Report | Date | Price | Return | |
Introducing Our Latest Investment | 14-Feb-22 | $0.088 | -1% | |
15 Ministries now signed off on CAY’s Mining Convention – Final Sign off by Government Next | 28-Feb-22 | $0.095 | -8% | |
Company
Current Price
First Coverage
Date
Price
5 Day VWAP
VWAP Returns
Our Entry Price
Our Returns
Report | Date | Price | Return | |
Introducing Our Latest Investment | 14-Feb-22 | $0.088 | -1% | |
15 Ministries now signed off on CAY’s Mining Convention – Final Sign off by Government Next | 28-Feb-22 | $0.095 | -8% | |
Current Price |
$ 0.087 |
First Coverage |
14-Feb-22 $ 0.088 |
5 Day VWAP |
$ 0.091 |
VWAP Returns |
-4% |
Our Entry Price |
$ 0.10 |
Our Current Returns |
-13% |
Feb 14th 2022
This investment memo is a short, high level summary of why we continue to hold CAY and what we expect the company to deliver in 2022. The purpose is to record our current thinking as a benchmark to assess the company’s performance against our expectations 12 months from now.
Canyon Resources (ASX:CAY) is developing one of the largest undeveloped, high grade direct shipping bauxite deposits globally in Cameroon, Africa.
Bauxite is the primary raw-material used in producing aluminium
Aluminium is considered a “green metal” due to its infinite recycling capacity & long-lifespan.
It is also considered a critical industrial metal in all manufacturing settings because it is both light-weight and strong. It is also a critical material in the primary technologies that will be the foundation of a low-carbon future including wind power, solar and energy storage (batteries).
More recently, the EU also recognised aluminium as a strategically important material in supporting the transition towards a modernised greener economy.
Objective #1: Mining convention converted into a mining permit.
Objective #2: Bankable Feasibility Study (BFS)
Objective #3: Final Investment Decision and financing
Objective #4: Strengthening of the in-country team to aid project into development
Permitting risk – There is a risk the mining convention negotiations fall through and CAY are not granted the mining permits. Given there are a lot of specifics related to the permitting process, we believe this is the single biggest risk for CAY at the moment.
Development risk – The challenge with Bauxite mines that sit in-land like CAY’s is that they need to have well-built out infrastructure for the projects to be considered economically viable. Cameroon has recently made some upgrades to it’s rail infrastructure but to support a project like CAY’s will need to make more investment. There is a risk this never materialises and the project is deemed stranded.
Commodity pricing – Bauxite prices are historically un-correlated with the price of aluminium, with demand for aluminium increasing there is a risk that bauxite prices lag or fail to respond to increased demand higher up in the supply-chain.
Technology risk – Aluminium is recyclable and with an increased focus on improving recycling technologies, there is a risk that demand for new aluminium is met by recycling and therefore demand for new bauxite ore is diminished.
Geographic risk – While we believe Cameroon’s current political climate is stable, there have been four coups in the last 4 years in the West Africa region. CAY’s project is subject to the volatility of doing business in this part of the world. Geopolitical risks form a significant part of CAY’s overall risk profile.
Funding risk – CAY’s project is located in Cameroon which is still a developing mining jurisdiction, there is a risk that the company fails to attract development financing with investors thinking the geopolitical risk is too high. In addition in the short term, CAY is reliant on tapping the market for funds as it moves toward bigger financing rounds.
At Wise-Owl we invest in later stage companies with a view to hold for 4 to 7 years.
Our plan is to hold a position in CAY to see it into production.
As with all our new investments, we have a 90 day trading blackout. After 90 days we are allowed to sell a maximum of 20% of our total position.
We may look to sell ~20% of our position late in 2022 if the share price re-rates as the objectives we want to see are achieved.
The authors of this article and owners of Wise-Owl, S3 Consortium Pty Ltd, and associated entities, own 3,000,000 CAY shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by CAY to share our commentary on the progress of our investment in CAY over time.