Denarius Metals' Share-Based Interest Payments: A High-Risk, High-Reward Gamble on Equity and Growth

When a junior miner starts issuing shares to pay interest on its debt, red flags often pop up for investors. But in Denarius Metals' case, this move isn't just a desperate liquidity fix—it's a calculated bet to fund explosive growth in high-grade gold-silver and critical mineral projects. Let's dissect the financial engineering, operational risks, and potential rewards of this strategy.

The Debt Play: Shares as a Currency

Denarius has $34.2 million in convertible unsecured debentures maturing in 2029 and 2030. Instead of burning cash, the company now settles interest payments by issuing shares. For the June 2025 payment, it issued 563,140 shares at a 0.60 CAD price, raising $337,885 in “interest” without touching its cash reserves. This isn't just a one-time move—it's a 12-month plan, with quarterly gold premium payments also subject to share-based settlements.

Why it works:
- Cash preservation: The Zancudo Project in Colombia just began shipping high-grade ore to Trafigura, and the 1,000-tonne-per-day processing plant is set to go online in Q4 2025. Every dollar saved here accelerates production ramp-up.
- Strategic timing: Share prices are currently undervalued (0.52 CAD as of July 16, 2025), making dilution cheaper. The 4-month hold period on new shares also limits short-term selling pressure.
- Gold price cap: By capping gold's London Fix at $4,000/oz for future premium calculations, Denarius shields itself from volatility, a smart hedge for a company reliant on precious metals.

The Operational Edge: High-Grade Projects as a Down Payment

Denarius isn't just issuing shares to stave off bankruptcy—it's funneling that liquidity into projects with outsized upside.

1. Zancudo, Colombia:
2. Progress: Mining began in Q2 2025, with two shipments of high-grade ore (9.4 g/t gold, 184.5 g/t silver) already sold to Trafigura. The 1,000-tonne-per-day plant is nearly ready.
3. Funding: A $9 million prepayment from Trafigura fully funded construction, proving buyer confidence.

4. Upside: With gold at $2,400/oz and silver at $30/oz, Zancudo's 500 tonnes-per-day capacity could generate $100M+ in annual revenue once fully ramped.

5. Aguablanca, Spain:

6. EU designation: Labeled a “Strategic Project” under the Critical Raw Materials Act, ensuring streamlined permitting and EU funding.
7. Nickel-Copper Potential: A 5,000-tonne-per-day plant sits idle but in good condition. With EU demand for EV battery metals surging, this project could become a critical mineral powerhouse.

Key question: Can Denarius execute on these projects before dilution erodes shareholder value? The answer hinges on execution speed and gold/silver prices.

Risks That Can't Be Ignored

1. Equity Dilution:
2. 563,140 new shares in June 2025 alone, plus quarterly gold premium settlements. At current prices, this represents a 2.5% dilution to market cap. If shares rise to $1.00 (a 65% increase), the cost balloons.

3. Executives receiving 144,068 shares in interest settlements signal alignment—but also highlight governance risks if management isn't disciplined.

4. Operational Delays:

5. Zancudo's plant must come online on time. A 3-month delay could force the company to sell shares at a discount.

6. Aguablanca's 20-year water concession is critical but could face environmental pushback.

7. Market Sentiment:

8. Share-based interest payments are a red flag for many investors. If production at Zancudo underperforms expectations, the stock could crater.

The Bottom Line: A High-Stakes Roll of the Dice

Denarius is betting that its high-grade projects will deliver returns fast enough to offset dilution. For investors, this is a classic “risk vs. reward” play:

• Buy if:
• You believe Zancudo's 500 tonnes-per-day plant will generate $100M+ in revenue by 2026.
• You're bullish on EU demand for nickel/copper and see Aguablanca as a hidden gem.

• You're comfortable with short-term volatility and see 0.52 CAD as a “buy-the-dip” opportunity.

• Avoid if:

• You fear gold/silver prices slipping below $2,000/oz and $25/oz, respectively.
• You're wary of management's ability to execute on timelines and budgets.
• You're not a fan of equity-based debt structures.

Denarius is walking a tightrope. If Zancudo and Aguablanca deliver, the dilution could be justified. But if these projects stall, the company's balance sheet will look like a minefield. For the bold, this is a chance to buy into a high-grade story at a discount. For the cautious? Watch from the sidelines—until the ore starts flowing.