Besra Gold (ASX: BEZ) is an Australian small cap gold miner working on the Bau gold project in Malaysia. Like all small cap exploration stage companies it is hugely dependent upon sentiment for its share price. Also, upon shareholders for funding - no one offers debt finance to an exploration stage company and clearly, there's no revenue to support anything either. So, all depends upon sentiment of how much they might find in the ground and how likely it is they'll ever be able to lift it out of said ground. Given that all of this is beliefs about possible futures thus the extreme volatility of shares in the junior mining sector.
The announcement is interesting, essentially that they've gained the necessary finance to be able to make it to the next stage of the proving process of the deposit. This does have value, of course it does, as it reduces uncertainty. Further, above about all money having to be capital at this stage. The money is coming from a mining finance house - Quantum - which has two effects. Firstly, it's claimed at least that this is non-dilutive, which is good for current shareholders. The second is that it's a confirmation of the company's claims. No, it doesn't prove, in the legal sense, anything at all. But that an experienced investor in the sector is willing to advance money does provide and independent proof of sorts of the claims. AGain, not that they're wholly true, but that there's at least a chance that they are - the claims being made are sensible that is.
Besra Gold share price from ASX
The Besra Gold announcement of the funding deal is here. The point to note is that this is not, not at all, funding to take Bau into production. The project is nowhere near that stage as yet. Instead Besra is going to redo, makeover, their 2013 feasibility study. This is the stage before trying to raise funding for actual mining. To look at measured and indicated resources and see if they can be proven up into reserves. So, there's still considerable risk over how much gold there may be over in “them thar hills”.
This is what may well explain the fallback in Besra Gold shares on Monday. The excitement of last week driven by less informed speculators thinking that the Bau Project was now a done deal. It isn't, it simply advances to the next stage of the necessary proof before anyone even thinks about actual mining.