Amaroq Minerals Ltd is an independent mine development company with a substantial land package of gold and strategic mineral assets covering an area of 7,866.85 km2 in Southern Greenland.
Amaroq Minerals (LON: AMRQ) shares have been relatively volatile over the past few months and were even trading for as low as 25p before its rebranding from AEX. Now worth 40p and boasting a CAD$182 million market cap, the company has hit my radar as an excellent speculative opportunity for long-term holders with a multi-year timeframe in mind.
Short-term price movements are the preserve of the technical analyst — these are hard to predict with the blue chips, and least of all on AIM. For this article, we contacted Edward Wyvill, Head of Corporate Development and IR — who kindly gave up his time to answer a few queries.
To start with, the company is fairly rare in that it is triple-listed on London’s AIM, Canada’s TAX Venture Exchange, and Iceland’s NASDAQ First North Growth Market. While this does create ‘a bit more work,’ Wyvill considers this a fair trade-off gave ‘three jurisdictions to whom we can market to which opens up a larger audience and access to capital.’
Then there are the myriad simplicities and complexities of operating in Greenland. On the one hand, its geographical position between North America and Europe amid the battle for ex-China metals is advantageous. On the other, it’s miles from anywhere else — and this can make development more expensive.
And while the Greenland Pension Fund, the Greenland Venture Fund and the Danish Growth Fund are all equity shareholders in Amaroq, the country has seen its fair share of activism. Recently, this has included delays at the Kvanefjeld mine near Narsaq, specifically due to concerns over mining its uranium.
However, there is always activism when it comes to mining. It’s worth noting that Greenland is a far more reliable regulatory environment than most countries in Africa, and given Chile’s recent lithium laws, also swathes of South America. And given the record gold price and widening critical minerals supply chasm, the regulatory environment is becoming ever more favourable to miners.
Nalunaq: AMRQ’s crown jewel
While Amaroq has multiple projects in its portfolio, it has something in common with many of my favourite FTSE AIM picks, in that it boasts a ‘crown jewel.’
Greenland-based Nalunaq is a proven brownfield site, having produced 350,000oz of gold between 2004-2009. It then closed down due to ‘falling gold prices, financial difficulties, and a lack of exploration,’ this latter point was most important as the prior operator drove cash generated at the mine to operations elsewhere.
The most recent Mineral Resource Estimate constitutes an Inferred Mineral Resource of 355.0 Kt at 28.0 g/t Au for 320 Koz gold. In grade terms, this is within the top 2% of ore quality globally. And notably given its prior producing status, there is little, if any opposition, to reopening the mine.
A subsidiary of AMRQ has been conducting exploratory work since 2015. And as with most brownfield sites, the project capex should be relatively low as a result of previous expenditure by former operators.
At any rate, Wyvill seems confident of success. The company procured most the components needed for the processing plant in 2020 and has therefore avoided a lot of the current mining inflation — and further, he reminds me that the high grade being seen means that the company can remain profitable even if the gold price slips from its record high. For context, my view is that the US seems ready to pause rate hikes, so further gold price rises are likely.
AMRQ recently announced 2022 exploration results at the adjacent Nanoq deposit; these will be fairly meaningless to novices but offer significant potential. The company conducted a 407km high-resolution heli-borne geophysical survey, with results revealing ‘numerous potential gold trap structure that coincide with known high grade samples, demonstrating the resource hosting potential of the projects.’
Importantly, the survey showed up clear further exploration targets, including a large prospective zone to the immediate west of Nanoq and favourable structures across nearby Jokum’s Shear. AMRQ argues that there is a 25km prospective gold corridor between the two projects, intersecting its Siku licence.
CEO Eldur Olafsson enthuses he is ‘delighted that we continue to identify further significant gold opportunities across Southern Greenland. The work undertaken across Nanoq and our other advanced gold exploration projects will help us to grow our underlying resource base.’
Meanwhile, VP of Exploration James Gilbertson notes that ‘Nanoq represents yet another positive target identified across the prospective Nanortalik Gold Belt, with potential for near-term resource development. Importantly, these results do not just provide a geological rational for the high grade intersections we already hold at the project, but also identify further gold targets, expanding Nanoq’s potential.’
Key operational priorities are now to conduct feasibility studies on the use of hydropower to supply the mines alongside work with ABD Solutions on the potential integration of autonomous vehicles, with proposals for the design and offsite construction of an operations centre expected within 12 months.
Further drilling is constantly ongoing, with Wyvill noting that ‘early indications are that these (other targets) have the potential to be Tier 1 multi-million ounce deposits, but we will require the Drill bit to prove it.’
Sava Copper Belt
While Nanoq is the crown jewel, the rebrand from AEX Gold has been deliberately designed to reflect its wider strategic minerals portfolio, as well as the renewed focus on Greenland. Amaroq owns rights to a massive portfolio of 7,866.85 square kilometres across the south of the country.
Its 2023 strategic minerals exploration programme is focused on its assets in the Sava Copper Belt. This includes significant drilling and geological mapping, including the incorporation of the North Sava licence alongside additional targets:
- a detailed airborne geophysical survey across its Kobberminebugt licence
- a detailed magnetotellurics geophysical survey at Stendalen
- a concentratred drilling campaign at Saqqaa Dyke
- a reconnaissance exploration programme across Paatusoq
The company is hunting for copper, nickel, titanium, vanadium, and REEs in a highly prospective area. At the moment, the prospects look very promising but definitive resource numbers will take time.
Financing in brief
All investors considering companies in the exploratory metals space have to consider the risks of dilution, and the never-ending tapping on investor shoulders for the next tranche of funding to get hold of the promised jam of tomorrow.
This is not the case with Amaroq.
To start with, it’s already raised £30 million in capital fundraising across London and Iceland.
It’s also secured a $49.5 billion senior secured financing package — announced in March 2023 — to bring forward Nalunaq production. In brief, the package consists of:
- an $18.5 million Senior Debt Revolving Credit Facility with banks Landsbanki and Fossar Investment Bank (two-year term, and interest charged at SOFR+ 950bps)
- up to $21 million Syndicated Convertible Notes with an affiliate of ACAM LP, JLE Property Ltd, Livermore Partners and First Pecos (four year term, interest of 5%pa, and conversion at 42p/s). ACAM’s main investors are also heavily involved in GCAM
- a $10 million, two cost overrun loan by JLE Property Limited (convertible note terms plus 2.5% commitment fee on unutilised amounts)
AMRQ intends to use this financing to accelerate the phased construction and ramp-up of its proposed 300tpd processing plant and the associated infrastructure. As noted above, the company has already purchased most of the required plant components, which now have a carrying value of $8.5 million.
Further, AMRQ has signed a JV with GCAM, whereby GCAM has subscribed £18 million and has been issued with 49% of the shares in new JV Gardaq. This £18 million is with Amaroq now — and is to be used to explore its strategic minerals deposits — not only in the Sava Copper Belt, but also at Stendalen, Paatusoq and Kobberminebugt.
The people
It’s worth touching on the people at the top. To start with, GCAM does not invest lightly — and multiple investments suggest high confidence in the company’s projects and management expertise.
The CEO and Chair are significantly experienced, but it’s the ‘shadow’ board members operating behind the curtains who pique my interest. CFO Jaco Crouse was briefly Vice President Business Planning & Optimisation at Barrick, while non-executive director Warwick Morley-Jepson is a mining quasi-celebrity who served in multiple senior hands-on roles at Ivanhoe Mines, Kinross Gold, and also at Barrick.
These board members bring significant credibility to an underpublicized company.
Where next?
Olafsson recently enthused that ‘2022 was a transformational year for Amaroq in terms of the repositioning of our business.’ This seems an accurate assessment.
One near-term catalyst is the plan to explore a main market listing on Iceland’s Nasdaq Exchange. Those looking ahead may wish to consider the implications.
Iceland was hugely impacted by the 2008 Global Financial Crisis and was forced to impose capital controls for years to stop cash outflow. Partially, this was due to overexposure derived from its outsized banking sector. Indeed, the 2020 pandemic crash saw the country make a pact with the pension funds to halt foreign investments for six months to protect the exchange rate of the krona and reduce its fluctuations.
Consequentially, the country’s pension funds, at over $50 billion, are collectively worth roughly double its economy. The law still limits the share of overseas holdings in pension assets at 50% — and despite loud noises to increase this limit, the country’s government is unlikely to change the rules as it could devalue the currency.
This means that when AMRQ lists on the main exchange, which itself has only 22 constituents, Icelandic pension funds are likely to jump at the chance to diversify. Indeed, Wyvill thinks that the listing will ‘will open up another large pool of investors like pension fund and mutual funds and make us eligible for both Icelandic and International Indices.’
Over the longer-term, the size and prospectivity of the licensing area means that ‘if a major wants to play this region in the future, they will probably have to play it through us. This opens us optionality for M&A and funding across our portfolio.’ There is some truth to this, and combined with the pensions argument, explains why the company has managed to land sizeable funding and major players in the gold space.
There are caveats of course.
The company is at least a year from production — perhaps longer. Seriously encouraging results thus far make the rewards worth the risk, but there are no guarantees in exploratory mining.
Overall, most investors considering a portfolio addition will be considering Amaroq as a speculative ‘add’ at this juncture, alongside other promising gold explorers such as Greatland Gold, Caracal Gold, or Great Western Mining.
Q&A with Edward Wyvill, Head of Corporate Development and IR
- Amaroq is listed on London’s AIM, Canada’s TAX Venture Exchange, and Iceland’s NASDAQ First North Growth Market. Why the triple-listing, and does it create any regulatory issues?
The Triple listing does not necessarily create regulatory issues per say but obviously reporting across three markets does require a bit more work. However, the advantage is that we have three jurisdictions to whom we can market to which opens up a larger audience and access to capital as evidenced in our last £30m equity raise last November and $49.5m debt funding package HOTs announced recently. The shares are fungible across the three markets. Our intention is to move from the First North Market to a full main board Nasdaq listing in Iceland in the near future which will open up another large pool of investors like pension fund and mutual funds and make us eligible for both Icelandic and International Indices.
- AMRQ’s operations are in Greenland, which is an autonomous country within the Kingdom of Denmark. Do you anticipate any hurdles given competing political interests over Greenland’s metal deposits as operations come online?
People often comment that Greenland is in the middle of nowhere, but we would argue that actually Greenland is in the middle of everywhere! It sits in the middle of the North Atlantic between North America and Europe which gives direct access to both of these marketplaces. Both Europe and North America have strong demand for these metals which we believe is a huge advantage for Greenland. We don’t believe this will create competing political interests as both continents should benefit. Greenland has recently joined ERMA (European Raw Materials Alliance)
- Despite volatility, AMRQ shares essentially flat since the company launched its IPO. Do you think the company is about to turn the corner in terms of investor returns?
Like most businesses, Amaroq’s(then AEX Gold) share price was hit hard by the Covid pandemic in 2020 and went down to circa 25p at the low. Since then, despite the very difficult market conditions we have made a strong recovery back to 40p+ over the last few years which is testament to the strength of the business. We have made significant progress over this period which we don’t believe we have been given value for currently in our share price and we are now very well-funded with nearly $100m in equity and debt available to advance our operations across our Gold and Strategic Metals portfolios.
- 4. Much has been made of the record gold price — but when growth returns, investors will rebalance portfolios towards growth and gold will fall. Where do you think gold goes next?
As a company, we don’t publicly speculate on the gold price however if this scenario does happen and the gold price does recede, due to the high grade nature of the Nalunaq mine deposit we believe we can still be very profitable at prices significantly below todays price of $2000+ per ounce. and don’t forget, Gold is only half of our business!
- Much of Greenland’s local population remain opposed to mining development. Have you considered the risks associated with developing mines in a country where a political shift could see that investment collapse at short notice? Or is this an unfair interpretation?
We believe this is an unfair interpretation, in fact most political parties are very pro-mining in Greenland. However, they want to make sure, understandably, that this is done with highest ESG standards possible. We are totally aligned with that. Each mineral deposit will be judged on its own merits, for example, it’s location (is it near a population or in an environmentally sensitive area?), the type of mineral and process to extract it, the infrastructure required etc. We consider these risks very early on in the exploration stage on each discovery we make and work closely with the Government to make sure all the relevant studies, permits and public consultations are done correctly. The Greenland Pension Fund, the Greenland Venture Fund and the Danish Growth Fund are all equity shareholders in Amaroq.
- Flagship Nalunaq produced 350,000oz of gold between 2004-2009, but then closed down due to ‘falling gold prices, financial difficulties and a lack of exploration.’ Given that the original operators think that the deposit is exhausted, why do you think otherwise?
The deposit is definitely not exhausted as we have proven from our drilling results over the few years particularly in the last two years. We now have an inferred resource of 320,000 ounces at a Grade of 28g/t and we are very confident we will grow this significantly over the years to come. Out of the three reasons you highlight above, I think the ‘lack of exploration’ is the most important point although probably triggered by ‘falling Gold prices’ leading to ‘financial difficulties’. Narrow Vein Mining is all about preparation, you have to keep exploring forward at least 12 months in advance not only to expand your mine life but also you have to know what you are developing into and that requires the drill bit. If you don’t spend that capital in advance then you are opening yourself up to a nasty shock if the Grade drops off or the vein thins out. By Exploration drilling forward, you should foresee this and can focus your mining efforts on the best areas in which to mine. Nalunaq past produced circa 70,000 ounces in its best year, we hope we can do it again.
- Mining operations have suffered circa 30% inflation as a global average. How can you mitigate capex costs? How is Nalunaq ‘low cost’ — can you qualify this claim?
Grade is King! To put this simply, our inferred resource grade is currently 28 g/t (grammes of Gold per tonne of ore mined) which is in the top 2% of Gold mines in the world. If another mine is running at 7g/t, then they will have to bring out 4X as much ore to deliver the same amount of Gold. At 3.5 g/t is it 8X more ore that has to be mined and processed. Obviously this has significant implications on ‘cost’. This is the reason the mines with the lowest AISC (All In Sustaining Cost) in the world are the usually the mines with the highest grade. Regarding Capex, we managed to procure and purchase most of the large components for the processing plant in 2020 and have them currently in storage ready to ship so we have luckily avoided the inflationary increases that we have seen recently and the long lead times that are evident in the market for this type of equipment.
- There’s been a lot of investment into Amaroq recently; GCAM’s £18 million subscription for 49% of the Gardaq JV, the $49.5 million senior secured financing package to bring forward production at Nalunaq, and £30 million of capital fundraising. Can you paint me a picture of the company’s current financial position, including cash runway?
We believe this is a great testament to the potential of Amaroq, the quality of management and the support we have from our shareholders. GCAM (a consortium of High Net Worths led by Tim Leslie and Louis Bacon) Gardaq JV gives us £18m to explore, drill and quantify our Strategic Metals portfolio over the next 3-4 years. The £30m of equity and $49.5m senior secured financing package aims to bring the Nalunaq mine into initial production as well as more exploration drilling at Nalunaq to keep increasing that resource. The intention is that the future cashflow from Nalunaq will fund the company going forward to bring the other advanced exploration targets in our Gold portfolio like Vagar and Nanoq up the value chain. Early indications are that these have the potential to be Tier 1 multi-million ounce deposits but we will require the Drill bit to prove it!
- I’ve covered several speculative gold explorers over the past few months. Why investors should consider adding Amaroq shares to their portfolios? Do you have any specific advantages?
Firstly, we are not only a Gold Explorer but also a Gold Mine developer (soon to be producer) and also a Strategic Metals explorer so by owning shares in Amaroq you will have exposure to future income from Nalunaq Gold Mine, blue sky exploration on a new gold province with Tier 1 potential and also the upside of world class exploration potential in a Strategic Metals portfolio. Unlike other mining companies who generally own specific assets, we see ourselves as being more of a jurisdictional play. We have currently 7866km2 of South Greenland which we believe is the most prospective ground under licence with multi mine potential, if a major wants to play this region in the future, they will probably have to play it through us. This opens us optionality for M&A and funding across our portfolio at an asset or company level for us to extract the best value for our shareholders and ultimately the people of Greenland who will benefit from the future royalties. We have over $100m in available capital to advance our business so we are well funded and we are drilling at least six targets this year so expect a lot of news-flow.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this are provided for general information purposes only. Nothing in this blog/interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
