This past week has seen Thor Mining (LSE:THR) deliver a double dose of good news to investors, with the firm potentially increasing the life of its Molyhil operation while further strengthening its already-sturdy cash balance. Thor had already looked undervalued with a market cap of less than £20m despite publicly available assessments of its assets putting it in control of at least $1.8bn worth of metals. With shares still sitting at just 2.5p, last week’s positive news seems to have gone un-noticed yet again and may offer a good opportunity for those considering investing.
On Wednesday, Thor announced that it would acquire a 40pc interest in an exploration licence based in the Bonya Creek area, around 30kms away from its 100pc-owned Molyhil tungsten project in Northern Australia. The licence – called EL29701 – hosts 13 outcropping tungsten deposits along with one copper deposit that has already yielded significant previous drilling results. Alongside this, Thor has bought a 100pc interest in another licence – EL29599 – which it claims to be considered prospective for copper exploration.
The projects, which were bought for a total consideration of A$550,000 (c. £300,000) in Thor shares, have an exploration target of 3-4.9MMt at 0.3-0.5pc Tungsten Trioxide. Thor’s executive chairman Mick Billing hailed the news as ‘outstanding’ for Molyhil, claiming it has the potential to increase both the scale and life of the operation.
With Billing’s comments in mind, it looks like the acquisition could be the deal needed to finally achieve Thor’s goal of increasing Molyhil’s life of mine from seven years to 10 years or more. If the business can get Molyhil to this point, then it would not be surprising to see the project begin to start attracting some major attention from other mining companies looking to move into the tungsten arena.
Billing added: ‘The proximity of the Bonya deposits to Molyhil should add significantly to the projected economic returns, dovetailing with our commercialisation strategy for Molyhil. Historic drilling and trenching have confirmed tungsten mineralisation on several deposits at Bonya. However, there has been no tungsten focussed exploration on the tenement in over 35 years. Provided some of these known prospects mature, along with others which we expect to develop, it is more than likely that Molyhil production life and throughput volume should increase substantially. The potential for small but high-grade copper deposits is also very attractive with the proposed processing plant at Molyhil highly likely to be also suitable for copper flotation.’
Following the acquisition, on Thursday Thor announced that it could receive a sizeable boost to its liquid assets if a key deal between one of its investments and Australian company Hawkstone Mining (ASK:HWK) reaches completion. Hawkstone has a 14-day option period to acquire 100pc of USA Lithium’s shares in exchange for 262.5m of its shares. It must also receive shareholder approval and carry out a successful A$2.5m capital raising. If the option is ultimately exercised, then Thor, which owns a 6.25pc equity stake in USA Lithium, will receive Hawkstone shares worth A$609,375 (£333,000) at the firm’s close price today.
On this, Billing said: ‘We welcome this very positive development for USA Lithium and the opportunity it provides to fund the exploration and evaluation of the exciting USA Lithium portfolio. While the agreement is subject to due diligence as well as appropriate shareholder approvals and successful capital raising, completion of this will be a very positive step. Assuming successful completion, the holding by Thor of tradeable securities in Hawkstone should very positively augment the available working capital of Thor, increasing it to near £2.0million post completion which we will mainly apply to the development of our strategic tungsten and copper interests.’
Where is the love?
On Thursday, following the news that Thor had purchased the Bonya assets near Molyhil, the firm’s share price rose by just 0.8pc. Then, on Friday, after the announcement of the USA Lithium disposal, Thor’s shares closed down by 4.8pc, or 0.12p, to 2.5p, giving the company a market cap of just £16.8m.
Although this reaction may be down to a general lethargy among traders as the Easter holidays approach, it seems like the market could be missing the point here. Firstly, by disposing of USA Lithium, Thor is perfectly positioned to turn its attention entirely onto its three large assets; the Pilot Mountain tungsten project in the US, the Kapunda copper mine in South Australia, and, as mentioned, Molyhill.
Secondly, as Billing put it himself, the funds arising from the disposal put Thor in an even stronger position to grow its assets. This is especially encouraging when one considers that in November Thor said its $1.3m fundraise which was taking place at the time would give it enough funds to operate until 2019. Since then it has received a £300,000 investment from Metal Tiger and an additional £594,537 from warrant conversions. With a further £333,000 being added this week – and the Bonya purchase being paid for through shares rather than cash – the business now looks to be fully funded for growth well into 2019. With that in mind, it seems unlikely that Thor will come to shareholders asking for money anytime soon.
The third point the market appears to be overlooking is the sheer potential of Thor’s assets. This is not a new point- as we have written before, publicly available assessments of Thor’s projects suggest it already controls at least $1.8billion worth of metals. The Bonya assets are only in their early stages, but with an exploration target of 3-4.9MMt at 0.3-0.5pc Tungsten Trioxide they reinforce the argument that the market might be seriously undervaluing Thor. As just 2.5p a share, Thor certainly looks attractive.