Zinc Play: ZincX Resources (ZNX.V/US:ZNCXF/FRA:A2JLRM)
ZincX Resources Corp. (TSX-V: ZNX) is a mineral exploration company focused on unlocking the long-term mining potential of the Zinc-Lead-Silver enriched Kechika Trough district located in the low-risk development environment of British Columbia. The company is the dominant tenure holder in the prolific Kechika Trough district that is host to several Zinc-Lead-Silver deposits including the company’s Cardiac Creek deposit. The company has strategically subdivided its extensive tenure holdings into two key projects: The Akie Project (Cardiac Creek deposit) and the Kechika Regional Project (Blue Sky exploration potential). With metals being more and more needed (zinc is up 35% Year-over-Year), the company offers excellent exposure to investors in the mining sector.
Akie & Kechika Regional properties
The company is involved in two projects, the Akie project (116 Km2) and the Kechicka Project (505 Km2), totalizing more than 621 Km2. If we focus on the Kechika project, Teck Resources and Korea Zinc acquired 51% of the area, representing 177 Km2. Indeed, an option agreement has been created between all the parties to gain interest in the Pie, Cirque East & Yuen properties (the adjacent Kechika properties). Tech & Korea Zinc have exercised options to own 3 of 10 Kechika regional properties. Both companies acquired 1,250M shares of ZNX at a premium price of $0.40 when the share price was only trading at $0.20!
What is interesting here? Teck Resources (TECK-B.TO) is a giant in the industry. Its market cap is worth $30B, and Teck is one of Canada’s leading mining companies, with operations and projects in Canada, the United States, Chile, and Peru. What is even more interesting here? Teck and KZ jointly own the Cirque deposit, which lies 20km away from Zincx’s Cardiak Creek deposit.
One of their most exciting deposit is probably the Cardiac Creek Deposit. A preliminary economic assessment (PEA) explains this project is at a Present Net Value of $649M with a base case for Zinc at $1.21. Zinc is $2.00 per LB, which gives the project an estimated 2 Billion Value. Several great endings could happen for Zincx Resources and its shareholders. The most likely one should be a takeover by major companies seeking Zinc supply. Three giants already validated the program (KZ, Teck, and Tongling, which fully funded the 2021 drill program).
With chronic Zinc shortage occurring, coincidental with depletion of significant zinc mines coupled with very limited new mine developments, everything leads to very bullish views on Zinc’s price and Zincx Resources. The company is one of the very few pure-play Zinc out there.
Share Structure/Fundamentals
In the latest financial statement shared by the company (period ended March 31st), the company has 177M shares outstanding for 190M shares fully diluted. Zinxc has 8.3M options at an exercise price of $0.18 and 3.7M warrants at an exercise price of $0.40. Because the warrants’ price is higher than the current stock price, the company can not exercise them. Besides, they will expire on April 9th, 2023. It will be interesting to see if the company will exercise them if the stock price gets above $0.40.
The company has $1M in cash and had a $180k net and comprehensive loss for the three months. It means that the company still has more than a year where it can pursue its operations without running out of cash.
In the financial statement program, the company says: “The Company’s operations are currently not generating positive cash flow; as such, the company is dependent on external financing to fund its activities. The company will spend its existing working capital and raise additional amounts to carry out the potential expansion, continue operations, and pay for administrative costs. Companies in this stage typically rely upon equity and debt financing or joint venture partnerships to fund their operations.”
There weren’t significant transactions done by insiders (2 buys in a year totalizing 50k shares done by Peeyush Varshney, CEO). We can also highlight the company’s share-buyback cancellation program in 2020, which has canceled close to 2M shares.
In the financial statement program, the company says: “The Company’s operations are currently not generating positive cash flow; as such, the company is dependent on external financing to fund its activities. To carry out the potential expansion, continue operations, and pay for administrative costs, the company will spend its existing working capital and raise additional amounts as needed. Companies in this stage typically rely upon equity and debt financing or joint venture partnerships to fund their operations.”
Share Movement
Currently, the stock is traded at $0.12 for a $22M market cap. Its 52-weeks high is at $0.20 (June 8th, 2021) and is now closer to its 52-weeks low of $0.10 (February 7th, 2021). The stock has found its consolidation area, hovering around $0.11. According to the chart data, if the stock was considered on a downtrend for weeks, we could witness a change because its Simple MA (200) and its Simple MA (20) are both in the $0.13 range. Regarding daily fluctuations, the Bollinger bands indicate we could see the stock price navigating between $0.12 to $0.14.
The volume increased steadily and reached 70k shares traded on the 10-days ADV (with a high pick on June 7th when 143k shares we sold). Previously, there used to be 50k shares traded (90-days/50-days/30-days/20-days ADV).
There aren’t significant walls upon the current stock price which could let it fly. There are also numerous support areas underneath (150k shares at $0.095, 125k shares at $0.10, 240k at $0.105, 150k shares at $0.11, 110k shares at $0.115).
Bottom Line
The company is significantly undervalued if we look at all the potential of Zincx Resources. Already three giants in the industry are involved through drilling programs or interest in the projects, showing a potential buyout is more than likely. With zinc’s supply being in a shortage, more eyes will focus on this material, accelerating more and more interest in ZNX.
This article solely expresses the opinion of the writer which might be disagreeing with the other writers of BFN News. Moreover, the writer is not involved in ZNX, and does not own shares of the Company .