Mineral exploration and development companies vary in their approach to exploring and mining the vital minerals upon which global trade relies. Some companies explore only a few large projects, whereas others tap into several smaller-size projects to aggregate as much value as possible from them. An excellent example of the latter case is Thomson Resources, an Australian exploration and development company currently focusing on multiple polymetallic exploration properties in New South Wales (NSW), Australia, and working on getting those projects to work like a single unit to increase efficiencies.
Most of the company’s projects are located either in the New England fold belt or in the Lachlan Fold Belt. The New England fold belt is the primary focus of the company with its hub and spoke strategy. Within that fold belt alone, Thomson Resources is aiming to reach 100 million ounces of silver equivalents, and it has already defined 87.1 Moz silver equivalents in mineral resource estimates within its projects. It is very close to reaching its goals and easily exceeding them.
Economies of Scale and Scope for Increased Efficiency
This gives Thomson Resources plenty of room to aggregate resources into one hub, as is described in the central processing pathway study the company published recently in 2022. According to the study, a central processing facility will enable the company to achieve economies of scale, and realize $425 million in cash flow from the first stage of the study. The company’s market capitalisation is around $15.7 million, and thus there is a lot of potential for growth in valuation based on the above scenario.
A central processing facility will help Thomson Resources reduce processing costs, shipping costs, as well as administrative costs. Moreover, the company’s level of long-term debt is low and healthy. The company has recently sold its Texas project which will give it a good cash injection and extra liquidity. All of those factors make Thomson Resources an economically robust entity.
But the advantages do not stop there. In addition to the economies of scale that can be realized by focusing on silver, there is a lot of value to be extracted from the company’s projects as many of them contain zinc, tin, and copper deposits. This paves the way for economies of scope as well.
Effective Risk Management to Reduce Downside Risk
Thomson Resources displays prudent risk management across different risk categories. The projects it has acquired have been known mines before, and the company has conducted a re-evaluation of the resources estimates of the projects to be more certain about the current resources and the room for future expansion.
Moreover, the company’s exposure to different metals means it has diversified its commodity price risk. Despite this, commodity prices seem to have plenty of upside potential, especially the ones that are critical for the green shift, such as copper.
Thomson Resources has also obtained the social license to operate given that it hires local talent for the most part (which also improves overall performance), and the local community is familiar with mining operations as the areas have been mines before.
Summary
In addition to the potential of the exploration properties that Thomson Resources currently owns, the management is experienced and very wise with its approach to exploration and mining. As such, the company is obtaining as much value as possible from its projects and capital. This good financial management assures investors that their capital is allocated where it can bear fruit. Thomson Resources is listed on the ASX as TMZ and on the OTCQB and TMZRF. At the current discounted price, it can be a valuable asset to add to long-term oriented portfolios and is suitable for commodity investors who want the benefits of focus and diversification at the same time.
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