Helix Resources: a focus on financing and finding more copper

This article is a sponsored feature from Mining.com.au partner Helix Resources Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions. This is the second of a two-part series.

What makes a junior exploration company successful?

As Helix Resources (ASX:HLX) Managing Director Mike Rosenstreich reiterates to Mining.com.au in part one of this series, having a competent management team is a strong determiner of success.

For junior exploration companies such as Helix, the region and geology in which it operates, commodity focus (as well as drill results), play the most integral roles. However, as he explains to this news service, securing finance, managing cash, and “ticking boxes” to reach milestones are also important.

“For investors seeking exposure to copper discoveries, in Australia, on the ASX – Helix represents an outstanding opportunity with a host of exciting activities immediately on the horizon.”

The MD says, Helix is ‘all-in on copper’ exploration in the prolific copper-producing region of Cobar in New South Wales. The company possesses a sizable landholding across 3 tenement groups, which are largely untested despite being within 50km of significant copper-producing operations.

At its core, the company’s strategy is to “find more copper”. Therefore, it now reports under ‘discovery’ distinguishing between ‘advanced projects’ and ‘regional exploration’ comprising early stage targets and prospects. Further splits between copper, copper-gold, or gold prospects will be highlighted by the company.

“Fortunately, Helix has remained well funded with a cash balance of $5.9 million, which allows us to roll out the drill rig to start testing these targets”

Rosenstreich adds that ‘discovery’ is a numbers game – and the company needs to be testing lots of targets to make those new discoveries. The only way to achieve that is to fund an intensive and extensive drilling program.

“Fortunately, Helix has remained well funded with a cash balance of $5.9 million, which allows us to roll out the drill rig to start testing these targets.”

The almost $6 million cash can place the company on a ‘discovery’ pathway. That provides options for investors regardless is any new discovery is large or small given the range of local processing options Helix has being strategically located in close proximity to 6 suitable processing plants, as well as towns, sealed roads, rail, and power infrastructure.

Access to capital

Helix is therefore ideally placed to pursue its discovery opportunities given it has access to these funds.

Earlier this year, Bridgend Capital Advisory released a report which said Australian mining companies are increasingly being forced to seek project funding for development projects away from traditional banks. Bridgend suggests that offtake deals, equity raisings, and government lending agencies have emerged as more reliable sources of capital.

According to Bridgend, since peaking in 2015 aggregate exposure to resources by the ‘Big 4 banks’ in Australia has declined steadily to $40.4 billion in 2022, nearly $25 billion (37%) below the peak to levels not seen since 2013.

Rosenstreich says there is capital available in Australia for junior ‘discovery’ companies and  Helix Resources is a testament to that notion.

The company has proven it can raise capital when needed and will use its current war chest in a strategic and measured approach as it moves towards discovery one intercept at a time.

“Having been in the banking business myself, you don’t lend money unless you can see a way of it being repaid or ‘borrow’ without a clear means of repayment. Therefore, debt is not an appropriate funding structure for explorers – unfortunately, a discovery cannot be ‘guaranteed’. When it comes to the financing of juniors, I don’t know that a lot’s changed – we are very reliant on the equity market in Australia, but one of the things that has changed is the weight of capital to support more risky investment such as discovery, exploration, predevelopment. It’s moved from the Northern Hemisphere to the Southern Hemisphere.

“When it comes to the financing of juniors, I don’t know that a lot’s changed – we are very reliant on the equity market in Australia…”

Exploration is high risk and with that can come ‘high rewards’ for investors, but also, more often ‘regret’. In my view, investors are backing us to take those exploration risks because we have a highly-prospective ground position and we are generating targets and testing targets. Some of them won’t come through, but we’re able to learn from the misses, reset and  in a systematic way, bring targets through into, hopefully, new discoveries.

That’s the gap for an underfunded junior it’s very difficult to manage the ‘misses’ but they are a feature of greenfields exploration. There’s the challenge and we try to maintain interest from high-grade intercepts from our advanced projects – such as Canbelego. I think people back the focused Helix strategy, the talent of the team and the highly endowed Cobar copper district in which we operate.”

Rosenstreich notes Helix has a 50:50 budget allocation where it undertakes regional exploration in order to make new discoveries and looks to grow resources at existing advanced projects.

Ticking boxes

Meanwhile, the MD adds that institutional investors have different objectives and timeframes than retail or other investors, which is something companies need to consider. Some investors seek confirmation that a junior is on a discovery pathway, he says, while others are interested in near-term development.

“That’s what sort of ignites the share price. Now, in terms of our liquidity and price situation, I think it’s fair to say that just after we did the $11 million institutional placement last year at that pricing, global metal markets rolled off the boil and we saw quite a significant drop in the base metals complex in terms of pricing. And I think there was macro factors around China, COVID, all of those kinds of things were coming to play.”

For Helix, it seems to be now ticking a lot of boxes for investors given its management team, location of its assets, positive drill results, among others.

“In my recent investor roadshows feedback is that  investors are more focused on a sound strategy and ability to execute rather than a basement level price entry. So they tend to take a staged approach; follow the Helix story for a while, hold us accountable and then likely acquiring stock at various stages. It won’t be bang, all the money down on the table on day one and I’m very comfortable with that works well for both sides.

“It’s a large land position – but we are doing the ground work; geology, geophysics, geochemistry and soon the drilling – that’s how new discoveries are made.  We’re actually doing that work”

So, where we are at the moment is that we have built-up terrific momentum in our regional exploration work stream with a solid bank of prospective targets lining up for drill testing. The drill rig is booked for mid-August so we will soon start knocking off some those targets and hopefully, generate results where investors can see these guys are onto something. It’s a large land position – but we are doing the ground work; geology, geophysics, geochemistry and soon the drilling – that’s how new discoveries are made. We’re actually doing that work.”

Rosenstreich says in terms of Helix’s share liquidity, for the most part, recently it has come down to the composition of the company’s share register. Helix listed in 1986 and now has 2.3 billion shares on issue with the top 20 holding only 24.3% of the issued stock. As of 14 July, the company’s key shareholders include Yandal Investments (2.2%), Technical Ceramic Marketing Services (2%), Mr Bulent Besim (1.9%) and AG Investment Services  (1.8%).

“In regard to the  institutional support we received for our $11 million placement in March of last year. We had been speaking with Ashanti Capital, who managed that raise for approximately 6 months before hand. We were able to take advantage of a confluence of events; one, the metal markets were very strong and the equity market supporting metals was also strong, probably at a yearly or bi-yearly high, and that contributed to the opportunity.

Secondly, there was a lot of institutional or sophisticated investor interest in the Cobar region, I think spearheaded by Glencore’s divestment of the CSA mine with a headline sale figure of US$1.1 billion.

Thirdly, there was other corporate activity such as Peel Mining’s raise on the back of a management transition and pivot in strategy from exploration to more development focus. So, there was quite a lot of interest and eyes on the area and I think people saw an opportunity that there was going to be a lot of rationalisations, a lot of consolidation, and I think people recognised the very strategic land position that Helix had.”

Getting on with the job – a powerful concept

Rosenstreich says these external factors cannot be controlled by the company. What can be steered is Helix Resources’ works program and how studiously is deploys its war chest of cash.

In this respect it’s been yet another active period for Helix with a series of ‘highly encouraging’ developments right across the company’s stable of copper prospects in the June quarter.

In the coming 6 months the company will enter a new phase of work – starting to drill test the various new targets being identified and refined.

During the June quarter, Helix continued to define further copper mineralisation and develop  exciting regional targets at its copper projects located along the Rochford and Collerina trends within the Cobar region.

Helix Resources is ‘all-in on copper’ exploration in the prolific copper producing region of Cobar in New South Wales.

“We’re getting on with the job, we’re doing what we said we’d be doing, and the company is generating some strong early-stage results”

“We’re getting on with the job, we’re doing what we said we’d be doing, and the company is generating some strong early stage results. There’s been a little bit of share price movement, especially coming out of the May regional-style exploration results. I am talking to investors about the Copper Powerball concept; that means new discoveries can be like winning a Powerball lottery for investors that is ‘fun’ and potentially life changing. Except, with our team, the targets and current funding – maybe much shorter odds than hitting a Powerball. So that’s my invitation for  why people might consider an investment in Helix.”

There are more than 3,000 junior mining companies listed on exchanges globally, with new ones constantly appearing. So how can all of them survive and make money?

Rosenstreich says Helix is somewhat unique on the ASX as it is focused primarily on copper and is focused on one project area – Cobar in NSW.

“We don’t have assets in Western Australia or Chile anymore and I think that’s important for small companies on how they execute strategically and deployment of capital.”

At Rochford, the company is advancing a pipeline of wholly owned copper opportunities, as well as the Canbelego JV Project where a 77% uplift in contained copper in resources to 31.8 kt was recently reported. Helix has additional exposure to ‘energy metals’ through its Homeville Nickel-Cobalt resource and numerous, ‘high-grade’ laterite, nickel-cobalt prospects. It is presently seeking to consolidate various regional nickel-cobalt opportunities into its 100% owned Ionick Metals for a potential IPO.

However, these longer term plans and financing options will be considered in due course –the current focus is generating and testing targets…one intercept at a time”.

Write to Adam Orlando at Mining.com.au

Images: Helix Resources Ltd
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.