%Zn from 82m – I Deposit hole AI010;

The company has also conducted a Pre-Feasibility Study at the project which has significantly de-risked the project and has confirmed highly robust financials. Key outcomes of the PFS are presented in the below diagram:

 

In May 2019, the company commenced the Phase II infill and extension drilling campaign which produced following Notable results:

  • 14.0m at 15.3% Pb equivalent (13.0%Pb, 89g/t Ag) and 1.0%Zn from 24m – CDEF Deposit drill hole ACD080;
  • 23.0m at 11.3% Pb equivalent (9.0%Pb, 88g/t Ag) and 1.2%Zn from 59m – CDEF Deposit drill hole ACD071;
  • 21.0m at 5.6% Pb equivalent (5.0%Pb, 21g/t Ag) and 0.5%Zn from 23m – CDEF Deposit drill hole ACD056;
  • 11.0m at 7.6% Pb equivalent (6.9%Pb, 26g/t Ag) and 0.1%Zn from 29m – B Deposit drill hole AB050;
  • 22.0m at 10.2% Pb equivalent (8.8% Pb, 52g/t Ag) and 0.3% Zn from 68m (including 16m at 13.5%Pb equivalent (11.7% Pb, 68g/t Ag) and 0.37% Zn from 63m) – CDEF Deposit in drill hole ACD082;
  • 8.0m at 13.7% Pb equivalent (12.4% Pb, 51g/t Ag) and 0.3% Zn from 80m – CDEF Deposit in drill hole ACD058.

Pacifico shares strong Forward Plan

The company is planning to conduct a phase III drilling program at the project in October 2019. Further, the company also intends to complete an Optimised PFS Study and Ore Reserve Estimate by January 2020.

Pacifico expects Sorby Hills to be a high-value asset for the company considering the forecasted growth in the Lead demand.


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