Dark Horse Resources Limited

DHR Details

Signing of Binding Term Sheets: Dark Horse Resources Limited (ASX: DHR) is an exploration company with major focus on lithium and gold projects in Argentina. The market capitalisation of the company stood at ~$12.11 Mn as on 7^th September 2020. Recently, the company notified the market that it has implemented the second phase of the new Strategic Business Plan, wherein the company inked binding term Sheets to acquire interests in mineral permits in the Gold-rich Central Otago region of South Island of New Zealand. However, this is subject to regulatory approvals. DHR entered the binding term Sheet to earn a 75% interest in the Cap Burn Gold Project and also signed another term sheet to earn a 100% interest in the Rock and Pillar Prospecting Permit Appliction (PPA), Filly Burn PPA adjacent to OceanaGold’s Macraes Mine; and the Raggedy Range PPA. In addition, DHR has applied for Exploration Permit Application (EPA) at Wild Dog Creek, which is near to OceanaGold’s Macraes Mine.

During June 2020 quarter, the net cash used in operating activities stood at $73k, after payment of $68k and 5k for administration and corporate costs and Interest and other costs of finance paid, respectively. DHR finished private placement during the quarter and raised $675,000 cash. Following the quarter end, the company also raised $1,532,000 through SPP.

Cash Flows (Source: Company Reports)

Acquisition of Tampere Gold Project:  On 14 August 2020, DHR executed a Permit Purchase Agreement (PPA) with Sotkamo Silver AB for the acquisition of 100% interest in a number of highly prospective gold exploration permits in Finland, known as the Tampere Gold Project. In another update, the company announced that the first drilling program for the Tampere Gold Project in Finland has been designed and is expecting to commence drill as soon as feasible during the last quarter of CY20. The company’s objectives revolve around to advance the Finland Tampere Gold Project towards defining JORC Resources within the next twelve months. 

Key Risks: The company’s business activities are exposed to a variety of financial risks such as credit risk, liquidity risk and market risk. Credit risk arises from the default of counterparties on their contractual obligation, while liquidity risk is influenced by the inability of the company to pay its financial obligations. 

Stock Recommendation: In the month of July and August 2020, the company has raised $2.0 million in cash. In addition, the company is also raising a further $343,000 (before costs). The funds raised places the company in a decent position to pursue successful discovery in Finland. Debt to equity of the company stood at 0.19x against the industry median of 0.21x. The stock of DHR is inclined towards its 52-week high levels of $0.005. On the technical analysis front, the stock of the company has a support level of ~A$0.002 and a resistance level of ~A$0.006. Therefore, considering the recent signing of binding term sheets, acquisition of Tampere Gold Project, deleveraged balance sheet and fund raising program, we give a “Hold” recommendation on the stock at the current market price of $0.005 per share, up by 66.667% on 7^th September 2020 owing to release of strategic acquisition in New Zealand.

DHR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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