Demesne Resources (DMSE:CA) targets Canadian micro-IPO

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A quick overview of Demesne Resources Ltd.

Demesne Resources Ltd. (DMSE:CA) has applied to raise $370,000 in a Canadian IPO of its common shares, according to a SEDAR filing statement.

The company is a development-stage mineral. exploration company focused on magnetite minerals located in the Canadian province of British Columbia.

Given the risks facing the company and its early stage of development, I am on hold for the initial public offering.

Inheritance Overview

Demesne Resources Ltd., headquartered in Kelowna, Canada, was established to develop the Star Project area which consists of “five contiguous mineral titles covering an area of ​​approximately 4,615.75 hectares located in the Skeena Mining Division, British Columbia, Canada”.

Management is headed by Chief Executive Officer, Brennan Direnfeld, who has been with the firm since November 2018 and is a CPA and CA with start-up advisory experience.

In the short term, the company aims to complete several phases of its analysis and exploration of the Star Project plan.

As of June 30, 2022, Demesne has reserved a fair market value investment of approximately $174,000 from investors.

Heritage market and competition

Based on a 2021 market Investigation report According to Research and Markets, the global magnetite metals market is forecast to reach $130.8 billion by 2026.

This represents a forecast CAGR of 5.0% from 2020 to 2026.

The main drivers of this expected growth are a growing demand for high-grade iron ore used in the production of iron and steel products as major regions of the world continue to industrialize and urbanise.

In addition, the Asia Pacific region will continue to be the largest region by demand, “as China, India and Japan are the main producers of steel.”

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The Chinese government is expected to continue to prioritize investment in the construction and infrastructure markets.

Major competitors or other industry participants include:

  • Rio Tinto

  • BHP Billiton

  • Vale SA

  • iron atlas limited

  • Fortescue Brass Group

  • Venture capital firms

  • Labrador Iron Mines

  • champion minerals

  • Natural resources of the cliffs

  • cathay industries

  • Others

Financial performance of Demesne Resources Ltd.

The company’s recent financial results can be summarized as follows:

  • no income

  • Net loss

  • Cash used in operations

Following are the relevant financial results derived from the company’s registration statement (amounts are in CAD$):

Financial results

Financial Results (SEDAR)

As of June 30, 2022, Demesne had $116,619 in cash and $40,373 in total liabilities.

Operating cash flow for the six months ended June 30, 2022 was negative ($77,379).

Details of the initial public offering of Demesne Resources Ltd.

Demesne intends to raise $370,000 in gross proceeds from a Canadian IPO of his common stock, offering 5 million shares at a proposed price of $0.074 per share.

The IPO is not being marketed to investors outside of Canada. No filings have been made with the US SEC.

No existing shareholders have indicated interest in buying shares at the initial public offering price.

Assuming a successful initial public offering, the company’s enterprise value at the initial public offering would be approximately $649,281, excluding the effects of agent over-allotment options.

The ratio of free float to outstanding shares (excluding agent over-allotments) will be approximately 36.1%. A figure below 10% is generally considered a “low float” stock, which may be subject to significant price volatility.

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Management says it will use the net proceeds from the initial public offering and its existing cash as follows (amounts are in Canadian dollars):

Proposed expenses

Proposed Expenditures (SEDAR)

(Source – SEDAR)

The company’s roadshow management presentation is not available.

With respect to pending legal proceedings, management says that there are no ongoing or known legal proceedings contemplated against the company.

The listed agent for the initial public offering is PI Financial Corp.

Comment on Demesne’s IPO

DMSE:CA is seeking investment from qualified Canadian investors to continue its early-stage exploration efforts for magnetite metals in the Star Project region of British Columbia.

The company’s financials have shown zero revenue, only net loss and material cash used in its operations thus far.

The company currently plans not to pay dividends and to use future earnings to reinvest in the company’s growth plans.

The market opportunity for magnetite metals is large and is expected to grow at a moderate rate in the coming years, with the Asia Pacific region representing significant demand.

The main risks to the company’s prospects are its small size and low capitalization, as well as its unproven ability to successfully commercialize magnetite resources.

Although the company enjoys a positive market environment for its potential products, management appears to have little or no experience in the industry.

Given the risks facing the company and its early stage of development, I am on hold for the initial public offering.

Expected IPO price date: to be announced.

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