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Anglesey Mining plc: THE INVESTMENT CASE

Anglesey looks to Parys and positive metals prices

Anglesey is the owner of the Parys Mountain underground zinc-copper-lead-silver-gold deposit in Wales, where it is updating earlier scoping and economic studies.
Anglesey looks to Parys and positive metals prices
INVESTMENT OVERVIEW: AYM The Big Picture
Anglesey is developing base metals and iron ore projects

Shares in base metals and iron ore focused Anglesey Mining plc (LON:AYM) shot up as it gave a favourable assessment on the outlook for the business and metals prices.

The owner of the Parys Mountain project

Anglesey is the owner of the Parys Mountain underground zinc-copper-lead-silver-gold deposit in Wales, where it is updating earlier scoping and economic studies.

The site already has a resource of 2.1 million tonnes at 6.9% combined base metals in the higher confidence indicated category and 4.1 million tonnes at 5% in inferred.

The company also holds a 15% stake in Canada-listed Labrador Iron Mines which has direct shipping iron (DSO) ore deposits in Labrador and Quebec, while a more recent addition has been a direct 6% interest in the Grangesberg iron ore project in Sweden and a right of first refusal over a further 51%.

Chairman John Kearney told investors: "With recent political developments in the UK and the United States, coupled with the likelihood of renewed stimulus investment in China, we feel that there is sound reason to believe that the future outlook for the commodity prices which are important to Anglesey Mining is very positive."

He homed in particularly on the Parys Mountain site, where zinc is likely to be the main metal produced during the early years of the mine.

Zinc likely to be big driver

Zinc has been one of the strongest performing metals in 2016, rising 50% from US$0.70 per pound at the end of 2015 to US$1.15 per pound recently, while the demand fundamentals have  been improving over the last five years.

Precious metals prices  have been supported by macro economic uncertainty, while lead has also performed well this year rising from US$0.75 per pound at the end of 2015 to US$0.95 per pound in the third quarter.

The prospect of big infrastructure spending by newly elected Donald Trump has also buoyed metals - particularly copper and iron ore and zinc, which is linked to steel making.

Anglesey expects the new scoping study for Parys to form a solid base from which to move the project towards production

"We expect that capital costs of developing Parys Mountain will be lower in today’s less competitive environment and, coupled with positive changes in exchange rates, could make the project attractive at expected metal prices."

Iron ore has been decimated but signs of Chinese consumption continue to increase and it is now selling at US$74 per tonne on a 62% (the higher quality used in steel) iron basis.

Kearney says longer term steel consumption in China must catch up with levels in the west, which would see at least a doubling in iron ore and zinc demand.

Grangesberg has favourable grades

At Grangesberg, technical reviews continue. Notably, the high grade of concentrate to be produced from the project, along with infrastructure and potential sales within Sweden’s domestic markets, remove the need for major port facilities and expensive shipping costs.

At Labrador Mines a plan is in train intended to restructure  the business and refinance an orderly resumption of its iron ore mining activities when economic conditions warrant.

If the plan is implemented as expected, Anglesey’s holding will be diluted by around 25%.

What about the financials?

In the six months to September 30, there was no revenue, while the loss before tax was £124,576 (2015: loss of £135,949.

The group holds cash of £40,608 versus £7,970 at the same time last year.

Additional financing will be required for working capital to maintain the group and carry out planned progress at Parys Mountain.

Anglesey shares rose nearly 17% to stand at 2.625p.

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