Paradice Investment scoops up $7m stake in Caravel Minerals as copper mine plans progress
When investing in small caps, Paradice says it looks for companies trading at “substantial discounts” to their intrinsic value.
The unnamed large institutional investor that is scooping up a $7 million stake in Caravel Minerals (ASX: CVV) has been revealed in a general meeting notice as US-based Paradice Investment Management.
Earlier this month, Caravel announced it had received firm commitments for a $7.5 million placement via the issue of 27.8 million shares at $0.27 each.
In that announcement, the company noted an unnamed “large institutional investor” was subscribing for the majority of the placement, committing to acquiring a $7 million stake – amounting to more than 29.9 million shares.
Paradice manages about US$4.4 billion in global assets and was outed as the investor in Caravel’s notice of general meeting released to the ASX last week.
Paradice global small mid cap strategy
Paradice is known for its long-term investment strategy in the global small and mid cap space.
The company looks at investing in 40-80 businesses globally that it believes are undervalued.
Its strategy is to uncover “strong” businesses trading at “substantial discounts” to what Paradice deems is its intrinsic value.
The investment vehicle says it employs a fundamental “bottom-up” process to build its portfolio of undervalued securities.
When selecting a business to invest in, Paradice looks at four key criteria – undervaluation, high quality, balance sheet strength and capable, shareholder-friendly management teams.
According to Paradice, the global small cap space is “under-researched” on both the buy and sell side and this results in market inefficiencies while opening the door for “attractive investment opportunities”.
Aeris investment
Paradice’s strategic stake in Caravel is not its first foray into the ASX small cap space. The vehicle acquired up a 7.05% stake in Aeris Resources’ (ASX: AIS) in multiple transactions between October and December last year.
The vehicle paid almost $10 million for the holding.
Aeris operates the Cracow gold mine in Queensland and the Tritton copper mine in New South Wales.
Since June last year, Aeris’ market cap has grown from $19 million to about $200 million, with more increases anticipated as the company ramps up profit from its operations while expunging debt.
Caravel Minerals
Spectators could easily be mistaken for believing Paradice theorises a similar growth is in the pipeline for Caravel as it advances its namesake copper project in Western Australia.
Since June last year, Caravel’s share price has risen from $0.025 to $0.38 as is rapidly progresses the asset.
The company’s market cap is currently hovering around $132.1 million.
Advancing the Caravel copper project
Caravel is using the $7.5 million placement proceeds to fund infill and extensional drilling at the copper project, which will feed into a pre-feasibility study.
A 10,000m reverse circulation infill program has begun at the Bind deposit this week with the aim of targeting the shallow higher-grade zones within the Bindi Hinge and Bindi East Limb targets.
The program’s objective is to increase confidence in the higher-grade areas for resource and reserve classification.
Caravel is hoping to incorporate these higher-grade areas into the early stage of the proposed mine schedule of the pre-feasibility study, with the aim of improving early project economics by mining high-grade and shallower material.
Since late last year, Caravel has maintained active diamond and RC drilling – recently completing 5,000m of diamond holes and 9,000m of RC drilling.
Earlier this month, wide zones of high-grade copper were uncovered at the Bind East Limb target.
Highlight intersections were 130m at 0.30% copper from 230m, including 10m at 0.47% from 230m; 151m at 0.32% copper from 100m, including 16m at 0.58% copper from 122m; and 164m at 0.38% copper from 30m, including 12m at 1.26% copper.
One of Australia’s largest undeveloped copper projects
The company’s wider Caravel copper project is located near major highways, power and other requisite infrastructure including a local workforce.
Caravel says its namesake project is one of Australia’s largest undeveloped copper projects with a resource of 662Mt at 0.28% copper for 1.86Mt of contained metal.
A scoping study indicates a potential 25-year mine life based on the resource. It also assumes an open pit bulk mining scenario using standard processing to generate a “clean and readily marketable concentrate”.
Caravel has just appointed Ausenco as lead engineer for the pre-feasibility study, which is scheduled for release late this year.
A resource update is due to be published in the September quarter.