25 May 2016

Frontier Mining in off-take talks

Robert Tyerman

Kazakhstan-focused Frontier Mining is negotiating a £6 million funding with potential customers of its two million-tonne Benkala copper project.

Chairman and chief executive Erlan Sagadiev is in London discussing possible financing deals to take Benkala into production next summer and says an off-take deal, most likely with a Chinese group, is one of the options being considered.

AIM-quoted Frontier, which is merging with its 50 per cent local Benkala partner, Colville Intercorp, by granting Colville shares, argues Benkala, with a 0.55 per cent copper grade, would break even at copper prices less than a third of today's $6,600-plus a tonne. Sagadiev, an entrepreneur who built a bust dairy business into Asia Foodmaster, the continent's leading dairy products concern, points out Frontier also has several other projects in hand.

These include a potential copper deposit, with gold and molybdenum, at Baitimir, a 10,000 oz-a-year gold project at Koskuduk newly in production and Maminskoye, a gold project, where Frontier hopes to treble estimated resources from one million oz at 2.49 grammes of gold per tonne of ore to three million oz. Sagadiev says he hopes Maminskoye will start producing in 2013 with estimated production costs of $430 an ounce, against a current market price of nearly $1200 an ounce, and says the company is looking for new assets in Kazakhstan, Kyrgyzstan and Mongolia.

Sagadiev is the controlling shareholder in Frontier, which is re-domiciling itself from Delaware in the USA to the Cayman Islands, and says he is anxious to restore its former institutional following, while hinting at a first dividend in 2013 or 2014. The company lost $30.3 million (£20.2 million) last year on maiden revenues of $2.9 million, after a $25 million 'fair value adjustment' chiefly relating to outstanding loan notes, but analysts see profitability within the not-too distant future.

Floated at 15p six years ago, Frontier shares have been dismal performers. Now 5p, 1p up from their low, they value the company at £46 million and offer speculative recovery potential for the bold.

Tags: AIM, Dividend

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