SMALL CAP SUBMIT IDEAS: Mineral Sands Researcher Capital Metals

“The mineral sand market is very exciting at the moment,” says Michael Freyn Capital metals.

“The ilmenite market is experiencing a huge shortage. Some of the major capital projects have had a false start, while demand continues to grow. ”

In particular, Asian pigment factories require a product that, among other things, is used in paints and white goods.

Capital Metals seems to have a good position to join this breach.

Capital Metals hopes to extract ilmenite used in paints and white goods, among others

The company owns the Eastern Minerals project in Sri Lanka, which Freyn describes as “very advanced”. Indeed, the conceptual work is largely complete.

All that is needed now is appropriate permits from the Sri Lankan government, and the company can come out to raise capital to build the project.

How much do you need? – the answer, not very by mining standards.

According to the latest estimates, it will take only $ 37 million to bring the project to a positive cash flow, although further costs will still be required as the phased development process continues.

Freyn puts the total capital expenditure at $ 80 million. And for that you get a lot.

Over the ten years it is planned to produce 150,000 to 200,000 tons of mineral sands per year, and this is a significant enough amount to interest several potential buyers.

But Freyn is still refraining from making a deal.

On the one hand, he is more interested in registering end users rather than intermediaries. On the other hand, it may turn out that at the time of arrival of the permit in the markets of mineral sands may still be hot.

However, the project now looks pretty healthy.

The baseline scenario the company is running shows that the Eastern Minerals project has a net current value of $ 158 million and is capable of generating an internal rate of return of 56 percent.

This is already a high value for mining of this size, but the company’s more optimistic scenario, in which mineral sand prices were considered 24 percent higher, put the IRR at more than 70 percent.

How realistic is such a scenario? Well, in these times of inflation and growing international tensions, it’s hard to rule something out.

But at the moment, working assumptions based on existing price expectations are serving well enough.

The Eastern Minerals project is expected to bring in $ 25 million to $ 30 million in ten years. And it may not be the end, either.

It is expected that over time more resources will be proven and can be added to the overall resource base.

“It expands easily,” Frayn says. “We only drilled the top three meters of our resource.”

Thus, all eyes are on the Sri Lankan authorities regarding the issuance of mining licenses.

Maybe it will take a long time? It is difficult to say, but the Sri Lankan economy is currently in need of foreign investment, and the government is trying to encourage it.

Freyn says the operating environment is very encouraging, that the law is based on the English legal system, and that overall it is a good place.

Moreover, Capital Metals also supplies ticks in a number of ESGs, so there should be no significant obstacles in this regard.

Operation – free digging and from the surface. The initial concentrate will be produced using spirals and gravity separation, and then after the first 12 months of production there is the idea to build a separate plant with magnetic and electrostatic drums.

This is not a difficult chemical process, and in any case, the people of Sri Lanka are already familiar with operations with mineral sands – the Sri Lankan government has its own mines of mineral sands.

Thus, all is true for a potentially strong revaluation of Capital Metals shares after obtaining a mining permit.

This can happen even earlier when investors wake up to the value of the offer, when the company publishes further news about the processing and starts talking in more detail about the purchase agreements.

The net current share price of the company is 70 pence, which looks interesting when compared to the current share price of 6 pence.

This is not necessarily an indicator on which to bet on the farm. But on the other hand, it indicates some inconsistency of values.

Some of the links in this article may be affiliate. If you click on them, we can earn a small commission. It helps us fund This Is Money and keep them free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

SMALL CAP SUBMIT IDEAS: Mineral Sands Researcher Capital Metals

Source link SMALL CAP SUBMIT IDEAS: Mineral Sands Researcher Capital Metals

Back to top button