The Mining Mongrel: April Review (Part 1)

Good evening and welcome to my second weekly review of the London mining space!

This week has seen the foundations of the junior exploration market shake, as businesses hustle for their position in the food chain of generalist investors attention. Valuable, small fundraisers have been completed with loyal shareholders backing some early stage projects.

These have been predominately for those projects with experienced management in new and developing elephant country jurisdictions, but sadly to early in the ‘bull’ cycle for most generalist investors. Whereas, on the other end of the spectrum, we have seen several geologically sound projects being heavily impacted by inexperienced or ‘dirty’ corporate management.

But in general the share prices of those juniors that are cashed up and hold prospective ground, are looking to be well positioned for a positive few months ahead and leading towards the end of 2020.

Looking at the explorers, a huge uptick has been seen for the near to production- takeover assets, with financing to production secured. Investments have been seen flooding back into projects such as Greatland Gold, who appeared in this months Global Mining Review, so could this be a factor of generalist investors following the flock?

Anomalies to this are Kefi Minerals and their Tulu Kapi gold project in Ethiopia and IronRidge Resources (focusing here on their early stage Zaranoue Au discovery. Both have clear pathways to reaching the next fundamental milestones, with cash in the bank and proven management record. The vast majority of companies however, with these earlier stage projects have seen their share prices flatline.

Though most investors are currently looking to capitalise on the short-term commodity price squeeze, it should not be forgotten that these projects are still attractive to what should be a rush of JV and buyouts as cashed up, mid-tear producers start looking for opportunities to grow. Small raises have been seen in the junior space this week with loyal investors of ECR Minerals completing a $500k raise @ 5p, putting the company in a strong position.

Pembridge Resources, the copper producer in Canada, this week announced it has been unable to meet their obligations with respect to its US$3 million cash call contribution into the Minto copper mine. As a result Pembridge have reduced their economic interest from 33% to 11%. Eurasia Mining has also reared its head, having had a fantastic start to 2020, directors of late-state PGE project in Russia were caught insider trading on social media leading to the company being suspended.

The news out this week has given no indication as to if or when the company will be trading again, but the hunt is on for them to obtain a new Nomad that will be willing to take on a company with such a history. Finally Goldstone has gone into suspension after management were unable to complete annual filings to the Registrar. Though this is a significant inconvenience to investors, having heard from the very technically competent directors, this is just a hiccup in what is a highly attractive, near to production gold project in Ghana.

With investors moving back into the resource sectored, predominately looking for exposure to the safe haven of precious metals, royalty companies have started to be noticed. With no operating expenditure and highly diversified portfolios, groups such as Anglo Pacific, are looking to perform particularly well from what has been predicted to be a short-term squeeze across all commodity's, with significant repercussions for the medium and long term.

With a near-term squeeze on commodity prices, weak local currencies and lower oil prices, ‘producing’ producers will be the biggest winners in the short term. However, this does not consider the significant risk of mine closures. Currently over 150 producing mines across all commodities have closed. These are now ‘care and maintenance’ projects, which are burning through cash that could have been used for takeover’s, exploration and general company growth. In addition, such operations generally have long lead times to getting back into production, therefore making them slow in reacting to future events.

Until next week,

Charles Stephenson
SI Capital

Posted in The Mining Mongrel

Charlie Stephenson View posts by Charlie Stephenson

Mining Specialist ECM Analyst Charlie is an exploration and mining geologist, with a wealth of knowledge having started his career in 2013 as an exploration geologist in Turkey, he has since worked in Europe, East Africa, Australia and Chile. In November 2019, Charlie joined the team as an ECM Analyst producing research notes and developing the SI Capital Research and Marketing Package. Follow more of Charlie's thoughts on Twitter: @GeologyCharlie