Hammer Metals (HMX) - Copper-Gold Explorer That Needs To Re-Excite The Market

Hammer Metals is a mineral (copper and gold) exploration company with assets in Australia. The focus since 2014 has been on its 2,200km2 tenement, the Mt Isa Project within the Mount Isa mining district, but will little tangible success. Newmont had shown interest for 18-months with a JV in 2017, but decided to walk when they didn't like what they saw. JOGMEC is the new strategic partner, pledging C$6M as part of the JV on 10% of the tenure.

Within the Mt Isa Project, Hammer Metals has a 100% interest in the Kalman (Cu-Au-Mo-Re) deposit, the Overlander North and Overlander South (Cu-Co) deposits and the Elaine (Cu-Au) deposit. Hammer also has a 51% interest in the emerging Jubilee (Cu-Au) deposit. In addition, the company recently acquired the Bronzewing South Gold Project, which is right on the doorstep of the 2.3Moz Bronzewing gold deposit in the Yandal Belt of Western Australia.

Matthew Gordon interviews Dan Thomas, 9th June 2020

Hammer Metals has raised c A$20M since 2014, but the market cap is just A$12-13M today. The original aim was to define a large-scale deposit, primarily funded via capital raisings. However, Thomas has realised that a small-scale budget spread across a very large (2,200km2) area does not always produce the results that investors are looking for. As time has drawn on, investor fatigue has become an additional negative factor.

Hammer Metals had C$2.8M in the treasury as of last quarter. 100% of the company's current funding is going to the Bronzewing South Gold Project. Investors are currently more in tune with pure gold exploration rather than copper-gold plays, Thomas refuses to write Mt Ida off as a pipe dream. He believes that Hammer Metals could "play a big part" in the accretive growth story. Exactly how he plans to arrive at this cash-pumped destination, especially after Newmont has given it the thumbs down, remains to be seen. However, Thomas is staunch in his view that condemning a large project area after c. 5 drill holes is "premature." However, this is a clear indicator that Mt Ida might not have major-level potential hoped for. A large land package doesn't always convert to large value.

The current priority is sourcing JV opportunities for each prospect within the Mt Isa portfolio. However, Thomas is being picky about what deals he makes and, therefore, which existing resources he gives out. It seems that the segue to Bronzewing has given Hammer Metals a little bit of breathing space to take its time and identify the right strategy for the company on Mt Ida. Hammer Metals' business strategy appears to fall somewhere between a project generator model and a JV/exploration model. Some of the ideas and "concepts" at the Mt Ida project are gradually being developed, such as at the Kalman Deposit (c. 20Mt at 1.5-2% copper), where some "fantastic conductive structures" have been generated.

Bronzewing, obtained by Hammer Metals last year, has a degree of infamy, having been involved in a high court battle for around 10-years, which was resolved in 2002. Newmont conducted 1-year of drilling before the gold price crashed. The company shut up shop and moved on. Hammer Metals has carried out some preliminary drilling, throwing up some "interesting results." However, the geology is complicated, and complicated screams expensive and time-consuming. It doesn't look like Hammer Metals knows too much about the asset yet. COVID-19 has been mildly disruptive, but the company thinks in-field drilling could further prove some potential; the company is back at work in 2 weeks time. The Western Australian government is also in approval, giving Hammer Metals some funding to drill some deeper diamond holes on the Brzonewing South property. Several members of the team have taken a gold exploration project through to production, so the market may feel a little more assured.

With an expensive project, Thomas is going to have to make his already limited budget stretch even further. He's also going to have to produce data that will get the market excited: something that just isn't happening right now. Thomas has been at Hammer Metals for 9-months, and other than citing a commercial/strategic lack of focus, he doesn't think the company had been doing too much wrong. This might worry investors, given the lack of share price growth.

To bolster Hammer Metals' coffers, plan A is to get the previously issued options exercised and to look for JV partners. Plan B is to look for new equity markets investors after some success at either of the company's projects.

It seems like the management has some skin in the game and are regularly buying shares. However, the CEO, Thomas, hasn't bought any shares on the open market yet... a red flag? There a 5 people within the board and management, and all of them are paid. The 3 directors also receive a Directors fee. That's a lot of remuneration for a company that hasn't done much yet.

What did you make of Dan Thomas and Hammer Metals? Comment below and we will respond to all of you.

Company Website: https://www.hammermetals.com.au/