Article posted on www.ReRateStocks.com on November 20, 2016.


Minco PLC is a company that I have been following for years. I do not expect a lot of readers to be familiar with this story because Minco is listed on the AIM in London and has not progressed their projects very aggresively. With 478,142,184 shares outstanding and a share price of £0.013, the market capitalization is £6.2 million. It is not easy to acquire a significant position in the market as the spread between bid and ask is often 0.002 or more (15 - 25% of the share price). Every time that there is a little buying volume, the ask price moves towards £0.0155 or 0.016. I personally prefer the TSX-V over the AIM in London, as market makers have a dubious reputation on the AIM. I had problems buying shares out of the ask as market makers are only obliged to sell shares at the ask price if your bid size is 50,000 shares or less. You would expect enough liquidity with this number of shares outstanding, but in reality there are not many shares available.

Share structure

Issued and outstanding: 478,142,184

Deferred shares: 38,000,000 (non voting and have no right to dividends or conversion)

Options: 12,714,530 (weighted average exercise price £0.0597)


1. Directors & Management

John F. Kearney, Chairman and Chief Executive

John Kearney's is the Chairman, President & CEO of Canadian Zinc. He was previously President and Chief Executive of Northgate Exploration, Campbell Resources, and Sonora Gold Corp. He is currently also Chairman of Labrador Iron Mines Holdings, Anglesey Mining, and Conquest Resources, and a Director of Avnel Gold Mining, and Xtierra Inc (in which Minco holds a significant share position). He is also a director of the Mining Association of Canada, and of the NWT and Nunavut Chamber of Mines.

Danesh K. Varma, Director, Chief Financial Officer and Company Secretary

Mr. Varma, Chief Financial Officer and Secretary of Minco, is a chartered accountant with over 32 years of experience in the mining finance industry, having been a director of American Resource Company, Northgate Exploration Ltd. and Westfield Minerals Ltd. Mr. Varma holds directorships with Labrador Iron Mines Holdings Limited, Brookfield Infrastructure Partners L.P., Conquest Resources Limited, Connemara Mining Company Plc., Anglesey Mining Plc. and Xtierra Inc.

Peter McParland, Director

Mr. McParland is the founder and managing director of Quarry and Mining Equipment Ltd (QME), based in Navan, Co. Meath, Ireland. QME is also a contractor of Dalradian Resources on the Curraghinalt Gold project.

Terence N. McKillen, Director

Terence McKillen is a professional geologist and retired mining executive with over 40 years experience in the mining industry. Peter McKillen was formerly Chief Executive of Minco Plc, President and CEO of Xtierra Inc., Executive Vice President of Labrador Iron Mines Holdings Limited, President & CEO of Conquest Resources Limited, Vice-President Exploration of Northgate Exploration Limited and Westfield Minerals Ltd. Mr. McKillen is a founding director of Minco.

Michael Power, Director

Michael Power is a director of Zaruma Resources Inc. and of Conroy Diamonds & Gold. He is a professional engineer with over 30 years of experience in the mining industry in Canada and internationally. Based in Toronto, Michael Power is a Chartered Financial Analyst, he was formerly Vice-President & Secretary of Moydow Mines International, Vice-President of Corporate Development at Hemlo Gold Mines Inc., and previously Noranda Mining Ltd.

Patrick D. Downey, Director

Mr. Downey is a Canadian Chartered Accountant and Institute of Corporate Directors Certified Director with over 30 years experience in the mining industry. He has been a director, CEO and CFO of Toronto and New York Stock Exchange listed companies including Northgate Minerals Corp. which was recently acquired for $1.3 billion.

Warren MacLeod BA., Director

From July 16th, 2013 Warran MacLeod has been a director of Minco plc. and President of its 100% private subsidiary Buchans Minerals Corp.


2. Insider ownership

Insiders own approximately 9.5% of the O/S, acquired at much higher prices than the current share price of £0.013.


3. Balance sheet and expenditure

Minco did not aggresively progress its projects over the past 2 years. Earlier this year Minco started some activities in Canada and Ireland. More information about those activities will follow later.

It is important to keep an eye on the cash reserves and the expenditure to know if we can expect our shares to be diluted over time by financings. Minco sold its 23.6% ownership of the Pallas Green project to Xstrata in 2011 for US$ 19.4 million. On June 30, 2016, approximately USD$ 3.4 million of that cash was still left in Minco's treasury.

Minco has significantly reduced its expenditures in 2015. The table below shows Minco's "current assets" quarter by quarter.

With average quarterly expenditure of US$ 450,000 since March 2015, I expect that Minco can continue without a financing until early 2018. This can of course change significantly if Minco decides to increase work expenditure on one of its projects or decides to divest assets.


4. Projects

Now that we have an idea who is behind Minco PLC and that the company's financial condition is, let's have a look at the projects. I start with the most valuable asset from my personal point of view.


4.1 2% Net Smelter Royalty (NSR) on Dalradian Resources Curraghinalt gold project

The Curraghinalt project is located in County Tyrone and County Londonderry, Northern Ireland. The Curraghinalt gold deposit, located near the centre of the property is approximately 115 kilometres west of Belfast by road. The property measures approximately 84,000 hectares comprising four contiguous areas (DG1, DG2, DG3, and DG4), to which Dalradian has title. Dalradian holds, through its wholly-owned subsidiary, a 100 percent interest in the property, subject to a 2 percent net smelter returns (NSR), payable to Minco plc, and a 4 percent royalty payable to the Crown Estate Commissioners upon production of silver and/or gold.

Earlier this year Dalradian announced an updated mineral resource statement on the Curraghinalt gold deposit, including a 109% increase in gold ounces contained in the Measured and Indicated categories compared with the 2014 resource (2.09 million ounces of gold at 11.61g/t in the Measured & Indicated category and 2.3 million ounces of gold at 7.13g/t in the Inferred category.


In the figure above you can see a picture out of Dalradian Resources' Corporate Presentation. It shows their vein system projected on a regional map. The current Curraghinalt deposits falls within Minco's royalty area that is called "NSR area of influence". The figure below shows this area. We believe that both the 400m and 900m step outs indicated on Dalradian's map are within the "NSR area of influence". We also believe that the Alwories discovery holes are just outside of that area. 

What is the value of a 2% NSR on a world-class project? That is of course depending on Dalradian's ability to bring this project in production. The feasibility study is due and therefore we will soon know what the economics are.

The 2014 PEA results (based on $1200 gold)

  • IRR after tax 36.2%
  • NPV $504 (8% discount factor)
  • Initial CAPEX $249 million
  • 18 year mine life

These results are not representative anymore as Dalradian can only use measured & indicated ounces in the feasibility study. Therefore the mine life in the feasibility study will probably be in the range of 10 - 13 years (depending on a lot of factors including mining methods).

Even though we will have to wait for the feasibility study results in order to properly value this royalty, we have prepared an NPV calculation based on:

  • Gold price $1200
  • Silver price $16
  • 11 year mine life
  • Annual gold production of 145.000 ounces
  • 8% discount factor

The result of this NPV calculation is a NPV (8%) of USD 24.5 million.Since Minco is listed in London it is interesting to look at the NPV in Pound Sterling. At the current USD/GBP 0.81 exchange rate it translates into a GBP£ 19.9 million NPV. Minco's market cap is currently £6.2 million

In addition to the NPV calculation, we looked at some recent royalty transactions to better value the 2% Curraghinalt NSR. It is not easy to compare royalty transactions, as there are many important variables such as;

  • expected annual cash flow
  • mine life
  • exploration upside
  • quality and size of the operator
  • jurisdiction.

The table below compares recent royalty transactions based on expected annual cash flow. The average transaction price was 4.42x the expected annual cash flow. Based on this single factor we calculated the Curraghinalt NSR to be worth: 4.42 x $3.44 million = $15.2 million.


Whether the value of the royalty is $15.2 million based on recent transactions, $24.5 million based on the NPV calculation, or a value somewhere in that range, it is clear that the market does not appreciate the royalty like that based on Minco's market capitalization.


4.2 Woodstock Manganese Project - New Brunswick

The Woodstock Project site is located approximately 6 km from the town of Woodstock and approximately 10 km from the Canada-US border at Houlton, Maine. The site is readily accessible by road from the Town of Woodstock via Trans-Canada Highway.

Minco released the results of the PEA in July of 2014. Economic analysis of the base case production strategy has resulted in a pre- and post-tax IRR of 17.97% and 14.40%, respectively, and pre- and post-tax NPV of CDN$845.8 million and CDN$461.1 million. This is based on a 3,000 tonne per day open pit mining, hydrometallurgical and electrowinning operation, with a pre-production capital expenditure of CDN$864 million and average annual payable production of approximately 80,000 tonnes of electrolytic manganese metal.

Comments from Minco in the MD&A dated December 31, 2016:

Despite most EMM producers focusing almost exclusively on achieving internal efficiencies, Minco has been able to attract the attention of one of China’s largest EMM producers which recognizes the advantages offered by the Woodstock project but has decided to postpone evaluating the project further until EMM market conditions improve.

Comments from Minco in the MD&A dated March 31, 2016:

It is important to note however, that despite the anticipated delay in attracting a development partner, the attributes of the Woodstock project are strong with key competitive advantages including a project life of 40 years, excellent potential to increase the resource and extend the project life further, proximity to and ability to enter the U.S. market without being subject to the 12% import duty applicable to all other EMM producers in the world, and, most importantly, a projected operating cost that is anticipated to be amongst the lowest in the industry averaging US$0.68/lb EMM over the life of the project.

We think that Woodstock is also a project that is difficult to value at this point. You could consider it a call option on the price of electrolytic manganese metal (EMM).


4.3 Buchans Zinc project - Newfoundland

Minco’s 100% owned Lundberg deposit is a large, near-surface open-pitable resource located on the north side of Red Indian Lake near the town of Buchans, NL. The deposit is comprised of base metal sulphide enriched stockwork mineralization located in the footwall to the previously mined, high-grade, Lucky Strike massive sulphide ore body, which was mined by ASARCO between 1926 and 1984. Since 2007, Minco has expanded the deposit to more than twice the size of original ASARCO estimate. The lastest resource estimate can be found in the figure below.

Minco owns a number of other zinc deposits near to the Lundberg deposit (Bobbys Pond, Daniels Pond and Tulks Hill). Minco entered into a collaboration agreement with Canadian Zinc to undertake a research program to complete physical and metallurgical bench scale studies on seven volcanogenic massive sulphide (VMS) deposits located in central Newfoundland and to share research data on their respective central Newfoundland Cu-Pb-Zn-Ag-Ag deposits. The intent and objective of the program is to determine the technical and economic viability of developing the companies’ key deposits into producing operations by utilizing a central milling facility. The concept is based on the potential that collectively, the satellite deposits can be economically mined, preconcentrated, trucked and then milled simultaneously or sequentially through a central mill. The collaboration agreement between Minco (through its entity Buchans Minerals) and Canadian Zinc is focused on seven VMS deposits located in central Newfoundland. Four of the deposits are held by Canadian Zinc (Lemarchant, Boomerang-Domino, Tulks East, and Long Lake) and three of the deposits are held by Buchans Minerals (Bobbys Pond, Daniels Pond and Tulks Hill).

It is interesting to note that Altius Minerals has staked a lot of ground recently neighbouring Minco and Canadian Zinc's properties. More information can be found on the Altius website or via this link: http://altiusminerals.com/uploads/Altius_Exploration_Buchans.pdf

In Minco's recent press release it stated:

The metallurgical test programs are being followed-up with a Process Simulation and Cost Assessment model (AACE Class V – order of magnitude / conceptual assessment) to evaluate and identify the key factors impacting the operating economics of a centralized processing concept for the production of the base metal concentrates. Results from the conceptual economic assessment will be used to help optimize future exploration and development plans, by focusing on key factors that are critical to assessing the economic potential and viability of developing the central Newfoundland deposits through a central milling facility.

4.4 Moate zinc exploration project

In December 2015 Minco has been granted three new Prospecting Licences in Ireland. The new licences, PLs 1228, 1229 and 3981, at Moate in County Westmeath, Ireland, are centered on a specific geological target identified by Minco, with potential for zinc-lead mineralization of Tynagh Mine type.

Minco’s new Moate licences are located along the northwestern margin of the Irish Midland Orefield on the “Tynagh-Ballinalack Trend”. All but one of the major Irish zinc-lead deposits of the Irish Midland Orefield lie along the margins of the Orefield. The Tynagh Mine operated successfully from 1965 to 1981 producing 9,000,000 tonnes of ore, from both open pit and underground, at average grades of approximately 7% lead, 5.5% zinc, 0.5% copper and 2.6 ounces of silver per tonne.

“This is a very specific geological target which Minco has developed and we have been waiting patiently for these licences to come open for some years”, said Peter Tyler, Minco’s Chief Geologist. “We believe Moate is the only remaining untested target of its kind in Ireland. The target has been outlined by past drilling, but remains unexplored as previous exploration focused on the Moyvoughly (Navan) Beds, host to the Boliden Tara Mines deposit at Navan, and not on reef hosted mineralization of the Tynagh Type”, added Peter Tyler.

Minco started a 1400 metres drill program in September 2016 and results are expected before year end.


4.5 Tatestown Project, Ireland (20% owned)

The Prospecting Licence is located adjacent to the Navan orebody belonging to Tara-Boliden at Navan, Co. Meath, Ireland. This licence is the subject of a joint venture between Minco subsidiary Westland Exploration Ltd. and Tara-Boliden and Tara-Boliden is the operator and manager of the joint venture. Westland's interest is approximately 20%. Earlier exploration had identified the Tatestown deposit which has an inferred resource of 775,000 tonnes grading 5.42% zinc and 3.83% lead which is separated from the Scanlanstown deposit, owned by Tara-Boliden (888,000 tonnes grading 6.45% zinc and 2.66% lead), by the River Blackwater. Tara-Boliden has continued exploration of license 1440R in an attempt to identify further mineralised areas that could be developed as satellite deposits for feed to the mill at Tara-Boliden's Navan mine.


4.6 Shareholdings in Xtierra (CVE: XAG)

Minco holds approximately 30 million shares in Xtierra Inc, a company listed on the TSX Venture, representing an approximate 26% interest. Xtierra holds mineral properties located in the State of Zacatecas in the Central Mineral Belt of Mexico. The Bilbao Project is a polymetallic sulphide and oxide replacement silver-lead-zinc-copper deposit located approximately 500km northwest of Mexico City in the southeastern part of the State of Zacatecas. Xtierra also holds an extraction licence for the silver-rich La Laguna Pedernalillo tailings deposit located near the city of Zacatecas in Mexico.

The total resources estimated and reported in April 2014 are 6,125,227 tonnes grading 2.31% zinc, 1.81% lead, 0.19% copper, and 65 grams/tonne silver in the Indicated category and 4,509,807 million tonnes grading 1.36% zinc, 1.78% lead, 0.15% copper and 47 grams/tonne silver in the Inferred category.

Xtierra's Bilbao project is near to Endeavour Silver's El Compas project and also to Santracruz Silver Mining's Veta Grande Project:

On January 31, 2016, Pacific Road and Minco both agreed to an extension of the maturity dates of the secured notes to April 30, 2016. The purpose of the various extensions of the maturity dates of the secured notes was to provide Xtierra additional time to assess its strategic alternatives.

The major shareholders of Xtierra, Minco and Pacific Road agreed to purchase working capital notes in 2014 and 2015. Pacific Road and Minco have not made demands for payment and are discussing possible solutions with Xtierra on a without prejudice basis. Xtierra has made certain settlement or restructuring proposals to each of Pacific Road and Minco. Pacific Road has advised Xtierra that Pacific Road desires to see this process come to a conclusion in the near term and, in the absence of an acceptable outcome, Pacific Road reserves all its rights to demand repayment of the Notes and if necessary to initiate foreclosure actions. On July 26, 2016, Minco made a further advance in the amount of $50,000 to fund Xtierra’s working capital and maintain its mineral properties.


4.7 England - North Pennines

Minco’s exploration project in the northern Pennines is centered on a 3.5 by 2.5 kilometre area in the vicinity of the village of Nenthead, the most prolific area of past production within the Pennines orefield which covers a total area of approximately 350 square miles. Minco’s 2012-2015 drill programme has established a significant stratiform component to the mineralisation within the Great Limestone which had not been previously recognised. Intersections within the Great Limestone has demonstrated the potential for significant stratiform mineralisation adjacent to historic workings.

In the latest MD&A, Minco stated that it is negotiating extensions or amendments to certain of the exploration licences and option agreements, and expects to conclude the various Option Agreements in due course.


Summary

Minco PLC is a company with many assets including exploration projects, development projects, cash reserves, shareholdings, and a royalty. Most of the assets are difficult to value because of metal prices, the early stage that they are in, and the uncertaintly of future funding.

ReRateStocks.com believes that Minco is an interesting speculation because of the following reasons:

  • We believe that the royalty is worth between USD 15 - 25 million (GBP 12.15 - 20.25 million) meaning between 0.025 and 0.042 per Minco share,
  • We believe that Minco still has USD 2.5 million of working capital (GBP 2.05 million), meaning approximately 0.0043 per Minco share. This is to be confirmed in the upcoming financial statement,
  • Based on market prices, we believe that the 30 million shares in Xtierra are worth approximately CAD 1 million (GBP 0.6 million), meaning approximately 0.00125 per Minco share, We also believe that this project is worth much more if Minco can find a partner to progress this project.
  • We believe that the Buchans zinc projects including a 28 million Tonnes zinc, lead, copper, silver, gold deposit is becoming more and more interesting with the rising zinc prises.
  • We believe that the Woodstock EMM project is still underexplored, even though it already has a 40 year mine life. It can take a long time before interest returns for the EMM sector, but when it happens this project is worth much more than Minco's current market capitalization.
  • The Moate drilling results are due, and it could be become an interesting project if Minco's statement is correct "Minco believes that its Moate target has potential to host a significant zinc-lead deposit"


ReRateStocks.com would like to emphasize that the author is biased because the author owns shares of Minco PLC. This article was not solicited by Minco PLC and Minco PLC is also not a sponsor of this website.


Sources

  • Technical Reports filed by Minco PLC on Sedar
  • Minco PLC website
  • Xtierra website
  • Minco PLC press releases
  • Xtierra press releases
  • Technical Reports filed by Dalradian Resources on Sedar
  • Dalradian Resources website
  • Dalradian Resources Corporate Presentation
  • Dalradian Resources press releases
  • Contract between Strongbow Resources and Tournigan Ventures Corporation filed on Edgar
  • Altius Minerals website


Disclaimer

This article was not solicited by Minco PLC. The work included in this publication is based on SEDAR filings, current events, and corporate press releases. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the ReRateStocks.com website do not necessarily reflect the views of the publisher of ReRateStocks.com. Minco PLC is not a sponsor of ReRateStocks.com and has no relation with the publisher of ReRateStocks.com. The author is biased and owns shares of Minco PLC. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies such as Minco PLC can lose 100% of their value so read Minco PLC’s profile on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility. Note that selective technical information in this publication has been copied from Technical Reports, Minco’s press releases, MD&A, and Financial Statements.


Forward-Looking Statements

Certain information regarding Minco PLC contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although ReRateStocks.com believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration results, continued availability of capital and financing and general economic, market or business conditions. The forward-looking statements are expressly qualified in their entirety by this cautionary statement. The information contained herein is stated as of the current date and is subject to change after that date.