Crusader Resources Limited is a mining company based in Australia. The company primarily focuses on its operations in Brazil. Apart from the Posse Iron Ore Mine in Minas Gerais state, the company’s assets include the Borborema Project in Rio Grande do Norte state, and the Juruena Project in Mato Grosso state.
Crusader Operates Three Mines in Brazil
Crusader acquired the Posse Iron Ore Mine in September 2007 and progressed it from the exploration stage into an operating mine at a total purchase and development cost of $5.4 million. Commercial production of the commenced in March 2013, while its reserves have not been certified. The mine comprises of one granted mining license, an open pit mining operation and a beneficiation plant in Minas Gerais state. Crusader has employed the funds generated by Posse to acquire and progress less developed assets within its portfolio.
The Juruena Gold project was acquired in May 2014 from Lago Dourado Inc. for $C650,000 along with 2 million Crusader shares. The mine consists of 21 exploration licenses and applications located in the region, covering an area of 447km2.
Having delineated the mine’s first resource estimate, Crusader has defined a JORC compliant resource of 0.23 million ounces at an average grade of 5.6 grams per tonne, classified as inferred.
The Borborema gold mine was acquired in August 2010 for $2.4 million from MGP Ltda. has project covers 3 mining leases and one exploration license. Borborema represents a long life ‘turnkey’ opportunity.
Crusader’s Development Strategy
The Juruena mine is estimated to have produced approximately 7 million ounces of gold from 40 documented discoveries since 1979.
Whilst the scale of Crusader’s landholding and mineralised encounters to date may warrant investigation of Juruena’s potential to host large scale gold project, Crusader is presently focused on prospects capable of hosting a near term, high grade mine development.
In September 2015, the company formed the basis of a maiden a 0.23 million ounces’ resource estimation after conducting a 10,000 metre drilling program targeting close to surface ores. The resources are defined at three prospects within 1km of one another.
A scoping study is currently ongoing and is targeted at appraising the technical and economic merit of a mine development, whilst applications for trial mining licenses have been lodged. The scoping study is appraising open pit and underground mining scenarios involving two declines, at Dona Maria and Querosene. Completion, alongside an upgraded resource estimate is scheduled for the first half of 2016.
Crusader’s Financial Performance in 2015 was Impacted by Low Iron Ore Prices
Crusader predominantly generates income from the Posse Iron Ore Mine, which has generated cumulative revenue of over $33million since 2013. However, income has not been sufficient to eliminate Crusaders reliance on external capital.
During 2015, Crusader reported a 53% decline in revenue to $7.3 million, predominantly due to weaker iron ore prices. Posse delivered a ‘break even’ result, as the company reported a gross profit of $0.05million, a substantial decline from $6.2 million in the prior year. Overall, the company widened its net loss to $10 million, from $4.1 million, due to capital demands associated with other projects.
In addition to cash flow from Posse, Crusader has funded its capital demands via a combination of project debt and equity. As of March 2016, the company’s borrowings stood at $5 million.
Crusader’s most recent equity financing initiative was a $6.25 million placement at $0.10/share announced in March 2016. The placement expanded Crusader’s shares outstanding by 28.5 per cent.
Wise-owl’s Investment View
Crusader offers speculative exposure to gold and iron ore markets as it owns a diversified portfolio of operating and development assets in Brazil. Its track record of mine development in Brazil, scale of gold resources at Borborema, and near term cash flow opportunity at Juruena are the main catalysts. Other key factors include a decision to mine at Juruena and delivery of the Optimised Development Study at Borborema.
The Posse mine reduces capital demands across Crusader’s portfolio, whilst the company’s recent $6.25million equity raising should provide sufficient funding to demonstrate the case for a mining development at Juruena.
A few of the principal risks include the company’s ability to convert existing ‘inferred’ resources at Juruena into higher confidence categories, and securing the larger scale capital required to develop Borborema.
|Simon Herrmann – Equity Analyst at Wise-owl
Simon is a financial advisor and analyst at Wise-owl. As an analyst Simon’s focus is the coverage of mid-capitalisation companies in the ASX300. His area of expertise includes information technology and cloud computing and his research reports are being featured on Bloomberg and Reuters.