Besra Gold (ASX: BEZ) is an Australian small cap gold miner exploring in Malaysia. But the specific details aren't quite so important as the overall story for our purposes here. Small cap - or “junior” which really means “not producing yet” - miners are a very risky area of the stock market. It's simply inherent in the business itself. Finding out whether that mountain over there has interesting metals in it costs money. That money must come from shareholders. Further, once there's interesting metal there proving that it can be extracted at a profit costs much more money - all of which must come from shareholders. There are any number of potential failure points too.
Maybe there is no gold in them thar' hills. Or there is but not enough, or with the wrong chemistry. Or, as happened to Jervois and its cobalt, the metal [price makes the project unviable.These sorts of problems mean that the average - median - outcome of a junior mining adventure is zero. In some ways this is similar to Venture Capital in the start up and Silicon Valley world - in fact, much of that business model was derived from the mining industry. Many total losses made up for by the occasional true star.
Besra Gold share price from ASX.
It's much too early to say that Besra Gold is one of those stars. The speculation is that it's one of those stars in the making. Thus the risk - there are still points at which the project could fail entirely, just as it could end up as a large and profitable gold mine producing good volumes.
The specific interest today driving Besra up another 40% is that it has passed another one of those roadblocks to success. Recently it announced that it had gained potential funding. As and when Besra meets certain targets then funding will be released. Today's statement is that the first tranche of that funding has arrived. This might all seem like small beer - $2 million at first, $3 million to follow - but the total agreement is for up to $300 million. Sufficient to get Besra to the next major valuation stage of the gold project.This removes substantial uncertainty over funding and thus increases Besra's market capitalisation - and share price.
