Vox sector special: six companies bringing mining back to the UK
Mining is coming back to the UK. And no, we are not referring to bitcoin, as much as we have been impressed with 's proprietary technology. The UK's mining sector is growing again as the Government has redoubled efforts to secure the critical metals needed for its ambitious net zero goals, while promoting economic growth in regions most affected by Brexit and the cost of living crisis.
Furthermore, supply chain disruptions and the energy emergency have prompted many to call for increased raw materials and energy independence, necessitating local resource extraction.
Critical metals supply risk
Source: British Geological Survey
Indeed, in December Britain approved its first new coal mine in decades, not for electricity generation, but to support the British and European steel industries. While the singular decision made big headlines, the mine is meant be net zero and therefore not directly in conflict with sustainability goals.
However, what has hardly received coverage is the larger trend of increased critical metals mining in the UK, needed to phase out internal combustion engine sales by 2030 and achieve a net zero economy by 2050.
And with the UK awash with geological resources, several companies have spotted an opportunity to bring mining back to the UK after decades of decline. With that in mind we would like to bring your attention to 6 small and medium-cap companies leading that charge that we think investors interested in the mining and/or green energy sectors should be aware of:
Strategic Minerals
Known for its copper and magnetite operations in Australia and New Mexico, ( ) has also owned 50% of the Redmoore Tin and Tungsten Mine in southeast Cornwall since 2016. Subsequent drilling programmes and resource upgrades have indicated the project has long-term potential, particularly as tin and tungsten are now classified as "critical minerals" by the Government. Last autumn, Strategic's exploration license at Redmoore was extended by 25 years until 2037.
To the west of the existing Redmoore resource, Strategic's wholly-owned Cornwall Resources Limited has spearheaded the Deep Digital Cornwall (DDC) project. Led by the University of Exeter's Camborne School of Mines, the project is funded by the European Regional Development Fund through HM Department for Levelling Up, Housing and Communities. DDC represents one of the most detailed soil sampling programmes implemented in Cornwall, with further data gathering currently planned for the second year of the project. Approvals for a 4-hole drilling campaign have been received, targeting recently identified tin and tungsten prospects.
As DDC enters its second year, new datasets indicate high potential for new mineralised systems to the west of Redmoor, still within Strategic's license. Elsewhere, Strategic's Leigh Creek Copper Mine (LCCM) in South Australia is expected to begin operations this year. Strategic expects cash flow and profitability to improve "dramatically" from the additional revenue stream.
Alba Mineral Resources
( ) is perhaps best known for being the majority owner of ( ) whose flagship Amitsoq asset in Greenland has been confirmed one of the highest-grade graphite deposits in the world. Amitsoq has a resource estimate of 23.05 Mt at an average grade of 20.41% graphite, following January's 3x resource increase.
The European Raw Materials Alliance has endorsed the Amitsoq project as a "graphite resource of global importance" that will "enable the European Union to achieve a certain level of independence for the electrical vehicle supply chain". Previously, GreenRoc had confirmed that Amitsoq graphite could be purified to exceed the EV battery requirement of 99.95%. With global demand for graphite expected to soar, Amitsoq's vast deposit is set to play a key role in the transition to net zero.
Amitsoq alone puts Alba on the map as a major player in the critical metals and green energy markets. However, as we are focusing on UK concessions in this article, we are also going to mention Alba's 100%-owned Clogau-St David’s Gold Mine in Wales. The mine has historically produced at least 80,000 ounces of gold, making it the UK’s largest ever gold producer. It closed in 1998 when the price of gold was only $300 an ounce, compared to its current price of c. $1800.
After launching the largest exploration programme conducted at the site, Alba identified several targets inside and outside the historic mine within a total licence area of 106.94 km2. Alba's primary target is the projected Llechfraith Shaft lode extension in the Lower Llechfraith workings. The target was identified through surface drilling campaigns in 2020 and 2021, by which the company was able to confirm lode continuity up to ~122 m below the existing Lower Llechfraith workings. As Alba nears production at Clogau-St David and Amitsoq, interested investors should the company to stay informed of expected quarterly cashflow increases.
Cornish Metals
Similar to Strategic Minerals, ( ) has tin and copper concessions in Cornwall, which means it benefits from the Government's Levelling Up Initiative due to its geography, as well as the Critical Minerals Strategy, which includes tin.
Cornish's flagship South Crofty project is located in the Central Mining District of Cornwall and has historically been one of Cornwall’s best known mines and one of the world's major past producing tin regions. In 1998, South Crofty was the last tin mine to close in the UK, 13 years after the 1985 collapse of the International Tin Agreement. Closure also meant the end of metal mining in Cornwall.
However, Cornish's exploration has uncovered a significant tin mineral resource remaining at the site. It is in fact the 4th highest grade tin resource globally, with a mineral resource grade of 1.6% tin (equivalent to 4.4% copper at current metals prices).
Cornish recently announced that it is targeting production at South Crofty in 2026, coinciding with projected deficits in tin supply. The project has a permit through 2071. Cornish completed a £40.5m funding in May 2022, the proceeds for which are to construct a mine water treatment plant, dewater the mine, and complete a feasibility study at South Crofty.
Anglesey Mining
As the name suggests, ( ) operates in Wales where it is exploring the polymetallic Parys Mountain deposit, containing zinc, copper, lead, silver, and gold.
A Preliminary Economic Assessment (PEA) was completed for Parys Mountain by Micon International in 2021 with mining and metallurgical input from QME and Fairport. The PAE included an updated mineral resource estimate showing 5.2Mt of Indicated Resources at a combined base metal grade of 4.3% (equivalent to a copper equivalent grade of 2.4%), as well as 11.7Mt of Inferred Resources at a combined base metal grade of 2.8% (copper equivalent grade of 2%).
The new Indicated resource estimate of 5.2Mt was a significant increase from the previous 2.8Mt from an earlier 2017 scoping study. Overall, the PEA indicated that Parys Mountain contained over 160,000 tonnes of copper and almost 400,000 tonnes of combined zinc/lead.
The PEA's expanded "Case C" produced an attractive financial return, indicating a total cash operating surplus of more than £408m over a 12-year life of mine, which translates to a pre-tax NPV discounted at 10% of over £96m with an IRR of 26%.
In addition to its Wales concession, Anglesey Mining owns minority stakes in the Grangesberg Iron project in Sweden, and the OTC-listed Labrador Iron Mines Holdings operating in Canada.
Scotgold Resources
( ) is Scotland's first commercial gold producer, currently operating the Cononish Gold and Silver Mine in Scotland, and exploring further prospective gold tenaments comprising its Grampian Gold Project.
Cononish holds a very high-grade gold deposit with a reserve grade of c.11.9g/t Au and a current life of mine of 8.5 years for an estimated 555,000 tonnes of ore. Even without further expansion, Cononish's in-situ value is estimated to be £288m at current gold prices with projected AISC of £554 per ounce. However, Scotgold does hold 13 licences covering 2,900km of the Dalradian Belt across the Grampian Mountain range for future exploration.
In its final results for the year ended 30 June 2022, Scotgold announced significant progress at Cononish thanks to continued optimisation initiatives. After consecutive quarterly production increases over the past year, the company is now targeting 23,500oz pa run rate of gold in 2023, which would place it as one of the highest yielding and lowest-cost gold producers globally. Long-term, Scotgold hopes to be a multi-asset gold producer in Scotland.
Galantas Gold
( ) operates the Omagh gold project west of Belfast, Northern Ireland, situated within a 189km2 license area. Additionally, Galantas holds five exploration licences in the region over an area of 596.7 km2.
The mine is in the development stage with more than 2,500 metres of ore and waste development completed. In July 2022, longhole drilling commenced to open the first series of stopes at the Kearney Vein, marking the start of the production process. Galantas's active exploration programme at Omagh has consistently delivered strong gold grades and identified additional targets for resource expansion.
Galantas is targeting an updated NI 43-101-compliant mineral resource estimate and updated mine plan by end of Q2 2023 to incorporate an additional 7,800 metres of drilling. Galanta's mine plan will determine the feasibility of targeting an initial 10,000 gold ounces per year with the potential for an increase to 20,000 ounces per year.
View from Vox
The UK has taken firm steps to resurrect its mining industry, only this time it will not add CO2 emissions to the atmosphere, but rather support the country's transition to net zero. With the combination of the Critical Mining Strategy, the Levelling Up initiative, and rising demand for critical metals needed for the net zero 2050 goal, the Government aims to create both supply and demand for mining at home.
Furthermore, increased calls for energy independence, raw materials independence, and domestic industry support in light of the conflict in Ukraine should create further demand for mining at home. The southwest of Britain, which has been hit disproportionately by Brexit and the current economic turmoil, will be in a position to regain its status as an industry hub and restore its rich mining heritage.
As this process unfolds, the domestic mining sector will be one for growth-oriented investors to watch, and the companies discussed above should be well-positioned to benefit.
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Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.