John’s Mining Journal: Condor, Alba and Empire Metals

Veteran mining analyst John Cornford reviews some of the more interesting plays in the junior mining sector…

Gold’s performance, and that of other metals, has been spurring a number of hopeful green shoots which I haven’t been able to follow in detail, so here is a quick canter (without detailed numbers or recommendations) past some of them for a quick thought.

Since I updated it in August, Condor Gold (LON:CNR) has remained in the shade of its efforts to pull together the last threads before its La India project can get going – if in a limited way. Rumours are that purchase of the final pieces of required land is almost complete, while a toll processing deal has been agreed in principle. 

With negotiations under wraps and initial volumes to be mined and trucked not known, it is impossible to estimate how quickly this will translate into cash to enable Condor to ramp up to its full potential in two or three years’ time. When it does, it will be compared with Calibre Mining as a fellow Canadian listed Nicaraguan gold miner, whose current £380m market cap compares with CNR’s £53m. Calibre’s output currently is possibly twice Condor’s initial volume and it has a stronger balance sheet. But Condor could have more potential in the long term, so the disparity remains interesting.

Greatland Gold (LON:GGP) is a case where enthusiasm for gold, regardless, might have taken its shares to an unsustainable £900m market cap – about 50% higher than Solgold’s. Unlike the latter, GGP has no resource yet at its flagship Havieron project in Australia except for estimates that it might be around 2Moz of gold – less than 20% that of Solgold (LON:SOLG). Its attraction, however, is its potential value to Newcrest, which is building up to an eventual 70% share by spending $65m on drilling to prove it up, because it is close to Newcrest’s 10M oz Telfer mine which is running out of ore. That does not mean Havieron is worth £900m to Newcrest, however. A maiden resource estimate is expected soon, but investors might do well to re-deploy at least some of their gains to other green shoots.

Of those, some in Europe’s Celtic fringes in the prolific Dalradian gold belt, which extends from Scandinavia, through Scotland and Ireland, to Nova Scotia, have flourished. Scotgold Resources (LON:SGZ) has well exceeded my expectations and, with first gold due, has reached 118p for a £64m market cap, having spiked 25% higher than that two months ago. 

SGZ has been followed skywards by Alba Minerals (LON:ALBA) – a long established British focussed explorer with a slightly rocky track record, but whose interests in the gold found in historically interesting amounts in Snowdonia look like bearing renewed fruit. It is re-exploring and refurbishing old mines and has recently added exploration rights at Gwynfynydd, which produced 45,000 gold ounces at a high 15 g/t grade up to 1999 when gold fell to an uneconomic $300/oz and the mine was closed. 

Meanwhile, results are due soon from sampling at its other main prospect, the Clogau-St Davids mine, where a new pilot processing plant is being installed. Along with other exploration projects in Greenland for ilmenite, graphite, and iron ore, Alba also owns 11.7% of the producing Horse Hill oil project in the Sussex North Weald, which has consents for commercial production at up to 3,500 barrels per day for 25 years but has been dogged by planning appeals. The uncertainty was the main cause of Alba’s shares’ fall from around 0.6p in 2017 and again in 2018, to below 0.1p early in 2020, from where news in August and a placing to enable restarting exploration and test mining at St Davids spurred the shares back up to current levels around 0.5p. 

Alba’s £27m market cap is almost half that of Scotgold Resources’ £64m, the latter of which I think is near its peak, as also might, for the moment, be Alba. SGZ has an NPV based ‘target’ according to research from Hardman’s of 167p per share – or a £122m market cap – in other words well above what I think investors should pay, especially given what it will have to spend on exploration to prolong its Cononish mine’s 9-year life.

So while both look a little high currently, resolution of the delays at Horse Hill could release what some think could be worth half of Alba’s current value, while good Welsh drilling results will help the shares. In addition there are its Greenland assets, the sale of which could help fund its Welsh gold development.

Plenty of other mining minnows have sparked up on the recent enthusiasm.

Empire Metals (LON:EEE) transmogrified from Georgian Mining in February when it decided to give up on attempts to deal with difficult politics in Georgia (the Black Sea one, which had caused the shares to lose 90% in two years) to try for better luck elsewhere.

That turned out to be in Australia where, in April, having raised £0.6m at 1p, EEE announced its proposed acquisition of a 41% interest in the Munni Munni Platinum group metals project in the Pilbara, followed in August with purchase of a 6-month option to buy 75% of the Eclipse gold project near Kalgoorlie.

Munni Munni, unfortunately, has become embroiled in a legal tussle with another shareholder so is on hold. Eclipse, however, has already found promising initial results from the $300,000 drilling programme Empire is committed to before it can take up its option to buy it for £1.1m. They promise to extend historic workings from which 900 gold ounces were produced 100 years ago at very high grades, since when practically no work has been done except in 2014, when limited drilling identified further gold. The present programme is less than 10% complete, so all hangs on further results which should be received by at least the middle of next year.

Meanwhile, as the share chart shows, volume is small, and the spiky share progress shows investors as having reservations, no doubt reflecting Empire Metals’ on-going need for funding. The £10m market cap at 3.6p isn’t expensive for the possibilities however, provided gold stays strong, while the recent agreed sale (for £4m in shares, but still to complete) of its Georgian assets to a TSX listed Canadian company with experience of mining in ‘complex jurisdictions’, might provide some backing. More good drilling results at Eclipse are obviously needed.