Ben Kramer-Miller, chief analyst at miningWEALTH, profiles Globex Mining Enterprises, which has a royalty on a zinc mine that has the potential to create a sizeable amount of cash flow.
Globex Mining Enterprises Inc. (GMX:TSX; GLBXF:OTCPK) is a recent miningWEALTH pick. It is a self-proclaimed “mineral property bank” that holds numerous claims and projects available to be optioned by exploration companies. Exploration companies pay Globex in cash/shares, and agree to do a certain amount of work over a given period of time in exchange for the right to earn the property, minus a royalty. Over the years the company has accumulated well over 100 projects and a couple dozen royalties.
Since our recommendation the stock has fallen, but the fundamentals have improved in a way that should propel shares higher: one of the aforementioned royalties is going to begin generating cash flow for Globex in the near-term.
Globex owns a gross metal royalty on the Tennessee Zinc Mines owned by Nyrstar. The royalty entitles Globex to a percentage of the revenue generated from metal sales from the mine. The percentage is 1% if the zinc price is $0.90–$1.09/lb. and 1.4% at or over $1.10/lb. Zinc currently trades at ~$1.06/lb.
The Middle Tennessee Zinc Mine is a small underground mine in Tennessee that is part of a larger mining complex in the area. The mine operates with just a few years worth of rolling reserves, though it has decades worth of resources in the “inferred” category.
In response to low zinc prices, Nyrstar shut down the mine in the middle of 2015. Up to that point the mine was producing ~40,000 tonnes of zinc per year, and at that production rate Globex would generate ~$1 million in royalty revenue per year. It generates nothing if the mine isn’t …read more