www.snrplc.co.uk
SNR intends to develop, own and manage natural resource extraction enterprises in southern Africa. SNR will concentrate, initially, on managing the development of and the investment in the Elitheni Mine, in the Gubahoek/Macubeni area of the Eastern Cape. Further opportunities both in South Africa itself and elsewhere in the southern part of the continent will be followed up as they arise. The company’s main country of operation is the Republic of South Africa.
Strategic Natural Resources a gem of the micro-caps, says Evolution
Strategic Natural Resources (LON:SNRP) was dubbed an ‘unknown gem’ of the micro-cap market by Evolution Securities, which this morning initiated coverage of the company with a buy recommendation.
Veteran mining analyst Charles Kernot values the shares at 49 pence each. The bullish circular had an instant effect on SNRP, which advanced 2.12 pence, or 11 per cent to 20.88 pence a share.
The company owns the Elitheni mine in South Africa’s Cape Province, a 150 million tonne resource. That said the company has drilled only 3 percent of the project area, which measures 1,800 square kilometres.
So by extrapolation the SNRP estimates there could be as much as 3 billion tonnes of coal of which as much as 1 billion could possibly be recovered.
Initially the mine will produce 500,000 tonnes a year, most of which has already been earmarked for the export market.
However, as production ramps up so the domestic industrial market will play a bigger part in its plans.
“Taking the likely yield into account, at planned initial production of 1.5-2 million tonnes a year this resource would be sufficient for 15-20 years,” says Evolution’s Kernot.
“The big prize for the group is the largest licence area which shows potential to supply up to 10 million tonnes per year.”
Earlier this month the company appointed London Commodity Brokers as its coal broker to advise on the negotiations to agree the company’s first off-take agreements.
It formalises a relationship that has existed for several months already as the pair teamed up to find potential customers for the output from the Elitheni mine.
SNRP said at the time of the announcement it is in discussions with potential customers on the terms of an off-take deal, adding that further announcements will be made in due course.
Chief executive David Nel explained: "We are delighted to have formalised a partnership with an experienced coal broker.
“This relationship is a result of significant time spent with LCB both in London and South Africa and we have every confidence in LCB's commitment to assist us in selling all tonnage the Elitheni mine can produce through their extensive network of buyers."
LCB’s experience is extensive as it has brokered global trades of almost 200 million tonnes of coal since its inception in 2005.
Last November Strategic Natural Resources revealed it was in talks with several “large, independent power companies” as part of a concerted push to bring on board major customers for coal from Elitheni.
The operation is on schedule to begin production towards the end of next year, or early 2012 at a capital cost of £20-£40 million.
“We believe that SNRP represents an unknown gem given that its position in the small and micro-capitalisation end of the market means that it sits beneath most investor’s radars,” Kernot added.
“With scope for a near term trigger in terms of off-take progress, we believe the group will attract a growing following.”
