Fine Tuning Operations ahead of Feasibility Study

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Published 11-APR-2018 00:00 A.M.

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3 minute read

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Overview: Freehill Mining Ltd ("Freehill Mining", "the Company") is an Australian minerals company focused on iron ore mining in Chile. The Company’s primary asset is the Yerbas Buenas Project situated 30 kilometres north of La Serena in the Coquimbo region, Chile. The Company has conducted pilot-scale iron ore mining operations since 2014 supported by an offtake agreement with Compania Del Pacifico S.A. ("CAP"), Chile’s largest iron ore producer. Since we initiated coverage in October 2017 at $0.095, Freehill has expanded its trial operations, appointed new key personnel, and achieved record revenues in January 2018.

Catalysts: Freehill Mining has made substantial progress at fine-tuning its trial operations at Yerbas Buenas, resulting in increased revenues, improved cash margins, and higher iron grades. As Freehill’s funding position improves, free cash flow will be used to accelerate the progression of a feasibility study for expanded mining operations. The appointment of a new Chairman adds significant experience to the Board as the Company prepares to validate the commercial viability of Yerbas Buenas. Exploration activities across the Company’s magnetite deposit offer significant upside if successful.

Hurdles: Despite increasing revenues, Freehill remains reliant on external capital to fund its operations and there is no guarantee it can procure the required funding to expand its mining operations. Considerable further capital and technical investigations are required to progress the feasibility study and confirm the long-term economic merit of continued mine development at Yerbas Buenas.

Investment View: Freehill Mining offers speculative exposure to iron ore markets through an operating mine in Chile. Recent leadership changes and operational progress at Yerbas Buenas are positive developments that deserve attention. Risks include capital demand, balance sheet, and operating the mine without a certified resource. Freehill is focused on fine-tuning its trial operations to accelerate the delivery of the required studies to expand its mining operations. The Company’s ability to scale quickly and effectively is an attractive quality and a leaner capital structure and stronger management team could help drive further improvements over the coming months. As the Company accelerates the progression of a feasibility study, we continue to monitor its turnaround potential.

THE BULLS AND THE BEARS

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THE BULLS SAY

  • Freehill Mining has made substantial progress at fine-tuning its trial operations at Yerbas Buenas, achieving record revenues in January
  • Free cash flow will be used to accelerate the progression of a feasibility study for expanded mining operations
  • The appointment of a new Chairman adds significant experience to the Board
  • Planned exploration activities are designed to appraise the technical and economic merit of Freehill’s magnetite deposit
  • Existing mining operations have the potential to fast track future reserve delineation and feasibility
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THE BEARS SAY

  • Despite increasing revenues, Freehill remains reliant on external capital to fund its operations and there is no guarantee it can procure the required funding to expand its mining operations
  • Operating the mine without a certified JORC compliant mineral resource or engineering study is a
  • Current mining operation at Yerbas Buenas are small-scale and volatile in nature and there is no guarantee that operations can be expanded
  • Considerable further capital and technical investigations are required to establish the feasibility and economic merit of the
  • There may be delays in delineating a certified reserve and delivering feasibility studies.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.

 

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