Heavy Minerals faces going-concern risk before garnet production

Funding uncertainty shadows garnet development plans

Heavy Minerals Limited (ASX:HVY) has reached the awkward stage familiar to many junior miners: its projects are becoming more defined, but the company’s finances are becoming less forgiving. The industrial minerals explorer reported a FY2026 net loss of A$2.84 million, compared with A$1.48 million a year earlier, while its auditor highlighted a material uncertainty that may cast significant doubt on its ability to continue as a going concern.

At 30 June, Heavy Minerals held only A$35,715 in cash against A$3.26 million of current liabilities. Current assets totalled A$108,899, leaving a net working capital deficit of A$3.15 million. Operating activities consumed A$666,681 during the year, while the company spent A$761,605 on exploration and evaluation and ended the period with A$4.94 million of exploration assets on its balance sheet.

The annual report says continued operations depend principally on raising additional capital and managing cash flows within available funding. Heavy Minerals raised A$3.045 million through royalty arrangements over Port Gregory and drew A$575,000 under its A$2 million Acuity Capital at-the-market facility during the year. The company also raised a further A$680,000 under its Tranche 2 royalty programme, giving subscribers additional royalty exposure over Port Gregory.

Kanmantoo moves towards an investment decision

Operationally, Kanmantoo is now the immediate test of whether Heavy Minerals can turn technical work into construction. The company signed a binding Tailings Processing Agreement with Hillgrove Resources Limited (ASX:HGO) in January, securing access to garnet-bearing tailings from the Kanmantoo Copper-Gold Mine in South Australia.

Front End Loading Stage 3 engineering work continued across a 50,000-tonne-per-year single-train plant and a 100,000-tonne-per-year two-train configuration. Initial production is targeted at 50,000 tonnes a year, with any expansion subject to permitting and a Final Investment Decision. That decision had not been made by 30 June, and funding discussions remained preliminary and non-binding.

Port Gregory adds scale, but not yet cash flow

Port Gregory provides the more substantial project case. Subsequent to year end, Heavy Minerals reported an 85.5 million-tonne Probable Ore Reserve grading 4.43% total heavy minerals and containing 3.3 million tonnes of garnet. Its pre-feasibility study estimated a 24-year mine life, A$322.8 million post-tax net present value at an 8% real discount rate, a 47.6% post-tax internal rate of return and A$122.1 million of development capital.

Those figures are subsequent events rather than FY2026 results, and the study’s production target is underpinned partly by Inferred Mineral Resources representing about 5.7% of mill feed. The company cautions that this carries a low level of geological confidence and that the production target and related forecast financial information may not be realised. Product qualification and distributor discussions also remain exploratory, with no binding offtake quantities, pricing or counterparty selected.

Royalty obligations sharpen the capital question

The funding structure brings its own clock. Heavy Minerals’ royalty agreements over Port Gregory total A$3.045 million of subscriptions and could leave the company with a 1.5975% gross-revenue royalty if no buy-backs occur. A 60% buy-back mechanism applies to the agreements, generally at 125% of the subscription amount or 137.5% for extended election periods.

One A$1.25 million subscription had a A$1.5625 million buy-back included in current liabilities at 30 June, although the holder agreed after year end to defer payment until no later than 31 October 2027, subject to the company raising funds. The immediate financing pressure has therefore been deferred, not removed. Heavy Minerals says it is evaluating bonds, debt, royalties, prepayments, offtake-linked structures, grants and potentially equity to fund development.