Anglesey Mining Research Notes:
None of the following should be viewed as financial advice.
Anglesey Mining (AYM) are a FTSE Main Market listed mining company with a market capitalisation of £9.5m with exposures to three high grade mining/exploration projects in Wales, Canada and Sweden:
- Parys Mountain
- Labrador Iron Mines
- Grangesberg
Parys Mountain:
This is a site that has seen a lot of historic drill work with regards to the deposits of zinc, lead, copper, silver and gold.
Anglesey Mining have planning permission for a 1,000 tonne per day mine, which was granted in 1988, reviewed in 2006 and remains current.
In 1990 Kilborn Engineering completed an independent feasibility study of the project that confirming technical and economic viability of a 1,000 tonne per day (~350,000 tonnes per year) mining and milling operation.
This study was based on a mineable reserve of 1,963,000 tonnes at a grade of 6.43% zinc, 1.30% copper, 3.32% lead, 75 grams of silver and 0.51 grams of gold per tonne and a mine life of seven years.
In July 2007, Micon International produced a scoping study demonstrating the viability of mining the White Rock area at 500 tonnes per day with a capital expenditure requirement of only £15m and with operating costs of £30.25 per tonne mined.
All of the above doesn't take into account the unexplored prospective areas to the east of these resources.
A new scoping study for Parys is expected within the next couple of weeks, which will likely improve on the grades suggested by Kilborn Engineering and the 2007 Micon scoping study.
Labrador Iron Mines:
On December 14, 2016, the Company’s Plan of Arrangement was sanctioned by the Court, marking the final legal milestone in the Company’s restructuring process.
Grangesberg:
Anglesey holds a direct 6% interest in
Grangesberg and a right of first refusal over a further 51%.
Extensive existing infrastructure is currently on site and nationally. This means that there's strong potential for
sales within Sweden’s domestic markets saving costs regarding handling and shipping.
In September 2014 an NI 43-101Technical Report was prepared by Roscoe Postle Associates Inc (“RPA”) showing a compliant resource estimate for the Grangesberg Mine of 115.2 million tonnes at 40.2% Fe in the indicated category and 33.1 million tonnes at 45.2% Fe in the inferred category.
Overall Investment Analysis:
For me there are several factors that make Anglesey Mining attractive and while the three projects are all attractive for me in particular the Parys Mountain project has the most short term excitement unrepresented in the current share price of the company.
All of the projects are in geographical regions that show high levels of political stability, meaning that no discounts need be applied to Anglesey Mining with regards to potential unaccounted risks.
In addition all of the projects are either close to being mined or in the case of Labrador Iron Mines suspended from mining while additional capital is being raised.
The low level of GBP/USD in addition to the generally rising price of metals would only add to the net margin expressed in GBP as the minerals are sold in USD then converted back to GBP.
Profitability of the Projects:
The most important factor for me here is the potential underling profitability of all of these projects to Anglesey Mining.
Using only Parys Mountain as an example:
As of this week the 6.228MT of total ore would be worth £1091m using spot prices (Zn=£412m; Cu=£336m; Pb=£171m; Ag=£86m; Au=£84m), with an estimated cost of extraction of ~£187m
This would give a positive gain to the balance sheet of £904m, which if represented fully in the current number of shares in the company would give an equivalent share price of £5.23 per share or eighty times the current share price at 6.5p.
Personally, I believe that the soon expected scoping study of Parys Mountain that's currently being finished (all of the metallurgical work is apparently completed) will illustrate a large value gap in the company. This will all be in combination with the low free float in the number of shares meaning that we could likely expect a very fast rise here on the release of said scoping study.
My personal fair value share price here is in the 15-25p range - dependant on what more comes from the new scoping study at Parys or the other interests Anglesey hold.
