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BlueJay Mining sees lots of exploration and other upside at Dundas

Snapshot

  • Has licence for Dundas Ilmenite project in Greenland
  • Pre-feasibility study valuation of US$83mln
  • “Plenty of scope to improve the numbers"
  • At 9.89p, BlueJay is valued at £84mln
mineral sands

Quick facts: BlueJay Mining PLC

Price: 8.51 GBX

AIM:JAY
Market: AIM
Market Cap: £79.14 m
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What it does

Ilmenite is the primary ore of titanium, a metal needed to make high-performance alloys, while most of the ilmenite mined worldwide is used to manufacture titanium dioxide which is used in pigmentation, whiting, and polishing.

In May, BlueJay Mining PLC (LON:JAY) published a resource estimate of 117mln tonnes at 6.1% ilmenite in-situ.

It also detailed a maiden exploration target of between 300 and 530 million tonnes in an offshore area, though the company noted that the potential size and quality of the target is “conceptual in nature”.

BlueJay also believes there are inherent advantages at Dundas - including a homogenous and consistent material, a high-grade resource, the coarse-grained and chemical nature of the ilmenite – which all potentially have economic benefits.

Dundas has a distinction of having “the highest concentration of in-situ ilmenite of any mineral sands project globally” thanks in part to its geological characteristics.

“This would have been a hard rock mine…But the slow grind of the glaciers has effectively mechanically mined the material for us.

Tide and wind and rain have then deposited what is a finished product on the beach over time.

It’s saved us the front end capex of setting up a mine there which helps a lot.”

That glacial grind has had significant consequences for the economics of production at Dundas, with McIllree saying the firm has “dodged anywhere between US$200-400mln in capex, mother nature has done our mining and concentrating for us”.

If Bluejay has the onward advance of glaciers to thank for the quality of the product at Dundas, it also has their retreat to thank for revealing the extent of the opportunity.

“Historically the project was only recognised as a small local occurrence,” says McIllree.

“But then the ice and snow melted, revealing a much larger occurrence. In 2015 we undertook a work programme that demonstrated the project could be globally significant. There are quite remarkable concentrations of the material across thirty kilometres.”

For those worried about the costs of operating in remote Greenland, McIllree offers reassurance aplenty. For one thing, there’s that initial capex dodge. But more tangibly, the project is situated near Greenland’s closest equivalent to an infrastructure hub, not far from two ports, two airports and the town of Qaanaaq, home to around 650 locals, all keen for an additional industry to start.

Even the mine camp has come pre-packaged: Bluejay has simply moved into a town that was abandoned following a change in local wildlife migratory patterns, providing a platform for accelerated implementation.

 

How is it doing

Dundas’ pre-feasibility study put a net present value of US$83mln on the project over a nine-year mine life.

Costs to build the mine and infrastructure were estimated at US$245mln.

BlueJay added that the PFS was based only on a JORC compliant mineral reserve of 67.1Mt and not the entire resource of 117Mt.

The cut-off grade used assumed a selling price of US$232/t, all in sustaining costs of US$113/t, a Greenland royalty of 2.5% and total titanium dioxide recovery of 79.7%

In August, the government of Greenland issued an export permit for the shipment of the 40,000 tonnes of run of mine bulk sample material from the Dundas ilmenite project to be processed at the company's pilot processing plant in Quebec, Canada.

In September, the firm lodged its mining application, ahead of the environmental and social impact assessments available for public scrutiny, towards receiving an exploitation licence.

Bluejay has two other developments in Greenland: the Disko-Nuussuaq nickel-copper-cobalt-platinum group elements project, where it has identified 28 drill-ready targets, and the Kangerluarsuk zinc-lead-silver project, which it is looking to expand by more than five-fold after having applied for an additional exploration licence.

The target testing works are scheduled for summer 2020.

In the six months ended June 30, operating loss was £982,334 and cash and equivalents were £6.5mln.

In November, it conditionally raised £11.5mln from City institutions and government-backed venture funds to continue developing its various projects in Greenland.

 

What the boss says: Mike Hutchinson, chairman

“As I think you will agree, the work streams have been extensive, and the team has done a stellar job in advancing shareholders' interests as well as to continue to de-risk the portfolio and build value."

 

Broker's comment

In October, First Berlin Equity Research GmbH started coverage on the stock with a 'buy’ recommendation and 21.8p price target.

"The homogenous, high-grade, coarse-grained and weathered nature of the Dundas ore body simplifies recovery and, despite the harsh high-market operating environment, is expected to have a bright future for the project," the broker said.

 

Inflection points

  • A detailed costing study will now get underway
  • Permit approval: the PFS has been lodged with the Government of Greenland
  • An additional exploration licence at Kangerluarsuk has been submitted
  • Talks are underway with European funding agencies over capital to build the mine

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