As junior resource stock investors, we are often happiest at the point when we have experienced a period of solid gains.
Graph One
Then again, after experiencing a period of losses we are often at the unhappiest point in the investing cycle of emotions.
Graph Two
For many of us, as junior resource stock investors, the last year has seen sliding share prices and some rather significant losses. Most people I have recently come across in this space are unhappy.
Yet, as the chart demonstrates unhappiness in the investing cycle is a good emotion, often signalling a period of considerable gain ahead. We should apparently embrace unhappiness. Conversely, happiness should be a red flag of caution, often signalling impending losses.
During these unhappy times, it seems an essential characteristic for success (apart from stoicism) is patience.
Nothing is guaranteed and exceptions are possible, but it’s noticeable that Jesse Livermore the well-known stock trader famously said “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made big money for me. It was always my sitting.”
As also often quoted – when the tide comes in all boats rise. In other words, as the resource sector starts to generally recover, many resource stocks will lift in valuation terms as sector confidence returns amongst investors and positive contagion permeates the market.
But who wants a dinghy when you could have a speedboat? Stock selection is generally accepted as very important to maximising the gains that can be made. Better positioned resource shares will generally react more quickly to improving market conditions and rise higher for longer. All good.
In the category of “better-positioned resources shares” I would place Thor Mining (LON: THR). This stock has fallen from a high of 4.375p in February to 0.725p mid as I write to date. That is a fall of 83.4% in a little over one year.
The fall is overstated, bizarre, irrational, etc. But it has still happened, and in total valuation terms, it means that Thor’s market capitalisation has fallen from a market capitalisation of circa £27million in February 2018 to under £6million today.
This is a company that in their 31.12.18 half-year results published cash of circa £1.05m. Deducting an estimated £250,000 for spend since 31.12.18 and adding £375,000 from the financing in March and you have cash at bank of £1,175,000. Enough at current burn rates to last well into 2020.
Thor has multiple project interests in various commodities – copper, gold, molybdenum, silver, tungsten, uranium and zinc. All projects are in the safe operating environments of the USA and Australia.
At Pilot Mountain in Nevada USA, the Company has a 100% interest in a substantial tungsten deposit with 34,290 tonnes tungsten trioxide, 16,000 tonnes of copper, 207 tonnes of silver and 40,300 tonnes of zinc. Well over a billion dollars in-situ metals in this project compliant resource alone and with significant upside potential to boot. In the 1970s this project was sold to Union Carbide for circa US$7million ($26 million today) and seems well placed strategically given that tungsten is a Critical Mineral in the US and there is no current primary tungsten production in the United States.
At Molyhil the Company’s 100% owned tungsten/molybdenum project in the Northern Territory Australia the Company has an updated DFS (2018) showing a project NPV of A$101m and a permitted mine ready status, subject to project level financing, discussions about which are in process. Further upside to mine life and processing throughput comes from the underground resource potential at Molyhil (yet to be drilled) and Bonya where Thor has a 40% interest in one licence area and 100% in another (with multiple tungsten deposits being drilled and tested as I write). Bonya also has historic high grade Vanadium drill intersections, for those with an interest in emerging battery technology and the metals that underpin it.
With newly formed Envirocopper Limited Thor will have a 30% interest in an extensive South Australian copper production opportunity. The process for metal recovery is In-situ Recovery (chemical recovery process rather than more expensive traditional mining) and amounts to more environmentally friendly metal recovery/production. Supported by a A$2.85m Australian Government research grant this business has two current copper resources:
- Kapunda (119,000 tonnes of contained copper)
- Moonta (exploration target of 428,000 to 713,000 tonnes of contained copper)
Assuming a mid-range target is hit for Moonta that means in-situ copper across both projects of circa 700,000 tonnes or US$4.3billion. Added to this, Thor recently confirmed gold has been recovered in the process adding a potential substantial recoverable gold resource into the Kapunda inherent valuation (difficult to predict what this could be worth until we know more).
Thor has also recently acquired Pilbara Goldfields Pty Limited and Hamersley Metals Pty Limited, two private Australian vehicles with licences/applications targeting gold and uranium in Western Australia and the Northern Territory.
For a well (cash) funded company, with four main interests ranging from exploration through development and all the way to a mine ready project, the current market valuation of just under £6million is an opportunity.
If history does indeed rhyme, I am hoping and expecting that we will, in the not too distant future, see a strong revaluation in the share price of Thor. The market has disagreed with my view in recent times and taken the share price down from the February 2018 high of 4.375p and all the way down to 0.725p.
The 83% loss of share price has arisen when the company has made substantial steps forward in the development of its business model. Yet the resource market has crumpled slaughtering the good shares with the bad.
Thor is in my humble opinion one to watch closely for the impending recovery. I hold on that basis.
Paul Johnson
17 April 2019
The article expresses the views of the author only and is not a recommendation to buy shares in the stated company.
Thor Mining PLC (ASX:LON:THR) Mick Billing, Executive Chairman, Company Presentation. Published on Apr 11, 2019
