Thor Mining (ASX:LON:THR) Nostalgia, Gains, Attrition, then?

I first bought Thor Mining back in 2009, if I recall correctly, and saw the share price rise considerably during the 2009-2011 bull run in UK resource stocks.

By Paul Johnson 

I remember it distinctly because it was one of a few shares where I made a six-figure return from my original investment.

In 2016 I was a director of Metal Tiger plc when we helped refinance Thor.  I went on the board of Thor in September 2016 (and stepped down in July 2018).  It was quite a challenge for 12 months or so to get the market to switch on to the then Thor proposition, but in October 2017 we managed to get over the awareness hurdle and saw the Thor share price increase from 0.70p to 4.4.p in a matter of a few months.

Some people made a fair amount of money on that move and Mick Billing and I with circa 5% of the company each saw the value of our holding rise dramatically on paper at least.

Now Thor trades at 0.60p as I write and has a market cap of around £4.9 million.  I have been an active market investor for many years and I don’t think I have seen quite such a bizarre valuation for a company with such depth and strategic significance to its asset base.

The Molyhil Debate

Most of the attention of late has been focused on the Molyhil tungsten/molybdenum project in the Northern Territory.  That project is construction-ready subject to project-level finance and it’s the question of how the finance will be secured, and when, that has been vexing investors for some time.

It hasn’t been vexing me much because I always believed the finance for Molyhil construction will be secured and that belief switched to conviction when the company secured an operational interest in the nearby Bonya deposit.  Thor had been chasing that Bonya interest for 5 years or so.

Bonya evidently contains large quantities of tungsten (and some copper) which can be added into the Molyhil ore feed and extend the current modest 7-year mine life, maybe upwards of 15 years, or longer, we will see.

Project level finance for Molyhil may well stimulate the market’s engagement with the Company by demonstrating that this project is real and investable.  It will provide cash flows to the Thor business helping finance its activities and it may allow dividends to be paid.

But its also 12 months to construction and post the finance announcement the company will need to manage the news void by ensuring regular construction updates are issued to the market.

Thor has stated that Molyhil is its flagship project, but when considering Thor as a business, it’s not what I think of as the flagship.

The Pilot Mountain

Yes the 100% owned large scale tungsten, copper, silver, zinc (and maybe gold) Pilot Mountain project is actually a mountain and from the valley floor you get a real feel for the size and scale of the thing (I went with a few other investors in November 2016 and it is an impressive place).

It was a former working mine and, at the moment, Thor have only really explored a proportion (a third I think at a guess) of the known mineralised areas.

From that third, they already have the largest report tungsten Resource in the USA of 34,290 tons of contained tungsten (WO3) worth around $700 million.

Throw in the 207 tons of silver worth in-situ circa $110 million, 16,000 tons of copper worth circa $88 million and 40,300 tons of zinc worth circa $90 million have a billion dollars of in situ value (benchmark only of course) from part of the project.

However, that is not the real point.

What makes this more interesting still is the inclusion of tungsten in the critical minerals list published by the Department of the Interior in the USA, recognising a need for homeland sources of certain metals and minerals. That makes Pilot Mountain strategic, and although there haven’t been partners/buyers thumping on the door to date, perhaps, there will be provided tungsten remains on that critical list and the USA remains serious about the development of critical metal projects within its borders.

What few people may know is that Pilot Mountain was bought by Union Carbide in 1976 from Duval Copper.  Duval Copper wanted more copper than they found and so sold to Union Carbide who were interested in the more prevalent tungsten.  (Duval may have been too quick with that decision).  Anyway, in 1976 the Pilot Mountain asset was sold for $7m – in 1976 dollars of course.  In 2019 dollars that’s getting on for $32 million today (£26million) and arguably the project is far more advanced today than in 1976.

In theory that should make Pilot Mountain my flagship Thor project as a cheque for £26million thumping on the Adelaide Thor office doorstep would make for a nice dividend. But it’s not!

Copper Bottomed

Thor has an earn into a strategic 30% stake in Envirocopper, which holds the Kapunda and Moonta projects.  Kapunda has a current JORC compliant Resource of 119,000 tons of copper and Moonta of 114,000 tons.  For Moonta, this is only the start and the estimate is for up to 713,000 tons, and maybe a bit more. Rumour has it there could be a million tons of in situ copper across the projects.

Let’s assume they end up with 500,000 tons at Moonta and with Kapunda at 119,000 that’s 619,000 tons overall.  In situ value in total would be $3.4 billion. And that’s at the currently depressed copper price.

Both projects are in-situ recovery which is a low-cost copper production method where benign chemicals are injected into the ground and the copper is recovered in solution.  The ISR process has been used in South Australia where the projects are found for quite some time and are, in essence, a cleanup operation to remove residual copper from previous mining and return the project areas to a far better state than currently.

The size, scale, potential, value and environmentally positive nature of the copper projects would certainly justify flagship status in a normal company, but this is Thor, and so not my flagship as such, but a major project in a major portfolio. Interestingly the plan seems to be a spin-out of these interests into a stand-alone vehicle.  Probably right, the value potential and upside is enormous.

What lies beneath……..

Remember Thor Mining is valued by our market at £4.9m.  The attributable total value of existing the Company’s existing core JORC compliant Resource interests in-situ (Molyhil, Pilot Mountain and EnviroCopper) is around $1.8billion (just under £1.5billion).

Interesting benchmark in-situ value v market capitalisation.

But for me, the enormous potential of the soon to be producing (assumption I know) Molyhil, the strategic Pilot Mountain and the dramatically scalable Envirocopper are not the flagships of the Thor business and are not necessarily the primary reasons to research Thor as an investment proposition.

Instead, for me, what makes the point as to what I think is the ludicrous valuation of Thor is what we haven’t discussed.  The things hardly considered by the market. The hidden flagships, as it were.

How about March Fly, the Uranium project with granted licences acquired in March 2019.  Should, as many expect, the uranium sector come back to life a uranium project in a safe jurisdiction with a chunky amount of historical work on the ground, will begin to hold a considerable portfolio value.

If uranium is not your thing how about gold, and not just the large amounts of as yet unrecognised gold possibly extractable at Kapunda or Pilot Mountain.  Instead, I am talking about the gold prospective ground acquired in March 2019 in Pilbara Goldfields some of whose licences are adjacent or very close to Greatland Gold’s Panorama project (you know the one where they are finding nuggets and high gold grades).  Finding the first few nuggets always seems to ignite share prices of the micro-caps.

Or then, maybe flashback to the Thor announcement of 3 July 2019, and the Jervois Vanadium project, (Thor has a 40% interest) with an exploration target of 90-110 million tons of 0.3% to 0.8% V2O5.  Take the mid-range and assume 100 million tons at 0.55% – that’s 550,000 tons in-situ or 1.21 billion pounds.  At $7.50 a pound, the in-situ value would be circa $9 billion and Thor’s attributable at 40% $3.6 billion.

That’s the thing with flagships, the projects you think deserve that designation can sometimes be usurped in the race to value by others, not at the forefront of the market’s attention.

From my perspective what makes the Thor business seem not quite right is the market value of £4.9million.  Make that £49million and given the portfolio of interests it would seem a more comfortable valuation.

In the last 10 or so years, I have experienced 4 or 5 of these sector pullbacks, and by far the recent pullback in junior miners in 2019 has been the most challenging.  In every case, at the point of maximum frustration, the conditions suddenly change and weakness is replaced by strength.  Stock prices rise and climb the wall of worry (with many probably selling out too quickly in the recovery process.)

The stocks that rise the fastest and the highest are often those that have high awareness in the market, fundamentally sound business and plenty of opportunities to surprise the market with business developments.

I expect that Thor, having suffered an 85% loss of share price in the last 18 months despite a strengthening business model, has the potential to surprise to the upside, far more than people realise.

By Paul Johnson

4 September 2019
(Author holds shares in Thor Mining plc)
The author holds one or more investments in the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell.
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