Blackheath Resources (BHR.V) has thrown the towel and is exiting Portugal. After dropping the option to acquire the Covas tungsten property, the company has now also dropped the Bejanca tin-tungsten project and is selling its option to earn a majority stake in the past-producing Borralha mine to a Mauritius-based company.
As per the agreement, PanEx will replace Blackheath as option partner and has promised to spend at least C$5M on exploration and economic studies at Borralha to earn an initial 90% interest in the property. Theoretically, Blackheath Resources will end up with a 10% stake in the project but it will very likely elect to not fund 10% of the subsequent expenses which means the company will probably end up with the 1% Net Smelter Royalty. Considering Blackheath has been cash-strapped for a while, it’s probably a good thing to end up with a 1% NSR, which could actually be relatively valuable for a company with a market capitalization of just C$0.5M.
In a theoretical and hypothetical scenario wherein PanEx will produce 75,000 mtu/year at a tungsten price of US$300/mtu, the annual cash flow from the 1% NSR would be approximately C$225,000 (but even if this scenario unfolds, it’s still several years away). It looks like Blackheath Resources now is a clean shell with a decent share structure and a low C$500,000 market capitalization. As PanEx will also invest C$100,000 in Blackheath (and will continue to invest C$25,000/year) in a private placement priced at C$0.05/share, Blackheath can now start looking for new projects or allow itself to be used for a RTO.
Go to Blackheath’s website
The author has a substantial long position in Blackheath Resources. Please read the disclaimer
