With a market capitalisation hovering around the £200mln, Bluejay Mining PLC (LON:JAY) is one of the largest mining companies on the AIM market. What’s particularly intriguing about this punchy valuation is that the company has yet to initiate mining at its Dundas titanium project in Greenland.
So rather than cash flow or profits, it’s the size of the opportunity that’s driving the valuation, and here, certainly, there is plenty to say.
Late in April, Bluejay announced a 400% increase in the resource base at Dundas, as verified by renowned consultants SRK Exploration.
The new number rings in at 96mln tonnes grading 6.9% ilmenite, including 81mln tonnes in the indicated category at 6.1%.
As part of the work involved in putting that resource base together, Bluejay also identified a new target at Iterlak that SRK says could contain between 20mln and 60mln tonnes of additional ore at a higher grade. But Bluejay chief executive Rod Mcillree is very confident it will be proven to host much more as time goes by.
And it’s not just the quantity. Quality has also been a factor in bringing Bluejay to the attention of investors.
“Dundas,” says Rod McIllree, “has the highest concentration of in-situ ilmenite of any mineral sands project globally.”
This distinction arises in part because of the intrinsic geological characteristics of Dundas.
“This would have been a hard rock mine,” continues McIllree. “But the slow grind of the glaciers has effectively mechanically mined the material for us. Tide and wind and rain have then deposited what is a finished product on the beach over time. Its saved us the front end capex of setting up a mine there which helps a lot.”
That glacial grind has had significant consequences for the economics of production at Dundas.
As McIllree puts it bluntly, “we have dodged anywhere between US$200-400mln in capex, mother nature has done our mining and concentrating for us.”
But if Bluejay has the onward advance of glaciers to thank for the quality of the product at Dundas, it also has their retreat to thank for revealing the extent of the opportunity.
“Historically the project was only recognised as a small local occurrence,” says McIllree.
“But then the ice and snow melted, revealing a much larger occurrence. In 2015 we undertook a work programme that demonstrated the project could be globally significant. There are quite remarkable concentrations of the material across thirty kilometres.”
The plan now is to move through ongoing pre-feasibility work and into a bankable study, to be completed by the end of the year.
“We are assessing a several options in regards to development funding for Dundas, and to that end we expect to produce 5,000 tonne samples of finished premium product to send to several potential customers,” says McIllree.
Quite what the production parameters will actually be remains to be seen but they ought to be impressive.
McIllree talks of ramping up through 2019 to a steady state of 450,000 tonnes per year, depending heavily on delivering sales agreements beforehand to facilitate this amount of extraction.
But clearly with the resource base that Bluejay has, production could theoretically go much higher and for a mine life that in the end could be easily more than 50 years.
And for those worried about the costs of operating in remote Greenland, McIllree offers reassurance aplenty. For one thing there’s that initial capex dodge. But more tangibly, the project is situated near Greenland’s closest equivalent to an infrastructure hub, not far from a two ports, two airports and the town of Qaanaaq, home to around 650 locals all keen for additional industry to start.
Even the mine camp has come pre-packaged: Bluejay has simply moved into a town that was abandoned following a change in local wildlife migratory patterns.
“We are confident that the capital costs will not be insurmountable,” says McIllree.
And some impressive names in mining investment seem to agree with him. Already on the Bluejay register are Sandgrove Capital with 13%, M&G with 12.5%, Capital Group with 6%, HSBC with 6% and ING at 5%. It’s expected these groups will continue to support the projects development moving forward.
Added to this is the fact that the directors and senior management don’t pay themselves a lot but are big shareholders, all bodes well for the future of this quite interesting opportunity.