Fine Tuning Operations ahead of Feasibility Study
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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
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
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.
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