Exploration Insights by Robert Tyerman

Backed by Russian tycoons Alexander Nesis and Alexander Mamut, the Jersey-based holding company Polymetal achieved a market value of some £3.5 billion when unconditional trading in its shares started in London. Polymetal boasts 10.6 million oz of gold at a grade of 2.8 grammes of gold per tonne of ore in North East Russia’s Magadan region and elsewhere and 396.4 million oz of silver.

Though the initial price was at the lower end of the indicated 910p to £10.35 price range, many institutions will have little choice but to hold Polymetal, which is the first of three hefty Russian resources groups to target London. Polyus Gold and Evraz, a steelmaker partly owned by Chelsea Football Club proprietor Roman Abramovich, are in the wings.    

Output spring for Centamin
Gold miner Centamin Egypt has hoisted third-quarter production 67 per cent to 50,539 oz from its key Sukari mine. The fully listed company, which claims gold resources of 14.5 million oz and reserves of 9.1 million oz at Sukari in Egypt’s Eastern Desert, reports its average selling price was £1,721 an ounce during the three months to September, against cash operating costs of $638 an ounce.

Centamin states that mining production rates returned to normal in this period, after earlier snags, with police blast inspectors issuing explosive products without interruption. Josef El-Raghy, the Australian-Egyptian financier who chairs Centamin, says the company, which made a third-quarter operating profit of $43.4 million (£27 million), is on track to produce 200,000 to 210,000 oz of gold this year at cash costs of about $550 an ounce, nearly $1,200 below recent market prices.

Growth Company Investor recommended Centamin shares at 33.5p in 2008 and later at 82.5p before suggesting partial profit taking at 166p. Uncertainty over the consequences of the ‘Arab Spring’ has not helped and, having traded between 197p and 89.5p over the past year, the shares now change hands at 110.1p and are likely to be volatile for a while, though the long-term fundamentals are encouraging, politics permitting.

Useful Niche in Turkey
New estimates value resource investor Niche Group’s indirect stake in Turkey’s Hatay gas blocks at £60 million, three times its £21 million stock market value.  The latest ‘competent person’s report’ by consultant Senergy (GB) has lifted best estimates for the four blocks in question 269 per cent to 93 billion cubic feet of gas, with a net present value of $583.4 million.

Highlighted Growth Company Investor at 5.93p in June, Niche Group’s volatile shares have fallen back to 3.03p. The new Hatay report could bring fresh support.

Tungsten tingles
Spanish tungsten hopeful Ormonde Mining says a feasibility study has upped annual production estimates for its Barruecopardo project 60 per cent. The AIM-quoted company reports that the study, which should be complete by the end of the year, now suggests potential annual output from Barruecopardo in western Spain of 230,000 tonnes of tungsten trioxide WO3.

According to Ormonde, the study includes an interim indicated resource estimate for Barruecopardo from consultant CSA Global of 4.83 million tonnes of WO3 at a grade of 0.29 per cent, with 2.6 million tonnes at 0.31 per cent recoverable by open pit mining. Anderson cites simple metallurgy, nearby infrastructure and a relatively inexpensive estimate for plant cost of $12 million, for a total estimated capital cost of $40 million.

Ormonde claims Barruecopardo as ‘Europe’s next major tungsten producer’. The company speaks of potential annual cash flows of £18 million with tungsten at $350 a tonne, against a current $450.

Having been dismal performers for a long time, Ormonde shares are perking up. Highlighted by Growth Company Investor at 4p last year, they now change hands at 8.38p and could go further.