5 Reasons to add Ferrum Crescent #FCR to your Watchlist - Vox Markets
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5 Reasons to add Ferrum Crescent #FCR to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

FERRUM CRESCENT #FCR
SHARE PRICE: 0.105p
MARKET CAPITALISATION: £3.2m

Ferrum Crescent is an AIM listed exploration company with a lead-zinc project located in Northern Spain.

They have just completed a maiden independent JORC (2012) resource estimate showing 16Mt@6.9% Zn Equivalent (including lead credits) and 25 grams per tonne of silver.

5 Reasons to add Ferrum Crescent #FCR to your Watchlist

On 30th January, Ferrum Crescent released their maiden JORC resource for it Toral Zinc-Lead project in northern Spain. A Summary of the results are below.

· 16Mt @ 6.9% Zn Equivalent (including Pb credits) and 25g/t Ag

· 670,000 tonnes of Zinc, 540,000 tonnes of Lead and 13 million ounces of Silver

· Deposit open along strike to the east and down dip (so resource could get bigger)

· This initial resource positions Toral as a potential “world class” lead/zinc project

This was approximately double their previous resource estimate. To put this in context:

The price of zinc as of February 2nd 2018 was $3,556.00 per metric ton.

Even if I use a conservative price by rounding down to $3,000 per metric tonne this values Ferrum Crescent’s zinc in the ground at $2.01 billion.

The price of lead as of February 2nd 2018 was $2,682.50 per metric ton.

Again if I use a conservative price by rounding down to $2,000 per metric tonne this values Ferrum Crescent’s lead in the ground at $1.08 billion.

The price of silver as of February 2nd 2018 was $16.67 per ounce.

If I use a conservative price by rounding down to $15 per ounce this values Ferrum Crescent’s silver in the ground at $195 million.

This would value their zinc, lead and silver at $3.285 billion.

It takes a lot of time and expenditure to get these metals out of the ground and processed for sale. So you could argue this isn’t an accurate way to value this project. So lets take another example.

Above are some listed zinc-lead peer comparisons.

As you can see, Consolidated Zinc has a resource grading 1 million tonnes at 16% zinc – lead with silver at 24 grams per tonne and is valued at $9m. This is quite high grade lead zinc but it’s resource is the 16th the size of Ferrum Crescent’s and is still twice the value.

Alta Zinc has a similar grade of lead-zinc and silver grams per tonne but Ferrum Crescents resource is 5.3 times bigger. So if we multiply Alta Zinc’s value ($9.9m) by 5.3 we get $52.47m, eleven times the size of Ferrum Crescent.

Meanwhile at the top of the value spectrum, Central Asia Metals, which is listed on AIM, announced it had purchased Lynx Resources (the owner of the SASA zinc-lead mine in Macedonia) on 6th November 2017 for $402.5m.

This size is slightly bigger but the grade is near enough the same and yet they are 89 times greater in value.

SASA is a producing mine so it’s value would be higher but either way you cut it, Ferrum Crescent with their resource size and grading is undervalued.

 

Zinc is the fourth most common metal in use, trailing only iron, aluminium, and copper with an annual production of about 13 million tonnes. Zinc is most commonly used as an anti-corrosion agent, and galvanization (coating of iron or steel) is the most familiar form.

Zinc prices are at a 10 year high, supported largely by supply-side factors, that is falling global inventories, Chinese mine closures (due to their efforts to reduce industry-generated pollution) and stable steel market demand.

According to Investing News, analysts forecast that the refined zinc market will remain in deficit in 2018. Commoditiy analyst CRU Group estimates that the deficit will be around 200,000 whilst CPM Group expects the refined zinc market deficit to reach 220,000 tonnes in 2018.

 

A good resource is an asset to a company, as is the jurisdiction in which it’s located. Many a company can boast a decent sized resource but not a good location and this can be considered a liability or an added risk.

If the resource is inaccessible by road or has lack of infrastructure such as electricity then, costs mount, adding more risk to the project. Then you have to factor in whether the government of the country, in which the asset resides, has a favourable record towards the mining sector or outside investors. History is littered with governments, especially in parts of Africa, where governments have nationalised profitable industry sectors or assets.

This is not an issue with Ferrum Crescent.

Their Toral project in located in the Leon Province of northwest Spain 400km north-west of Madrid, the project’s licence area hosts excellent road, rail and power infrastructure and is situated in a known historic mining jurisdiction.

Spain is increasingly supportive towards its mining sector – projects are being progressed into production and are subject to EU governance standards with respect to corporate, environmental and supply chain transparency.

 

On 5th October FCR announced that, following the resignation of the Company’s Executive Chairman, Justin Tooth, “the Board of FCR is in the process of comprehensive operational review, focused on how best to derive value for FCR shareholders from the Toral lead-zinc asset.”

On the 17th October Mr Myles Campion was appointed to the Board of the Company, as an Executive Director and then on 21st November entered formal employment contract to the role of Technical Director of the Company with immediate effect.

Mr Campion has a comprehensive background in all technical and financial facets of the resources sector, specialising internationally in resource evaluation and project assessment. This follows a 10-year career as an exploration and mine site geologist in Australia covering base metals and gold. He holds a BSc (Hons) in Geology from University of Wales College, Cardiff and an MSc (MinEx) from the Royal School of Mines in London, and also holds a Graduate Diploma of Business (Finance).

Mr Campion’s financial experience ranges from Australian and UK equities research through to project and debt financing in London, covering the entire spectrum of mining companies with an extensive knowledge of the global resources market covering the three main bourses, the Toronto Stock Exchange, AIM and the ASX. This knowledge was applied effectively as a Fund Manager at Oceanic Asset Management, where he successfully managed the Australian Natural Resources Fund, an Open Ended Investment Company (OEIC) traded in London. Mr Campion is currently a Non-Executive Director of Katoro Gold plc.

On 12th January Colin Bird was appointed to the board as a Non-Executive Director and Chairman.

Mr Bird is a chartered mining engineer with extensive multi-commodity mine management experience in Africa, Europe, Latin America and the Middle East. Mr Bird’s operational and corporate experience, includes the development of the Jubilee Metals Group production portfolio, concentrating on Platinum Group Metals in South Africa, in addition to the successful sale of Kiwara plc.

Kiwara plc was sold to First Quantum Minerals (TSX: FM) for US$260 million in November 2009, whilst its project was undertaking infill drilling at the Kalumbila copper-nickel deposit in north-western Zambia.

Currently, Ferrum Crescent does not have a CEO but I would expect this to be announced  in the not too distant future.

 


Even though Toral is the main focus for Ferrum, it isn’t their only prospect.

The Lago Project is located approximately 54km to the north-east of the Toral Project. Historical investigations completed by or on behalf of the Spanish mining firm, Exploracion Minera International Espana S.A, between 1985 and 1990, indicated that mineralisation at the Lago Project may be similar to that encountered at the Toral Project with vertical, lenticular bodies (probably more than one) approximately 800m long by 300m wide.

To date, exploration campaigns have seen 29 out of a total of 37 drill holes intersect Zn/Pb mineralisation. Historic drill results reported by EXMINESA include: 9.5m grading at 9.54% combined lead and zinc and 7.5m grading at 14.75% combined lead and zinc, with the mineralised structure estimated to be 1.3km in length.

The Lago Project is also situated 20km from the Rubiales Mine (owned by Teck Resources Limited / Cominco Limited), which was in production from 1976 to 1992.

Following the release of the maiden JORC resource on their Toral zinc-lead project in Spain, compared to their peers, Ferrum Crescent seems substantially undervalued. This is only one of their assets, which are both located close to excellent road, rail and power infrastructure and is situated in a known historic mining jurisdiction, in a first world country.

If you add this to the fact that zinc is in a supply deficit and will continue to be so for the foreseeable future, then Ferrum Crescent is shaping up to be a one of the better plays, if one were looking to gain exposure to this market.

The icing on the cake are the new board appointments who have a proven track record in proving up the value of small exploration companies, either taking them through to production or via a sale, for their shareholders.

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The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

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Mentioned in this post

FCR
Ferrum Crescent Ltd NPV (DI)