Disclosure: This blog is the work of Sunil Mark-Singh (Silky). Sunil holds Regency Mines shares.
Regency Mines Plc are a small cap resource exploration company creating value mthrough strategic investments and project development at bottom of the global commodities cycle.
Like many small caps, diversification is often key, however, RGM have a very interesting portfolio and one which has the potential, in my opinion, to not only create serious momentum, but to be extremely profitable at these levels for seasoned investors.
With a potential Metallurgical coal deal about to be announced, a world class Nickel-cobalt project in Papua New Guinea and one of the world’s largest underdeveloped Niobium-Tantalum deposits in Southern Greenland, RGM are not skimping on the asset front. Alongside this sits our 10% in recently AIM listed Curzon which has its focus on gas in Oregon, USA.
What has really turned the company’s fortunes was its investment in UK Oil and Gas (LON:UKOG) and Horse Hill, based in Surrey. The remarkable share price rise over the last months has created liquidity in RGM’s books to really get it’s projects to a level of tangible value.
The real short to medium value comes through our coal projects. This is due to them being able to generate revenues which can then help develop the rest of the company’s exploration assets.
So why coal?
When anyone first talks about coal, it sounds dirty and old fashioned. Not so attractive. However, when we talk about coal for RGM, we are talking Metallurgical, rather than thermal.
Metallurgical or ‘coking’ coal is used to produce coke, which is needed in steel making. Perfectly synonymous with the US’s industrial gearing. To put this into perspective . US coal exports totaled $3.6 billion in 2017’s first half – a 163% increase over the same period in 2016.
RGM and it’s Coal journey
As everyone knows it’s not been the easiest of relationships. RGM ownership of 20% of Rosa mine was initially a fantastic investment ‘once it got producing’. Getting it producing has been one of Andrew Bell’s biggest challenges over the last few months but could well be one of the most rewarding experiences. The difference a few months has made is in the sale of the UKOG shares and HH weald basin % which has seen a ROI of over £2 million. This money as previously RNS’d is to be used for:
- deleveraging the business
- furthering our interests in metallurgical coal
- provide working capital for the development of other opportunities.
Which is why at the lowly price of .6p means that the upside could be potentially massive if RGM can time this right.
We also have a management company in the mix which means our coal investments will be run with ‘partners or a partner’. This gives the much needed support and experience for this to really take off.
Whilst it’s important not to get carried away, the other assets we have with RGM are second to none.
I see the 50% owned Nickel-Cobalt deposit in Papua New Guinea, has a JORC Resource of 162.5 m/t @ 0.94% Ni 0.09% Co.
Whilst the nickel price is sitting pretty at $12,000/ton from its bottom it’s nowhere near the highs of 2008 which were $30,000/t. – Nickel-manganese-cobalt batteries are set to become industry standard over the foreseeable future which means demand will look to increase and this project could well be another company maker with the right guidance.
Our 100% owned Niobium-Tantalum deposit is another project picked up by Bell in 2014. Whilst it has had exploration it still needs some work to find its complete potential. It is already known to be one of the largest undeveloped Niobium-Tantalum deposits in the world.
What happens to this depends on company’s liquidity for developing this. However, once it does get underway, could quickly find itself on a lot of people’s radars just for scale. It has a JORC inferred mineral resource of 340mt @ 120ppm Ta2O5, 1850ppm Nb2O5 and 4600ppm Zr02.
Recently listed at 10p on LON:AIM, Curzon is the 100% owner and operator of coalbed methane gas accumulations on c. 45k acres in the Coos Bay area of Oregon.
RGM recently took part in the IPO which it took 8.28% of the company. Curzon will be targeting first gas by the end of this year (2017) deliverying $1m of annual operating cashflow within the first 6 months of listing and a Net Asset Value of over $30m by end of year 1 giving RGM significant uplift if Curzon delivers on its strategic outlook.
Whilst RGM has fantastic looking assets, it really comes down to the coal as the spark. Global economic growth has a lot to do with steel demand with first-half GDP growth higher than expected both in China (6.9%) and globally (3.6%). If we get the coal deal that we think we can, with the capital we have then RGM could be a real winner this cycle and at this price and market cap, it looks an absolute ‘steel’.
Note: For more information visit the Regency Mines website (see here).