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Mandrake Resources Ltd Limited

ASX:MAN

Last Price:

$0.038

Our Investment Summary

Date of
Initial Coverage

04-Mar-21

Initial
Entry Price

$0.080

Returns from
Initial Entry

-53%



Investment Memo: Mandrake Resources Ltd (ASX:MAN) - LIVE

Opened: 25-Mar-2022

Shares Held at Open: 2,150,000


What does MAN do?

Mandrake Resources (ASX:MAN) is a junior exploration company chasing a large scale copper porphyry discovery in a region of northern Chile that hosts the world's largest copper mine. MAN also holds ground 30km from Chalice Mining’s Julimar project in WA, Australia.

What is the macro theme?

We see MAN as being leveraged to the global electrification boom and anticipated commodities super cycle over the coming decade.

Copper is already the third most widely used metal in the world, used primarily in buildings and infrastructure projects - two sources of demand likely to benefit from pandemic stimulus. Copper also has a growing demand source from technology - EVs have up to 3.5 times more copper in them than a standard petrol car.

Why did we invest in MAN?

Copper project in a part of Chile home to large porphyry discoveries

MAN’s new copper acquisition sits in a region that hosts the world's largest copper mine - the 11.2bt @ 0.8% copper project owned by BHP/Rio Tinto, as well as the the 10.5bt @ 0.6% copper project controlled by state owned Codelco. Both of these are large scale porphyry deposits. MAN’s project sits on similar geological structures and has potential for a large copper discovery.

Historical drilling data indicative of high grade copper mineralisation

MAN’s new acquisition has ~15,000m of historical RC/Diamond drilling results which have returned a peak intercept of 86m @ 4.83% copper from 121m - which includes higher grade sections of 27m @ 7.1% copper from 134m, and 3m @ 14.4% copper from 164m.

Strong balance sheet: At 25 March 2022, MAN had $16.4M in cash

That’s a lot of cash in the bank for a small cap explorer, so MAN is well positioned to aggressively explore any potential discovery it makes across its project portfolio.

What do we expect MAN to deliver in 2022?

Objective #1: Complete 12 week due diligence period and proceed with acquisition

MAN has set an initial 12 week due diligence period, we want to see MAN complete the DD work and proceed with the acquisition of the project.

Milestones

Due diligence completion

Acquisition completion

Objective #2: Drilling program at the newly acquired copper project this year

Target generation works leading up to MAN’s first drilling program at the copper project. We want to see the company conduct at least one drilling program by the end of 2022.

Milestones

Geochemical surveys

Geophysical surveys

Exploration program detailed

Drilling permitting

Drilling commencement

Drilling results

Objective #3: Maiden JORC resource at the newly acquired copper project

With ~15,000m of historical RC/Diamond drilling results and any addition of new drilling data from drilling programs MAN completes, we want to see a maiden JORC resource for the new copper project either very late in 2022 or early in 2023.

Milestones

Drilling results compiled

Maiden JORC resource announcement

What could go wrong?

Acquisition Risk

The newly announced copper acquisition in Chile is via an option agreement which gives MAN until at least 31 May 2023 to decide if it wants to acquire the copper project. Until then, MAN could pull out of the transaction at any time should exploration work yield no results. There is a risk that MAN elects to not proceed with the transaction and would then need to look for a new project.

Environmental permitting risk

The Chilean government has signalled that it will put more focus on environmental permitting across the mining industry going forward. There is always a risk the government rejects new mine developments due to environmental concerns and so this is a key risk in Chile.

Exploration risk

MAN is an early stage explorer with no discovery made as yet. As a result the company has no cash flows to fall back on should they fail to make a discovery. There is a risk that nothing will be found.

Commodity risk

Junior exploration companies rely on elevated commodity prices to access capital. There is always a risk that the copper price falls and markets are no longer willing to finance new exploration.

What is our investment plan?

We plan to remain invested in MAN at least until it completes due diligence on the Chilean copper project. Given our confidence in the management team, if they choose not to proceed with the acquisition, we plan to continue holding until a new project is identified.

If all goes to plan and our investment objectives are met and the share price rerates, we will then look to take some profit and sell 20%, as per our standard investment plan for exploration companies.


Disclosure: The authors of this memo and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 2,150,000 MAN shares at the time of publication. S3 Consortium Pty Ltd has been engaged by MAN to share our commentary and opinion on the progress of our investment in MAN over time.



Investor Presentation

Due diligence period extended on copper acquisition

ASX:MAN Jun 27, 2022 Announcement


Investment Memo: MAN 2022

Objective #1: Complete 12 week due diligence period and proceed with acquisition


This morning, our junior exploration investment Mandrake Resources (ASX: MAN) updated the market with respect to the progress being made with its new copper acquisition in Chile.

MAN first announced the acquisition of the “Delfin” copper project on the 25th of March this year and since then has been conducting due diligence on the project.

Today, MAN confirmed that it had secured a two month extension to its diligence period at no extra cost, taking the due diligence period end date to 24 August 2022.

MAN also confirmed that the due diligence extension would allow it to complete all of the required works that would ensure a clear pathway to commencing exploration activities as soon as the acquisition is completed.

We are looking forward to MAN completing the acquisition given that the project sits in one of the most copper rich regions on the planet. The world's biggest copper mine, operated by BHP/Rio Tinto and contributing ~5% of global copper production, sits only ~100km away from MAN’s project.

We covered the acquisition in detail in our last MAN note which you can read here: Cashed up MAN picks up high grade Chilean copper asset


New investor presentation for Chilean copper project

ASX:MAN Apr 19, 2022 Announcement


This morning, our junior exploration investment Mandrake Resources (ASX:MAN) put out an updated investor presentation which ran through in detail, the company's newly acquired copper project in the Antofagasta region of northern Chile.

MAN’s project sits in one of the most copper rich regions on the planet. The world's biggest copper mine, operated by BHP/Rio Tinto and contributing ~5% of global copper production, sits only ~100km away from MAN’s project.

MAN’s project is also de-risked to a certain extent, with ~15,000m of historical RC/diamond drilling results on hand, with a highlight intercept returning:

  • 86m @ 4.83% copper from 121m
    • Which includes higher grade sections of 27m @ 7.1% copper from 134m, and 3m @ 14.4% copper from 164m.

The following slide from today’s presentation stood out to us the most, detailing all of the target generation works that MAN is completing leading up to its maiden drilling program.

  1. Rock chip sampling combined with geological mapping.
  2. Geophysical surveys (IP surveys)
  3. Geochemical sampling (More soil/rock chip sampling)

MAN is sitting on $16.2M in cash, which means its got plenty of runway to deliver on the above exploration plans.

We covered the acquisition and launched our 2022 MAN Investment Memo in our latest note.

To see why like the new copper project and our 2022 MAN Investment Memo, check out our latest note here: Cashed up MAN picks up high grade Chilean copper asset


Assays received from WA nickel, copper, PGE project

ASX:MAN Mar 31, 2022 Announcement


This morning MAN announced the assay results from the last EM conductor (Conductor C) which was drilled at its WA nickel, copper, PGE project.

The bad news first: the results returned low grade nickel mineralisation, similar to the first two EM conductors that were drilled over this project, with the following results:

  • 4m @ 0.37% nickel from 82m
  • 1m @ 0.33% nickel from 69m

The good news: MAN ran some downhole EM surveys as soon as drilling was finished and managed to locate an off-hole EM plate measuring ~80 x 20m with strong conductance of 8,750 siemens at a depth of ~125m below the ground.

Despite the conductor being relatively small in size it has a high siemens count, classifying it as having “strong conductivity”. This could at some stage provide an opportunity for MAN to come back and test this project.

As we outlined in our 2022 MAN Investment Memo, we are now more interested in seeing the company drill its newly acquired copper projects in Chile. We’re happy to see MAN confirm in today’s announcement that it will now move its corporate and exploration focus over to that project.

Our recently launched Investment Memo explains all of our reasons for holding MAN in our portfolio, what we want to see the company achieve in 2022, and the risks to our investment thesis.


Trading halt pending an acquisition

ASX:MAN Mar 24, 2022


Yesterday we saw our junior exploration investment Mandrake Resources (ASX:MAN) enter a trading halt pending news of a “material transaction”.

MAN’s share price closed at 4.7c just before it entered the halt. That gives the company a market cap of $22.6M, and given MAN had ~$16.4M in cash in the bank as at 31 December 2021, MAN’s enterprise value is currently around $6.2M.

That means MAN has almost 2.5x its enterprise value in cash in the bank. Given the uncertainty in the markets at the back end of 2021 and in early 2022, we like that MAN is cashed up and ready to do some deals.

We expect MAN to come out of trading halt tomorrow. Once the acquisition is announced we will cover it on Catalyst Hunter. Subscribe here to get our take on the deal.