Tuesday, July 02, 2013

Balmoral Resources Down But Not Out

Balmoral Resources (BAR.V / BALMF) is one of those junior resource explorers you just can't count out.  The stock has taken a pounding, dropping from a 52-week high of US$1.27 to around $0.30 these days.  That kind of fall from favor is a fairly common story among junior resource companies.

Their CEO is a geologist who has previously sold a gold mining company.  Several other officers were from that same deal.  That's nice, although this company has tons of advisors and board members but has yet to run a producing mine or make a fully compliant discovery.

Balmoral has four projects clustered together in Quebec.  Martiniere is in exploration with a recent 43-101 report that does not provide evidence of 2P or MII grades.  Their 2011 technical report recommended a total exploratory budget of $8.8M (I'm unclear whether it's Canadian or US dollars, so I'll assume Canadian).  Fenelon is in exploration; their 43-101 report from 2010 recommended a total exploratory budget of over $4.6M.  Grasset is in exploration with no 43-101 visible on their website.  Detour East has no data available.

They have another notable project at Northshore with a 43-101 report recommending a total exploratory budget of C$2.6m (finally, a specific currency).  Northshore has a lot of historic data but that's not something I weigh in my analysis.  The other projects they name have no data available.

The total identified exploration budgets for the above projects come to roughly C$16M, assuming they're all denominated in the same currency.  Balmoral's most recent quarterly report dated March 31, 2013 shows that they have cash on hand of almost C$9M and a burn rate of about C$600K/month.  They can survive for another 15 months at this rate (assuming they're executing their drill programs on some of those properties) but they do not have enough cash reserves to complete their full exploration plans for all of their most well-explored properties, let alone the unexplored ones.  I suspect they'll have the best luck if they focus on Northshore (where GTA Resources and Mining is helping to subsidize their exploration) and Fenelon, which together are within the company's present financial resources.  I'm not running or advising the company, so I don't expect anyone to listen to me.

Balmoral needs to raise a lot more capital (and dilute its shareholders) to fulfill all of its ambitions, or else sell some of its less promising properties to live within its present means.  There's too much uncertainty in either course of action for me to want to invest.

Full disclosure:  No position in Balmoral Resources at this time.