Tanga Resources holds multiple mining projects with no long term liabilities and have access to inexpensive labour and capital…so what’s going on?
Where’s the money?
Tanga resources (ASX: TRL) is a junior mining company, so it is expected for there to be troubles, yet they are currently in an awkward situation. They hold 1 mineral exploration operation in Namibia that is fully licensed and are exploring another 3 in Ivory Coast that are also licensed. Yet there are no revenue streams from these projects accounting for the time-intensive process to explore and mine gold.
The Damara Gold project in Central Namibia has been explored since June 2020, and over a year later we are still awaiting full coverage of the ground position. This means drilling is unlikely to commence until TRL completes the processes. With no estimated completion date in mind, it is simply a waiting game.
To talk of TRL’s Ivory Coast projects would be to say the same thing twice in different words. They currently hold 3 projects of interest; Bouaflé Project, Mankono Project and the Bocanda Project. With 8.8% of African gold production coming from Ivory Coast, it’s no wonder the Company has taken interest in the location. Geological and structural mapping are taking place within all of these projects and a “clear exploration strategy is in place, with work now ramping up”.
With no dates set out for completion and the time-intensive process behind exploration, investors should not expect positive earnings anytime soon.
At this point we should be questioning the company itself.
Action with no reaction
Currently, 29.10% of shares are held by insiders and during November 2020, TRL experienced significant insider buying of the stock of up to AU$860.2k in the last 6 to 9 months by two individuals and two companies. What’s of interest is that, conventionally speaking, this would normally trigger an increase in buying volume as it is picked up by institutions and retail investors alike. The lack thereof indicates a decreasing interest in the stock.
With no confirmed dates for the commencement of drilling and extraction on any of these sites, it can be explained why trading volume is not peaking or even subject to volatility as a result. There is movement away from this stock as investors possibly look for companies with a more ‘operational’ infrastructure.
Tanga Resources’ competitive moat is that they are unlikely to receive any issues with licensing or permits on any of their sites and have enough projects to promise them sustainable growth over the years at low operating costs. They hold the highest EV/EBITDA (-5.68) from their current competitors (Taruga Minerals Limited (TAR.AX) with -10.72) indicating a higher value.
In combination with the harm done to the West African Mining industry in which hundreds of mines in the exploration stage had to close temporarily in 2020, the Company stated they were subject to a “limited impact”, implying that there was minimal change in their standing against their competitors.
The Company’s most recent report stated that they must secure funding through issue of shares or options to pay their debts when they fall due in the next 12 months. While this may seem worrying, TRL’s total assets cover their total liabilities. Hence they are ‘sitting pretty’ in their current position.
With their vast availability of projects and operations that are yet to commence and the lack of debt combined with minimal disruption from the ensuing pandemic, we have noted this stock as neutral commanding a hold position. Until they are able to produce some form of a good and sell it, their future is in the air.