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Bargain Shares: Mining for hidden value

by Ozva Admin
  • £9.6m of negative fair value movements in the investment portfolio reduces the interim NAV to £29m (17.1p per share)
  • Since the end of the period, the Sandfire and Copper holdings have generated cumulative market value gains of £13.5m (8p per share)
  • $1.2 million cash return from Andean Copper Holding in July 2022

Investors should not worry about the £9.4m first half pre-tax loss recorded by metallic tiger (MTR:18p), an Aim-listed investment firm focused on undervalued natural resource opportunities. This reflected negative mark-to-market moves of £9.6m in the company’s equity investment portfolio and £0.3m of crystallized sales losses during a volatile period for resource shares.

However, since the end of the half year, the company has posted sizeable gains on paper in its two largest holdings: a 1.7 percent stake in the Australian Stock Exchange-listed company sand fire resources (ASX:SFR), an A$2bn (£1.18bn) mid-market capitulation mining and exploration group that is developing the T3 copper-silver and A4 projects located in Botswana’s Kalahari copper belt; and 21 for participation in Australia Copper Port (AU:CBE), another company listed on the Australian Stock Exchange and also developing four projects in the Kalahari Copper Belt near the Sandfire T3 and A4 deposits.

Copper’s share price has risen 18-fold since the beginning of July, making it post-Metal Tiger’s half-year end, after the company’s drilling campaign revealed several major copper intersections at its project. copper Ngami in Botswana. The data strongly suggests that Copper is sitting on a new copper discovery within the Kalahari Copper Belt, hence the share price reaction. In addition, Metal Tiger invested A$1.47mn, at 15c a share, in Cobre’s A$7mn summer fundraiser to increase its stake to 44.6mn shares. Not only did that recent investment more than triple in value, but Metal Tiger already owned 34.8 million shares which increased from £0.5 million to £9.5 million in value. The enlarged stake in Cobre is now worth £12.2mn (7.2p a share). The Sandfire stake is currently worth £19.1m (11.3m annual shares), well above the £17.9m valuation as of June 30, 2022.

Sandfire has also announced a positive news flow. Earlier this week, the Australian group published a positive definitive feasibility study for an expanded 5.2m tonnes/year mining operation combining Sandfire’s T3 copper-silver and A4 projects at its Motheo copper mine in Botswana. . The economics are compelling, even allowing for a 9.5 percent upward revision in projects’ capital costs. This is because Sandfire estimates an all-in sustaining cost (AISC) of $1.79 per pound of copper, or half the current spot price, yielding a net present value of $548 million (account discount rate). 7%) in a 10-year mine. life with a maximum annual production of 55,000 tons of copper in concentrate. Sandfire has already invested nearly half of the project’s US$397mn development costs and secured US$140mn of project debt financing lines with a syndicate of banks.

Leaving aside Metal Tiger’s stake in Sandfire, the company has a 2 per cent net smelter royalty (NSR) on the A4 project, which has been conservatively valued at £9.7m ($5.7m). year) on your accounts, and a limited NSR over Q3. project (book value £1.3 million). Royalties from A4 could be worth $8.9m (£7.7m) a year to Metal Tiger (at an annual production rate of 3.2m tonnes and a copper price of $9,000 per tonne). : Bloomberg consensus forecasts for the production period), highlighting the potential for a massive increase in the value of this investment. In addition, Metal Tiger has several other potential Sandfire-owned copper targets in Botswana that are subject to unlimited NSR.

Although Metal Tiger’s share price is up 22 percent since I last highlighted the glaring valuation anomaly (‘Leveraging a Valuation Disconnect’, June 20, 2022), and is 48 percent above the entry point in my 2020 Trading Stock Portfolio, is still trading about 20 percent below my spot NAV estimates. That is a harsh assessment. To buy.

Simon Thompson was named Journalist of the Year at the 2022 Small Cap Awards.

■ Simon Thompson’s latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus postage and packing. Content details can be viewed at www.ypdbooks.com.

Summer promotion: Subject to stock availability, the books can be purchased for £10 each plus £3.95 postage and handling, or £20 for both books plus £5.75 postage and handling.

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