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Kalkine IPO Report

Should You Subscribe for the IPO of this Mining Technology Company- SensOre Ltd?

Dec 20, 2021

The Offer

Company Overview

SensOre uses big data and artificial intelligence to help explorers better tackle target sites. The company structures its activities into three core business divisions to leverage the value of AI-Target opportunities, as follows: Technology; Exploration; and Exploration Services. It is focused on fast tracking the mines of tomorrow and believes that the combination of highest quality big data, ML and other scientific computing techniques will provide the next generation of exploration discovery in Australia and internationally.

Source: Company website

Key Highlights

  • Uses of Fund: The offer is expected to raise gross proceeds of approximately AU$10 million. The company will use proceeds for the purpose of funding exploration of the company’s Tenement Assets as well as expanding Exploration Services capacity alongside the development of the company’s Technology division, particularly through implementation of a SaaS offering.

Source: IPO prospectus

  • SensOre’s clientele: The company servers dozens of clients. Its first major client agreement was completed in September 2020 with BHP. The Joint Targeting Agreement with BHP Nickel West Pty Ltd focused on nickel targeting within a pre-defined search space.
  • Key competitors: GoldSpot a Canada’s TSX Venture Exchange listed company having a market capitalization of ~AU$ 134 million as on December 16, 2021, and KoBold (privately held) which is backed by Bill Gates and Jeff Bezos.
  • Major Shareholders: Shareholders holding 5% or more of the Shares on issue both as at the date of this Prospectus and on Completion of the Offer.

Source: IPO prospectus

  • Technology & IP Assets: The company invests heavily in its Technology division, comprising its R&D program, to validate and improve the company’s Technology & IP Assets. Since inception SensOre has invested more than AU$3.3 million in R&D.

Source: IPO prospectus

  • Demand drivers: Lowering exploration success and the declining grade and size of new discoveries is hurting the pipeline of new mining projects in mature mining locations such as Australia. The mining of lower-grade ore and orebodies with higher penalty elements across the sector also increases the environmental impact of extraction and production, leading to larger waste and higher energy and water demands per tonne of metal extracted and processed. Such trends indicates for the significant requirement for technological innovations designed to enhance discovery success rates and extraction performance.
  • Dividend policy: SensOre does not intend to declare a dividend in the coming financial year. The Company may distribute dividends in the future based on future growth prospects and capital.

Financial Highlights

Source: IPO Prospectus

  • Revenue during the year ended June 30, 2021, stood at AU$1,682,920, reported a jump of 262% from AU$ 464,448 reported in the same period of the previous financial year.
  • Loss for the period under consideration significantly increased to AU$ 4,169,977, compared to AU$1,632,074 reported in FY20, mainly on account of significant surge in Employee benefit expenses to AU$ 2,217,688 vs AU$ 634,010 reported in FY20 and Exploration preparation expenses to AU$ 1,797,400 vs AU$162,811 reported in FY20.
  • Loss per share in FY21 increased to AU$ 6.74 vs. AU$ 3.56 reported in FY20.
  • Cash and cash equivalents at end of financial period of 2021 improved by 12% to AU$ 1,603,835 against AU$ 1,434,492 reported at the end of financial year 2020.
  • Total liabilities as of June 30, 2021, stood at AU$ 1,476,630 and Total Assets as of June 30, 2021 stood at AU$ 13,021,735

Key Management Highlights

Source: IPO Prospectus

Risk Associated (High)

Investment in the IPO of "S3N" is exposed to a variety of risks such as:

  • Failure to attract new business: The company remains in the early stages of its client focused growth strategy and its ability to scale is reliant on new client growth.
  • Regulatory risk: Mining exploration and mining operations required licenses at various early stages of exploration.
  • Competition risk: The industry in which the company operates in is exposed to domestic and global competition. Key drivers of competition in the mining industry include commodity prices, production volumes and grades, transportation capacity.
  • Liquidity risk: The investors in the company are exposed to liquidity risk, given the micro-cap market categorization of the company.

Conclusion

The company is aiming to organize all of Australia’s geoscience information and then undertake this activity globally. Moreover, the company’s technology has been identified as most applicable to major mining jurisdictions with good data availability, namely Australia, North America, parts of South America and Europe. Also, It is laying the groundwork for scaling of international footprint including expansion into North America and Scandinavia.

We (Kalkine) believe that SensOre’s AI-enhanced exploration approach will generate mining industry benefits, leaving the company well positioned to grow its client base and enhance the value of its asset base.

However, exploration for minerals is a highly speculative venture necessarily involving substantial risk. There is a risk that the company will not find economic mineral deposits at the relevant locations, including those that may be identified by its ML enhanced technologies and large geoscience datasets.

Also, the company’s growth and development will require substantial expenditure. The Company currently has limited operating revenue and is only likely to generate substantial operating revenue with further maturation of the Company’s Technology and IP Assets and Exploration Services.

Therefore, given the SensOre’s competitive advantages of large geoscience data platform allowing AI-insights to be generated from geoscience, client focused growth strategy, and seasoned top management and risk associated, we believe the IPO of SensOre Ltd would be "Attractive' for a High-Risk appetite investor.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.