As all readers will be aware, this year has seen the outbreak of Covid-19 has driven one of the most significant market sell-offs in history. As more and more countries have enter lockdown conditions, appetite has waned significantly among panicked investors. In response, share prices have seriously declined across the board almost without prejudice.
However, while the short-term outlook may be grim, many experts are already eyeing the inevitable rebound that will occur once the pandemic passes.
Using analysis of performance during previous outbreaks, such as SARS in 2003, S&P Global has already identified metal markets as one of the most significant potential beneficiaries here. In particular, analysts expect a huge release of pent-up Chinese demand – coupled with unprecedented government and central bank intervention – to drive stronger commodity markets for some time post-Covid-19.
Should this be the case, then one London-listed company well-positioned to benefit could be Thor Mining (LSE:THOR). With assets spreading several commodities – copper, tungsten, and molybdenum to name a few – the recent hit to the firm’s share price could open up an interesting entry point once things begin to stabilise. Here, we take a look at Thor’s portfolio of assets in detail:
Kapunda is a copper and gold opportunity located in South Australia, close to a town also called Kapunda that lays claim to being the birthplace of the country’s booming copper mining industry.
Not only is Kapunda based near a great deal of established infrastructure and a skilled labour force, but it also benefits from historic exploration by many companies over the years. Data collected from this work has helped to establish an inferred resource of 47.4 million tonnes for 119,000 tonnes of copper for the property.
This copper will be extracted using a low-cost and low-environmental impact technique called in-situ recovery (“ISR”) that utilises chemical processes rather than mining operations. The process centres around extracting a solid that has come into contact with a liquid – a process called “leaching” that is not too dissimilar to the way a tea bag infuses boiling water when making a cup of tea.
In geological terms, leaching occurs naturally when slightly acidic groundwater dissolves minerals such as copper contained within bodies of rock into a solution. This is then transported through porous spaces in the rock to eventually reach the surfaces where it will be visible as staining. By pumping a solution called a “lixiviant” into the body of rock to dissolves all of the metal present, ISR substantially accelerates and scales-up this natural process. The “pregnant” solution is then extracted and transported to a processing plant where ion exchange technology is used to extract a saleable commodity.
As well as causing far less impact to the environment (projects can be entirely returned to their original purpose once extraction completes) the critical advantage of the ISR process is its low cost. This allows operators to process lower-grade mineralisation that would otherwise be uneconomical due to the high cost of building a mine.
The ISR process in action – notice that the waterbore wellheads are the only apparatus visible at surface (Source: ECR)
Although ISR has been used commercially for phosphate and uranium extraction since the sixties, its introduction at Kapunda would mark the first time it has ever been used for copper extraction in Australia. Meanwhile, several projects are in the commissioning stage in Arizona, USA.
Thor’s exposure to Kapunda comes through its 25% equity interest in private Australian company EnviroCopper – a stake that it can increase to 30% by investing A$400,000. EnviroCopper, in turn, is earning up to a 75% interest in Kapunda.
What’s the latest?
In 2018, the Australian government granted Environmental Copper Recovery (“ECR”) – Thor’s fellow EnviroCopper backer– an A$2.9 million grant to trial copper and gold ISR recovery at Kapunda over 30 months.
ECR has been busy at work ever since, and in the June 2019 quarter, it announced that it had successfully recovered both copper and gold from rock core at Kapunda in test scenarios. Later in the year, this work was taken further three holes were drilled into the deposit to measure its connectivity, porosity, and permeability, All of these characteristics are essential to the effective operation of an ISR project.
The Kapunda project as viewed from above (Source: ECR)
Initial field studies suggest the field pump tests were successful, demonstrating strong potential connectivity and XRF analysis showed good interim copper values, including 66m at 0.27% Cu. The Kapunda partners are now waiting for more accurate geochemical analysis of these results to verify copper values and measure the presence of any measurable gold. In the meantime, additional near-term activities include:
-Community liaison in respect of project activities.
-Testwork on historical drill core to work out the best chemical to use for metal extraction.
-Establishing appropriate parameters for future field trials.
Moonta is the second project into which EnviroCopper is earning-in to a 75% interest. The asset covers 819 square kilometres on the northern part of the Yorke Peninsula in South Australia, close to Kapunda and at the southern end of the Olympic Copper-Gold Province.
Although Moonta is a much earlier-stage project than Kapunda, early signs are already suggesting that it could be a much larger opportunity.
The asset contains three major deposits called Wombat, Bruce, and Larwood, which are based in an environment that suggests ISR should work and have conducive mineralogy. In August 2019, EnviroCopper released an initial mineral resource estimate for Moonta that put the three deposits’ inferred resource at 66.1 million tonnes grading 0.17% copper for 114,000 tonnes of contained copper.
However, there exists the potential for this figure to increase significantly, with all three deposits remaining open at depth. Meanwhile, there exists the possibility that much more exploration potential could be identified at Moonta by drill testing additional deposits along strike where copper has previously been intersected but the density of drilling was not sufficient for resource estimates. Indeed, in March 2019, EnviroCopper released an exploration target for the asset of between 238Mt and 310Mt for between 428,000 and 713,000 tonnes of copper – suggesting huge upside potential.
Although much of EnviroCopper and ECR’s focus currently lies in Kapunda, work to explore the true scale of the Moonta opportunity is ongoing.
Wholly-owned by Thor and based across two adjacent skarn bodies in the Northern Territory of Australia, Molyhil is one of the higher-grade open-pit tungsten projects in the Western World. With regulatory approvals and a definitive feasibility study (“DFS”) in place, the asset is also among Thor’s most advanced assets.
A DFS released in 2018 demonstrated the potential for Molyhil to provide profitable production with low operating costs and early payback of capex. Specifically, the work gave the property an EBITDA of $177 million against a $43 million finance requirement, an 18 month project payback period underpinned by opex of US$90/mtu (current global price for tungsten concentrates is US$180/mtu), and a seven-year mine life.
What’s more, these economics could be enhanced considerably. Aside from the fact that mineralisation continues below the current depth of Molyhil’s pit floor, the nearby Bonya tenements present a great deal of upside potential (more on this later).
Meanwhile, an upgraded mineral resource estimate released in October 2019 emphasised Molyhil’s potential to be developed as a polymetallic project. The work put the asset’s indicated and inferred mineral resource at 4.7 million tonnes containing 13,300 tonnes of tungsten trioxide, 6,800 tonnes of molybdenum, and 2,200 tonnes of copper.
What’s the latest?
Thor’s efforts at Molyhil have of late focused around marketing activities aimed at securing potential project finance and offtake agreements for both tungsten and molybdenum concentrate. In its most recent results, the company said it was engaged in ongoing discussions with various potential partners that had expressed interest in either offtake, joint venture or debt finance arrangements.
Meanwhile, Thor said it is in discussion with several Australian Commonwealth government agencies mandated to assist firms in developing Australian critical mineral projects (tungsten is among these critical minerals), and also to develop projects in remote parts of Australia.
Location of the Molyhil project and the Bonya tenements (Source: Thor)
Located 30 kilometres to the east of Molyhil are 13 outcropping tungsten deposits, a copper resource, and a vanadium deposit collectively known as the Bonya tenements. Bonya is 40%-owned by Thor as part of a joint venture and could extend Molyhil’s operational life by many years by using its processing facilities.
Towards the end of last year, a follow-up drilling campaign was completed over two Bonya deposits called White Violet and Samarkand. The work successfully intersected high-grade tungsten mineralisation and strong copper grades. It was used to prepare a maiden resource estimate for both deposits – the results of which can be seen below.
Bonya Tungsten Mineral Resources (announced 29 January 2020)
In addition to the tungsten at Bonya, there is also a small copper resource which will also contribute feedstock to the Molyhil plant.
Meanwhile, last year also saw Thor release details of a study outlining the potential of another deposit called Jervois to become a vanadium project, along with proposed development plans.
Another of Thor’s 100%-owned projects, Pilot Mountain is based in Nevada, USA, 250km south-east of the city of Reno. The asset contains tungsten, copper, zinc, and silver skarn style mineralisation across four primary deposits– Desert Scheelite, Garnet, Gunmetal, and Good Hope.
By combining its own drilling with that of its predecessors at Pilot Mountain, Thor has been able to establish an indicated and inferred resource for Desert Scheelite of 9.9 million tonnes. This is thought to contain 27,700 tonnes of tungsten trioxide, 207 tonnes of silver, 16,000 tonnes of copper, and 40,300 tonnes of zinc. Garnet, meanwhile, hosts an estimated 6,590 tonnes of tungsten trioxide in the inferred category.
Alongside these four initial deposits, Pilot Mountains present Thor with a significant amount of upside potential, containing exploration targets conceptually target between 11-22.6 million tonnes at 0.3-0.5% tungsten trioxide.
Although little drilling has taken place at Pilot Mountain in recent months, Thor continues to believe the project is substantial on a global scale and could be developed into a long-term open-pit mining operation. In a recent update, the firm said discussions were ongoing with third parties to secure investment.
One of the newest additions to Thor’s portfolio, the Pilbara gold tenements cover ground prospective for gold and uranium in Western Australia and the Northern Territory.
A field reconnaissance programme that included soil and stream sediment sampling was conducted last year and showed mineralisation in 17 of 44 sites samples – some even unexpectedly encountering chromium and nickel. The firm has said it will now follow up with field evaluation on a “strong” nickel target alongside several “very promising” gold targets throughout 2020.
Pilbara stream sediment samples (Source: Thor Mining)
Spring Hill royalty
A final opportunity worth touching upon in Thor’s portfolio is the royalty it holds the Spring Hill gold project in Australia’s Northern Territory. This entitles the company to:
- A$5.70 per ounce of gold produced from the asset when the precious metal produced is sold for up to A$1,500 per ounce; and
- A$13.30 per ounce of gold produced where the gold produced is sold for amounts over A$1,500 per ounce.
In an update at the end of March, when gold was sitting at around $2,600 an ounce in the face of market turmoil, Thor revealed considerable progress in its efforts to sell the Spring Hill project royalty. Specifically, the organisation said it had received indicative offers and entered an exclusivity arrange with one particular party who has now begun due diligence and preparation of final agreement documentation.
The deadline for completion of due diligence has now been extended to the end of April in light of travel restriction encountered as a result of Covid-19. However, the completion of any deal could provide Thor with a handy injection of capital as pandemic conditions continue.
A wealth of opportunities
Like many of its exploration peers – and indeed stocks in almost every area of the market – Thor has suffered a difficult start to the year in response to the coronavirus outbreak. At writing, the organisation’s shares have fallen 61.45% year-to-date to give it a market cap £1.7 million. This is far below the 0.85p at which the company’s shares sat in June last year. However, since that point, little has changed in terms of Thor’s strong underlying portfolio.
How the outbreak of coronavirus will play out and the effect it will have on stocks and commodity prices remains very difficult to predict – more downside could be on the way; it is very hard to call. However, when metal prices do rebound, a serious rally could be on the cards for stocks positioned strongly across many industrial metal sectors like Thor. With plenty of additional firm-specific catalysts also on the horizon– Molyhil financing and Kapunda progress marking two particularly exciting milestones – the firm’s Covid-19 lows may end up looking extremely cheap.