Today saw Nick Von Schirnding, chairman of Arc Minerals (LSE:ARCM), update investors on progress since he joined the business as part of its strategic shift towards African exploration in September last year. Primarily, Von Schirnding used the conference call as an opportunity to provide further information about Arc’s acquisition of a large stake in the prospective Zamsort Copper-Cobalt Project in Zambia earlier this week.
The acquisition and accompanying placing were welcomed by investors, with shares rising 6.6pc to 3p, and together mark one of the first moves by the firm since it changed its name from Ortac Resources in January. Here, ValueTheMarkets.com summarises the main points of the call.
Zamsort development
On Monday, Arc became the largest shareholder in Zamsort Limited, the organisation developing the Zamsort Copper-Cobalt project, after increasing its stake in the firm from 14pc to 49pc. Alongside its 49pc stake, Arc holds a convertible loan note in Zamsort equivalent to an additional 5.3pc position, potentially bringing its total holding to 54.3pc.
In conjunction with the purchase, Arc announced that it had raised £2.5m by placing shares at 2.4p, with much of this already allocated to a new exploration programme at Zamsort. Several of Arc’s board members took part in the placing, including Von Schirnding, who purchased £100,000 worth of shares.
Zamsort is a highly prospective site in Zambia, with its exploration licence encompassing nine of the 30 high priority targets ranked by a previous Anglo American/Equinox Minerals joint venture over the area. It has an existing near surface estimated copper-cobalt oxide resource of 16.59Mt at 0.94pc copper, with a historical exploration target of 150Mt.
Arc expects production of copper and cobalt hydroxide to begin within six months. Processing will take place at the site’s commercial-scale demonstration plant, which is approximately 75pc complete. As it stands, the business has already stockpiled 10,000 tonnes of screened ore grading 2.1pc copper and 0.3pc cobalt at the site. Arc is also in the process of building a new management team at Zamsort who will be undertaking a full assessment of current operations including historical exploration data and optimising the plant.
In today’s call, Von Schirnding said Arc had been approached by several private equity groups and large mining groups since word got out that it was planning to increase its stake in Zamsort. However, he said the firm is no rush to pursue these:
‘We have had some approaches from potential joint venture partners, but I am not in a hurry to involve them at this stage. We need to do our work and need to get drilling to see what is there. Zamsort is one of the most outstanding copper/cobalt opportunities in Zambia, and what this interest has underscored is that we do have an exciting asset with a great opportunity for exploration.
Von Schirnding told investors to expect drilling at Zamsort to begin ‘very soon’, with the aim of getting a resource estimate out towards the end of this year. He said Arc would spend around $500,000 on developing Zamsort’s plant and roughly $1-$1.5m on near-term drilling. Work will initially focus on Zamsort’s Kalaba prospect, which, according to Von Schirnding, has the potential to host a major tier-one copper-cobalt discovery. Although proceeds from this week’s placing will fund some of this work, Von Schirnding said the company has additional options up its sleeve:
‘We have an existing stockpile that we could utilise to fund exploration or the development of the plant. We could also do a bit mining on the small-scale mining licence relatively easily. We will spend the money raised very cautiously- we are not going to go out and do work that we do not need to do. We are a micro-cap stock aiming to become far bigger, and to do that we need to spend money wisely. We are currently wrapping up discussions with potential drilling parties. The short answer is we will begin drilling as soon as possible. We will be starting in the next few weeks and hope to report results in the next two months. We are pretty clear about where we want to drill near-term- Kalaba remains the most obvious near-term opportunity, but there are a couple of other very interesting prospects.’
Bigger picture
Von Schirnding also used today’s call to update investors about its 99pc interest in Casa Mining, a private firm that owns a 71.3pc stake in the 1.5Moz Akyanga gold project in the DRC. Some of the proceeds from this week’s placing will be used to complete a resource upgrade at Casa, which would ideally move the site towards pre-feasibility or scoping study at the project. However, Von Schirnding told investors that the business eventually plans to scale back investment at Casa, having already spent $30m in the area according to its most recent presentation:
‘We will continue to do some modest exploration work at Casa as several exciting targets remain. We are coming to the end of upgrading the resource, and I would hope by mid-May or early-June we can report back with figures.’
He also said Arc is also working on divesting its non-core assets, which include its 100pc-owned Sturec Gold Project in Central Slovakia and its Haykota Copper-Gold Project in Eritrea:
‘We are in talks about divesting non-core assets. We are not going to sit on a portfolio making no return for us. We are rattling the cage pretty hard and looking to divest those fully.’
Finally, Von Schirnding said it is currently too premature to discuss Arc’s future beyond Zamsort and Casa in great detail, but pointed out that he is open to various options going forward:
‘We have two potential company-making projects in their own right, and we need to make sure we get maximum value from them. Creating value could come down to the way we hold the assets, and we will look at different structures if need be. I believe in growing Arc and increasing value for shareholders. Whatever we do, it must be value-accretive. If it makes more sense to have the group as a twin-focused DRC/Zambia asset, then we will do that. If it makes more sense to have it as a focused DRC vehicle and a focused Zambia vehicle that could also make sense. I am open to all options for driving value.’
