Invictus Energy Primer Article
A brief intro to a company on the cusp of a huge potential discovery and rerating.
I imagine if you’re active in the junior resource space that you’ve come across Invictus Energy (IVZ.AX, IVCTF) before, as it’s been one of the biggest wildcat stories of the past few years. And for good reason – from where I sit, Invictus is pound-for-pound one of the best risk:reward opportunities on the market today. If you really are new to the story, your timing couldn’t be better, as Invictus is just weeks away from spudding their second well – Mukuyu-2 – in what could be a company-defining moment. If you have followed Invictus for a while, you will know I’ve hosted a series of webinars over the past year with them, so Managing Director Scott Macmillan and Invictus are one of my favourites. In light of my conviction and excitement, I thought it worth my time to discuss even just a little bit just why I think Invictus is such an exciting story.
The Size of the Prize
I’ve referenced before a mining aphorism I generally agree with that advocates not mucking about in junior explorers who aren’t hunting for giants. They aren’t worth your time because the size of the reward isn’t juicy enough to justify the inherent risk of pre-discovery plays. Which, yeah, I think is wise and highlights well the importance of building positions in plays with asymmetrical risk:reward opportunities.
Thankfully, this debate is irrelevant to this article because Invictus is after some huge prospects. As the map below shows, there is over 5.5 billion boe in Invictus’ land package, with that number looking to potential raise - significantly even - with ongoing above and below ground exploration of the Cabora Bassa basin. Take a look through the targets below to get a sense of them.
Their current target - the “A” Mukuyu prospect - alone potentially holds a massive 20 tcf and 845 mmbbl. This is no nickel and dime explorer looking to squeeze a little more juice out, but rather one of the largest undeveloped onshore basins in the world. At CAD ~$180m MC, the upside to discovery here anything approaching this P50 number is absolutely enormous. Even just a $1/boe,
And this is not some fly-by-night dream mission built on hype and no data. Rather, the potential of this basin has been known about for decades, dating back to Mobil’s exploration of the basin in the 1990s. Mobil ultimately decided it to be likely gas-prone, and walked away without further work as gas at that time had little economic value in the region. But times change
Mukuyu-1 - What happened and what was learned.
It is déjà vu all over again for Invictus shareholders these days - Invictus announcing a bold decision to self-fund and go it alone on a high-profile Q4 drill campaign, fingers crossed for a Merry Christmas discovery… this news sequences was all supposed to happen last year during the drilling of Mukuyu-1. But, as the old saying goes - Man Plans and God Laughs. Malfunctions, breakdowns, and other challenges prevented a fluid sample - and thus a formal discovery - from being announced during M-1.
But despite such an agonising gap in data, what was learned from M-1 and its side track was nevertheless very positive. Lots of zones of hydrocarbons, confirmation across those zones of trap and seal, net-to-gross ratios of 25%-30%, the anticipated presence of wet gas, but also excitingly the presence of light and volatile oil (meaning that some zones might have more valuable hydrocarbons than initially thought). All the data has just reconfirmed the excitement that has built up around Invictus over the years and now the market excitedly awaits to see if M-2 can finally, finally, deliver on the tantalising promise
.
The Demand
Nowadays, South Africa is desperate for more energy, struggling with a 6,000 MW annual shortage while 85% of their current energy is still being sourced from coal. Invictus would have eager buyers to their south. Another advantage for Invictus is that there are already pipelines built connecting Zimbabwe to potential buyers, reducing the need for new infrastructure. And this is to say nothing of burgeoning domestic industrial and electric demand from a country desperate to break out of the trap of energy poverty. As proof of this, Invictus already has signed 2 separate MOUs for offtake agreements with local companies. If Invictus has hydrocarbons to sell, they will find buyers.
The Team.
Scott Macmillan is a smart, hardworking geologist by trade and is a strong and effective leader in his role as MD of Invictus. Not to overstate things, but Scott has built up a reputation for being honest, forthcoming, and no BS, and I am inclined to agree with this take. I find Scott takes great efforts to avoid pumping, speak conservatively, and not shy away from difficult topics. He is an executive that I trust, and if you are in this sector you should know how important that is
Scott’s team is also strong - John Bentley and Robin Sutherland are recent adds that bring critical parallel experience in African wildcatting, development, and M&A from their time at Tullow. This “deepening of the bench” will only make Invictus stronger as the need for a more developed corporate effort increases as Invictus achieves greater exploration success.
Another key member of the board is Zimbabwe national Joe Mutizwa. One of Zimbabwe’s most successful businessmen, Joe’s involvement no doubt helps Invictus on the ground. Even more exciting, Joe chairs Mangwana Capital, which manages a wide variety Zimbabwean pension funds. In this role, Mangwana is the 4th largest shareholder of Invictus Energy, holding 2.4% of the company, making Zimbabwean retirement plans major stakeholders in any future Invictus success. Obviously, this is a huge shot of confidence in the face of jurisdictional concerns people generally have when they first come across Invictus.
Jurisdiction
I know jurisdiction is one topic that would-be investors often balk at with this story and Zimbabwe likely isn’t on anyone’s tier 1 list, but there are legitimate arguments that explain why Zimbabwe isn’t quite the scare some think it is. Scott, for one, himself is a Zimbabwe national. He knows the country, knows how it works, and knows its people. Joe’s own connections and influence are also critical to reflect on here. This is not a group of outsiders lost in an alien jurisdiction - these are locals who know intimately the world they are working in.
Also note that in recent, post-Mugabe, years, Zimbabwe has been working hard to be accepted back into the international community and welcome international investing and any shenanigan pulled on Invictus with such a high profile project could nail that doorway shut rather than prying it back open. To that end, Zimbabwe has very publicly supported Invictus and political officials have tied themselves to its success. Legally binding revenue sharing documents have been signed, even while the market awaits the PPSA.
Yes, Zimbabwe is riskier than Texas or Alberta, yes, it has its flaws in its society and political process that does not mesh with western expectations. But it is making efforts to demonstrate change, and Invictus and the Cabora Bassa basin seems like it is being held up as a flagship operation by the government, not a project about to be bushwhacked. This could honestly be a full article all on its own, but if you remain unconvinced, please take additional time to dig into this aspect.
Conclusion
I will wrap things up here for the sake of keeping things brief, but there is a heck of a lot more I could talk about. Obviously each of the above topics could be lengthy articles in their own right, and the online following for Invictus is very strong (check out Hot Copper’s Invictus channel). But Invictus is a heck of an opportunity in my eyes. Great leadership, incredible resource potential, and the ultimate short term catalyst - discovery. For all these reasons, Invictus is one of my top exploration picks.
-JRI