Focus on Botswana Project:
This is clearly where the opportunity lies for the MTR valuation so lets explore what’s happening in simple terms:
In Q1 2016, the JV made a discovery of ‘T3’ - T3 is the name of the copper/silver deposit where a discovery RC drill hole intersected 52m @ 2.0% Cu and 32g/t Ag from shallow depth in March 2016. A scoping study was issued in December 2016 valuing the deposit with a pre-tax NPV of US$297m based on $3/lb Cu
Things got a whole lot better (amazingly better actually!) in February 2017, when, following a trading halt, MOD released a statement announcing that they discovered another deposit directly below T3- which was obviously a total game changer. Assay results announced for one hole, MO-G-65D delivered 72.6m @ 1.5% Cu and 27g/t Ag
MOD’s Managing Director, Mr Julian Hanna, said the first assay results from this previously unknown zone were simply outstanding. “This new intersection exceeds the width and grade of the overlying T3 resource which is several times wider than most copper deposits in the Kalahari Copper Belt.”
Both MOD and MTR realised the scale of the opportunity, given the T3 deposit is a tiny fraction of the overall acreage they hold so they both raised significant sums of money, both at a premium to the prevailing SP and attracted big institutional money.
In April 2017, Exploration Capital Partners, a fund operated by Sprott Global Resource Investments, a leading global natural resources investor; took part in a placing in Metal Tiger plc at 3p raising gross proceeds of £4.85m. This marked a defining moment on Metal Tiger’s development attracting this world class fund’s support as its first institutional investor at a 9% premium to the closing price on the previous trading day before issue. Sprott conducted a huge amount of due diligence (nearly 4 weeks) on MTR and its assets before closing the deal which is a huge validation of MTR and its potential. Details of the placing are
Drilling was paused in late spring for Environmental Impact Assessments (EIA) applications to grant permission for a wider exploration campaign to commence using the huge war chest of funds held my both MOD and MTR.
Meanwhile, in late July, MOD/MTR announced the results of the high resolution airborne EM (AEM) survey – 50km along the T3 Dome. The AEM survey detected numerous anomalies and has enabled fast track exploration for potential ‘T3 type’ vein hosted and ‘structural contact type’ copper/silver deposits below surface. 19 potential targets have been identified as a result of this data. The full announcement including pictures can be found here.
In August 2017, an updated and upgraded Mineral Resource Estimate for T3 was released showing a 27% increase in Total Resource Tonnes, this incorporated the results of an infill and extensional drilling programme which was undertaken between the release of the maiden Mineral Resource Estimate in September 2016 and the end of quarter 1 2017. The revised estimate constitutes a significant upgrade to the project and is an important step towards the prefeasibility study which is due to be published end December 2017. Clearly, the 27% increase in resource revises up the NPV $297m accordingly. Details of the upgrade can be found here
On 7th August 2017, MOD/MTR announced they had secured the EIA to resume drilling 70 diamond drill holes with 4 rigs (announcement here) and subsequently increased this campaign on 1st September 2017 to now having 7 drill rigs operating (having identified significant visible copper mineralisation in the first 6 holes – this is highly encouraging – announcement here)
On 3rd October, MOD/MTR announced a potential major strike extension at the T3 project, having completed over 6,100 metres of drilling with a total of 19 diamond holes. MTR CEO quotes “Very excitingly, 50m wide zones of visible copper mineralisation have been logged in core from four holes drilled along strike from the current T3 Mineral Resource. We eagerly await assay results from these holes, and other holes, which point to the potential for major strike and down-dip extensions to the current resource” They also announced work on the pre-feasibility study is progressing well and have taken a decision to increase the modelled ore processing rate to a level 25% above that used in the Scoping Study to reflect the increase in Mineral Resource. These will clearly have a positive impact on the projects baseline economics.
The 25% increase relates to an increase in the proposed plant throughput capacity from 2.0 to 2.5Mtpa. These will clearly have a positive impact on the projects baseline economics. Full announcement here. Mod also corrected the announcement for clarification on 16th Oct here.
This image shows where the current drilling extends well beyond the existing T3 Resource. The pending assays could then confirm this is a massively growing copper mineralisation well beyond the ‘tiny’ NPV $297m area in the 2016 scoping study.
For reference, the mineralisation strike length is now almost a full mile long!
On 11th October, MTR raised £480,000 through a Directors warrant conversion by Terry Grammer. This was strange timing because the warrants expired mid 2018 and the company explicitly stated the money is to be used to explore investment opportunities outside of the Company’s two main Direct Project investments in Thailand and Botswana. Terry has also previously agreed to lock his shares in for 12 months after conversion. It may interest readers to know that Terry completed a similar transaction the day before the Botswana 30% JV purchase - so he is keen to put his own money in to fund strategic purchases when he sees a valuable deal. Full announcement here
On 13th October, MTR announced an investment update here. They have acquired a 4.99% equity stake in KCN KCN:ASX which is an Australian listed miner with a producing asset based in Thailand (of all places – think MTR Thailand based ‘KEMCO’ IPO just delayed!) and they have another silver asset in Chile. KCN was once valued at $1bn and now trade for $73m. The BOD have had bitter disputes with the THAI government and have got themselves into a tough situation. Production In their Gold producing Thailand mine was suspended in December 2016 and estimated costs to restart are about $50m but Kingsgate only have $24m cash.
Here’s a very brief snippet of what’s happened here. MTR have an excellent relationship with the Thailand authorities so could be very useful to KCN. MTR stopped buying at 4.99%, a fraction below the 5% ASX notification requirement (why?) but in a bizarre twist, earlier on the same day of the latest MTR purchase (taking them to 4.99%) and hours before the MTR announcement, KCN applied for a right to purchase up to 10% of its own shares here (remember they need MORE cash to re-start the mine so how can they afford this?).
One possibility is that any amount of share re-purchase would reduce the number of voting shares in issue and therefore push MTR over the 5% threshold and force a notification. Is this why MTR suddenly announced in the afternoon despite being at 4.99%? This blog is based on factual information and so it’s up to readers to join the dots if they believe there are dots to join, however, the things to consider
KEMCO IPO delay
MTR BOD excellent relations with Thailand authorities
KCN lack of cash to restart mine and have extremely "strained" relations with Thailand authorities
Thailand government themselves looking for a credible resolution
The key here is that MTR were stealth buying at rock bottom prices all through the summer so either it leads to bigger deals/merger with KEMCO or it’s a pure share investment play which is already well in profit so a win/win for MTR shareholders. Watch this space because this could be BIG.
Also on 13th October, GGP shares rocketed (over previous 2 days) and landed MTR with over £1m of profits on the shares and warrants they own in GGP (what fantastic timing!). MTR were quick to convert their warrants on the day, see here. Two large share sales appeared via delayed trades feed of GGP amounting to 85m shares – were they part MTR’s shareholding cashing in?
November 2017 updates on BOTS are showing the drilling is yielding more results and also confirming potential for a T3 underground project. Details on the 3 most recent updates can be found here, here and here. As we can see, the approvals for the AEM targets are coming in and the drilling is being stepped up accordingly. These are some exciting targets so watch
The 5th December saw the Kingsgate announcement by MTR as the plans begin to be unveiled – see here. More to follow here as MTR announce their plans and a website will be set up. KCN have announced the AGM will be held on 9th January
Meanwhile, with KEMCO, news landed on 8th December (see here)when the National Minerals Management Committee (the “NMC”) approved the first Minerals Management Master Plan (the “Master Plan”). This will then be presented to the THAI cabinet in January 2018. This was the reason MTR chose to delay the IPO as it will increase the IPO valuation price so keep an eye out here
That brings us right up to date (11th December 2017) and clearly we are now entering probably the most exciting chapter of MTR’s history. So, what's coming next?
Significant newsflow to drive sentiment:
· The company has confirmed it wants to explore more of the area and has ramped up drilling capabilities confirming there are now seven drill rigs on site drilling new holes. Clearly a campaign of this size will generate regular and potentially game changing news as was the case in March and with recent announcements.
· Meanwhile, the remaining assay results are due from the already completed drills and you can see the MOD/MTR executives are very excited about these due to the announcement on 3rd October 2017. Again, assay announcements will form a continuous newsflow in Q4 2017 and beyond.
· The company has confirmed the substantial resource upgrade and the enlarged (+25%) processing rate plant capacity as a result of this so the PFS due in January 2018 is also eagerly awaited especially as the Copper price is rising
· On 19th September 2017, an interesting announcement was made by MTR who have appointed NRG to provide strategic and financial advice in connection with the company’s strategic options relating to its 30% holding in the JV. This could well lead to a significant monetisation event which would unlock the true value of the JV on to MTR books which is currently undervalued in the MTR MCAP (explored further below) - the announcement can be found here.
· The KCN investment opens up a whole new chapter and if they end up with a corporate transaction for a % ownership then that could be truly awesome for MTR, totally game changing … if not then they are well in profit on the shares purchased
. AGM date is 9th Jan 2018.
· In relation to KEMCO, we have that important masterplan which will be presented to the Thai cabinet in January
· Also on KEMCO, we can expect a revised Q1 IPO timeline
· The whole warrants issue will be put to bed by end December 2017, either by conversion (providing more cash to MTR) or they will expire for good
So clearly, there is loads going on and huge excitement building. MOD shares have risen substantially since the beginning of 2017 rising 54% YTD, however MTR has trailed the rise in London and therein lies a growing ‘Investment opportunity gap’ which will be explored below.
The crucial thing here of course is that the resource looks to be increasing in size; the original resource was given a base case NPV of US$297m .. clearly this will be ripped up and recalculated due to the 27% resource upgrade and further exploration success
But that’s not all, the seven drilling rigs are now active and seeking more similar discoveries and the IP survey has identified a further 19 targets – EIA approvals are coming in to expand drilling to these targets with more EIA approvals secured in October 2017
The big question is – Just how big and how valuable are these discoveries?
That’s all to come in the coming days & weeks, hence the market excitement. So in the meantime, what’s the opportunity gap with MTR valuation?
As stated before, there are different projects and divisions of the company and each is relatively easy to value so here’s a breakdown of the implied embedded value of MTR as at 30th June 2017 (most recent half yearly report)
The investment Case:
With this type of company, it’s all about unlocking the embedded valuation of the underlying assets.
Here is a simple breakdown of the assets and their values:
MOD current MCAP: £56m
Less MOD 100% project valuations outside of the Botswana 70% JV: £5m (Source: MOD annual report)
Net Market Valuation of 70% stake of Botswana project: £51m
£51m is for MOD’s 70% share of the JV, so 100% of the project is worth £73m
Total 30% Botswana Project for MTR is net £22m
Other MTR Assets:
Cash balance est at £7m (11th December 2017) – No Debt
Asset trading division £8.9m (as at 11th December 2017)
Thailand NAV upon IPO £8m (Although VSA value it at £14m see here)
Spain JV £425K
Total Sum of parts valuation is £46m or 4.43p per share
Current MCAP of MTR is £23m at 2.17p per share
This is of course without the updated PFS, any further assay results, IP survey results exploration and seven drill rigs, operating and searching those targets identified by the IP survey.
MTR clearly has the potential to move well ahead of the current 4.5p valuation.
This also lines up perfectly with current TA forecasts.
Metal Tiger Technical Analysis (TA) chart by bonker99
(Click to enlarge)
Copper Technical Analysis (TA) chart by bonker99
(Click to enlarge)
MOD Resources Technical Analysis (TA) chart by bonker99
(Click to enlarge)