October 2021 – Mining

I have a confession to make. I really love mining. I don’t know if it’s something in my blood, as my ancestors made money from coal and iron, or just formative years spent amongst decrepit mine shafts in former industrial heartlands. I absolutely love it. I probably should have gone and done it as a degree. Pulling wealth out of the ground!

It’s not really pulling wealth out of the ground though. Gone are the days, and the mineral resources, where you could just rock up and pull money from crevices in the rock (except maybe if you’re a forest freeminer). These days mining has crazy overheads, economies of scale, and you need proper cash to be a player.

I’ve followed the fates of various UK mining concerns over the last decade. I’ve invested in some, and not really lost money. Let’s talk about a few.

Sirius Minerals

If you’re interested in investing, particularly with a UK focus, I think you’d be hard pressed not to have heard of Sirius Minerals (1, 2). They were a company building a mine to extract polyhalite , a type of potash used as a fertiliser compound, in North Yorkshire. It was/is a vast project, with a 22 mile underground conveyor to comply with North York Moors planning requirements, and the potential for £2.5 billion annually in exports. There was also a focus on local jobs, and a lot of local people stumped up cash, alongside institutional investment hype. Repeated rounds of junk bond sales were needed to raise the funds to build such a monster mine, and gradually investment dried up (at the time allegedly linked to Brexit) (3) . Without continued investment the project withered, and where it had previously been the ‘darling’ of the FTSE, it suddenly left a lot of small investors holding big losses (4, 5). People lost pensions and life savings, as ultimately Anglo-American bought out the company at a bargain price (6, 7, 8).

I didn’t invest in Sirius Minerals. By the time I heard about it it was making lots of new in the mainstream press, and I considered that too late to jump aboard. It also looked a bit like a giant white elephant in a deep hole. It remains to be seen whether Anglo-American can turn it around.

Wolf Minerals/ Tungsten West

I did stick some money through the AIM listing in Wolf Minerals (9). Wolf developed and ran a tungsten and tin mine outside Plymouth, on the edge of Dartmoor. The mine itself has been there for decades (centuries?), with the enormous deposit of high grade tungsten being used during WW2. It lay essentially dormant until rising tungsten prices prompted a relook, with a feasibility study suggesting low-cost, high-grade ore was available. At least £170 million was ploughed in, developing an open cast pit and low environmental impact ore recovery plant on site. Once producing, it never met volume expectations, tungsten prices fell and it ran at a huge loss before falling into administration in 2018 (10, 11).

The Drakelands mine may potentially live on; it’s still a high-grade resource with the world’s 3rd-largest deposit, planning and infrastructure. It has gone through various hands, ending up as Tungsten West who bought it out of receivership in 2019 (12, 13). Tungsten West is also market-listed, and I may well buy in (on sentiment) after I’ve read some more about them. Their plan is to re-open the mine, and with increasing tungsten prices and general onshoring/ mineral security concerns they are certainly interesting (14, 15).

There’s a theme here… (Image from http://www.lyngham.co.uk/cornishlads/lads2.html)

Strongbow exploration/ Cornish Metals

I’ve been following the mineral resource held by Strongbow Exploration, now renamed Cornish Metals, for at least a decade (16). They hold the rights to South Crofty mine, an enormous tin (and previously copper, arsenic and tungsten) mine under Camborne/ Redruth/ a lot of Cornwall, that has been producing ore since 1592 (17). It went into decline in the 1980s into the 90s with the collapse in the global price of tin, shutting down in 1997. Since then, as the price of tin has increased, there have been periodic attempts to restart the mine, but with progress slowed by planning problems (it sits underneath the towns of Camborne and Redruth, with old surface mine sites prime for redevelopment) and the involvement of UNESCO (it’s within a world heritage site). Through gradual purchases it now covers an area of 34 former mines, and after Strongbow bought the site out of administration they have been drilling, re-assessing, permitting, and are now de-watering the old South Crofty site (16).

It’s a common story across the Devon, Cornwall and rest of the UK. These mines did not shut due to exhaustion of the resource. The cost of recovery was too high versus the price of the ore. South Crofty’s previous owners, the Celeste Copper Corp reckoned there was >£1.5 billion in ore left in South Crofty. Cornish Metals has now listed on the AIM, and I’ve seen quite a nice profit from them (18). I think their recent rally has come because of new results from a separate site. South Crofty came packaged up with a lot of other rights, permits and sites, including the old United Downs near Gwennap. It had the richest copper reserves in the world in the 18th and 19th century, but shut down due to global competition and low prices (19). Wheal Jane, a mine in the area covered by United Downs, was run by Rio Tinto Zinc into the mid 90s (20). Cornish Metals have an agreement with Cornish Lithium (below) whereby Cornish Lithium can look for lithium in areas covered by Cornish Metals rights. Cornish Lithium were busy drilling for lithium in 2020 when they struck a potentially massive unknown copper/tin lode in the United Downs area (19). Since then Cornish Metals have been getting permits and test-drilling the site (21). These have come back positively, and I’m fairly bullish on this company (22, 23, 24).

Cornish Lithium

Lithium, so hot right now. The market loves it for it’s potential in batteries. This has been going on since 2017, with the potential for small cap growth (25, 26). So when Cornish Lithium popped up on a crowdfunding site in 2019, I dipped my toe (27, 28). There’s hard rock lithium scattered throughout Cornwall, and Cornish Lithium’s spin is that they have both access from a maiden hard rock mine and from brine in mine water from sites like South Crofty (27). There’s been further industry investment and crowdfunding rounds, so it will be interesting to see how it pans out (29, 30). Cornish Lithium have a rival, British Lithium, who are also busy developing a hard rock mine in Cornwall to produce battery-grade lithium, backed by UKRI funding (31, 32). They’re not publicly listed, but I’ll be following their progress to see what happens, as there seems to be a lot of competition and interest in bringing lithium production to the UK – this WIRED article is excellent (33).

Gold

There’s a couple of UK gold resources being explored/ mined, and what better way of finding portfolio diversity. Sod the gold ETFs, buy the miner. I’m watching Galantas, who are developing a mine in Omagh, and Scotgold, who have the Cononish mine in Scotland (34, 35, 36). I’ve also got half an eye on Alba Mineral Resources, who hold a few rights and are doing exploration in the old Clogau welsh gold sites (37). I’ve not invested in these yet, but dependent on what happens with the broader markets I may open positions, and develop myself a little mining portfolio. Would welcome comments and thoughts from readers.

October Finances

Yes, I’m very behind here. Baby’s are time consuming. Hoping to catch up over the Christmas period…

Checking the assets and liabilities:

These are taken, as always, from my Beast Budget spreadsheet. I saved a paltry 14% of my salary, as household bills on one salary have started to bite. This was almost all saved as cash or in my pension, as items for the baby meant I didn’t have any spare cash (even paying myself before) to invest. If you fancy a free share, sign up to Freetrade with this link (I also get one).

Budgets:

  • Groceries – Budget £200, spent £196.58, last month £396.02 – More on track this month, but still need to rein this in ahead of the decrease in household income
  • Entertainment – Budget £100, spent £113.55, last month £133.45 – Making the most of the few warm days with babysitters
  • Transport – Budget £250, spent £163.98, last month £384.92
  • Holiday – £150, spent £0, last month £0
  • Personal – £100/ £73.85/ £78.71
  • Loans/ Credit – £50/ £159/ £960
  • Misc – £50/ £69/ £145.83
  • Fees – £300 /£149.57/ £421.85

In the garden:

Winding down in the cold and wet, I harvested the last of my kale, pumpkins, squashes and spring onions. A few other bits plod on, but it’s mostly down to the greenhouse now, and my intention is to let everything run wild while occupied with other activities.

References:

  1. https://en.wikipedia.org/wiki/Sirius_Minerals
  2. https://siriusminerals.com/investors/
  3. https://www.ft.com/content/c35b094e-7d89-3609-973b-8af441c4f01a
  4. https://www.ft.com/content/e99f113e-b1b3-11e8-99ca-68cf89602132
  5. https://www.proactiveinvestors.co.uk/companies/news/902964/losers-and-winners-of-the-sirius-minerals-saga-902964.html
  6. https://www.thisismoney.co.uk/money/markets/article-8583999/Sirius-Minerals-boss-pocketed-1-3m-investors-lost-fortune.html
  7. https://www.bbc.co.uk/news/uk-england-york-north-yorkshire-51736395
  8. https://www.thisismoney.co.uk/money/markets/article-7472389/Sirius-Minerals-shares-crash-fails-secure-funding-mine.html
  9. https://en.wikipedia.org/wiki/Wolf_Minerals
  10. https://miningglobal.com/smart-mining/wolf-minerals-and-drakelands-tungsten-mine
  11. https://www.proactiveinvestors.co.uk/companies/news/206786/wolf-minerals-ceases-trading-in-london-after-uk-subsidiary-enters-voluntary-administration-206786.html
  12. https://www.business-live.co.uk/economic-development/tungsten-mine-owner-explores-options-20565271
  13. https://www.tungstenwest.com/overview-and-strategy
  14. https://www.thetimes.co.uk/article/king-of-mining-ian-hannam-plots-devon-tungsten-float-lbppjmj0f
  15. https://im-mining.com/2021/10/12/tungsten-west-set-to-bring-hemerdon-tungsten-tin-mine-back-into-production/
  16. https://www.strongbowexploration.com/projects/uk/south-crofty/
  17. https://en.wikipedia.org/wiki/South_Crofty
  18. https://miningglobal.com/automation-and-ai/strongbow-exploration-list-london-stock-exchange
  19. https://www.cornishmetals.com/projects/uk/united-downs/
  20. https://en.wikipedia.org/wiki/Wheal_Jane
  21. https://www.mining.com/cornish-metals-granted-key-permit-for-united-downs/
  22. https://www.insidermedia.com/news/south-west/cornish-metals-makes-progress-on-sw-venture
  23. https://www.business-live.co.uk/economic-development/high-grade-tin-discovered-cornish-22054497
  24. https://www.proactiveinvestors.co.uk/companies/news/968381/cornish-metals-reports-high-grade-copper-from-united-downs-copper-tin-project-968381.html
  25. https://www.proactiveinvestors.co.uk/companies/news/173004/small-cap-movers-lithium-miners-start-to-shine-173004.html
  26. https://www.businessgreen.com/news-analysis/3025238/cornish-batteries-scientists-embark-on-satellite-search-for-lithium-below-cornwall
  27. https://cornishlithium.com/
  28. https://www.telegraph.co.uk/business/2019/07/12/cornish-lithium-miner-goes-digging-crowdfunding/amp/?__twitter_impression=true
  29. https://www.mining-technology.com/dashboards/deals-dashboards/cornish-lithium-funding-techmet/
  30. https://www.crowdcube.com/companies/cornish-lithium-ltd/pitches/qYERNq
  31. https://www.businessgreen.com/news/4019146/boost-british-lithium-cornish-mining-firm-wins-gbp500-backing
  32. https://britishlithium.co.uk/
  33. https://www.wired.co.uk/article/cornwall-lithium
  34. https://www.proactiveinvestors.co.uk/companies/news/224283/galantas-gold-advancing-omagh-mine-after-placing-sees-high-demand-224283.html
  35. https://www.scotgoldresources.com/
  36. https://www.theguardian.com/uk-news/2020/jan/02/gold-highlands-mine-scottish-jewellery
  37. https://www.albamineralresources.com/

2 thoughts on “October 2021 – Mining

  1. Thanks for the interesting mining piece. My attention was first piqued by miners (though not as an investing opportunity) when Rio Tinto announced in 2007 that they had discovered ‘Kryptonite’. In 2018, when I set up my Dogs of the FTSE portfolio, RIO were in the top ten so I was happy to invest and they are in the current 2021 portfolio as well as two other miners, BHP and Polymetal. This will likely be my last Dogs portfolio (I’ll have 5 years of data) – I think I’ll hang onto RIO for now.

    Liked by 1 person

  2. Thanks weenie, I’ve followed your interest in Rio, BHP and Polymetal, but it’s definitely with a different spin. Most of my selection are growth/ exploration companies, not the big established dividend boys. I wonder whether a good balance would be some of both…

    Like

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