TORONTO (miningweekly.com) – TSX- and Frankfurt-listed Cardero Resource Corp on Monday announced that it would sell its Argentine subsidiary to explorer Artha Resources, in a proposed all-scrip deal.
The proposed reverse-takeover transaction was pending Artha shareholder approval, expected by April.
Analysts at financial services firm Desjardins Capital Markets believed that the transaction was unlikely to change the negative outlook for Cardero, as it had not attributed any value for the subsidiary and owing to the value of the Artha transaction not being known at this time.
Subsidiary Cardero Argentina's main assets included the 100%-owned Organullo gold deposit, in Salta province, the former-producing Mina Angela gold deposit, in Chubut province, and a proprietary exploration data set covering north-western and west-central Argentina.
In a note to clients, analyst Jackie Przybylowski questioned whether Cardero would be able to see the year out as a going concern, given its tightening credit and a high cash burn rate.
Przybylowski noted that as at March 11, Cardero had cash and equivalents of C$66 295 and available credit of $1.2-million. The company had estimated the general and administrative (G&A) expenses burn rate to be around C$57 300/m and had been incurring interest charges at a rate of about C$268 000/m for a total cash burn rate of about C$325 000/m before any development or corporate activity.
At this rate, Cardero had enough resources to cover about six months’ worth of expenses.
However, the company also had significant debt that was due in the short term. Cardero would be required to repay $2.2-million in short-term notes in August, which exceeded the capacity of the $6-million credit line, and which was also required to finance ongoing corporate costs. The credit line itself was due in January 2016.
“Refinancing the short-term notes could trigger further shareholder dilution – we note that dilution is a significant concern as the Kopple Group lenders already hold about 110-million warrants, nearly equivalent to the 117-million shares currently outstanding,” Przybylowski said.
She also noted that Cardero’s growth and expansion rhetoric continued despite the balance sheet challenges.
The analyst pointed out that Cardero proposed spending C$250 000 at its British Columbia coal prospect, Carbon Creek, this year, and management continued to evaluate acquisition opportunities in metallurgical coal, copper and other base metals.
“We do not expect that the company will have adequate financial resources to complete any of these proposed activities,” Przybylowski said.
The analyst maintained a ‘sell–speculative’ rating and a C$0.01 share-price target.
The share price had fallen 77% in the last 12 months, from a high of about C$0.13, to C$0.03 on Monday.