Toledo Mining worth more than market value - Ambrian

Toledo Mining (LON:TMC) is on the right path to commercialise its asset base and is certainly worth more than the current share price suggests, said Ambrian analyst Duncan Hughes.

The research note on “one of the cheapest metals explorers on AIM” was released in response to today’s news that the mining plan for Toledo’s Berong nickel mine in the Philippines has been finalised with its JV partners and the mine is to be re-opened with ramp-up to full production in the middle of next month. The update drove the share price up 32 percent to trade at 32 pence to make it the top performer on the London Stock Exchange this morning.

The company said that the mine on Palawan is targeting production of 500,000 wet metric tonnes (wmt) of nickel ore by the end of this year, aiming to ship 300,000 wmt by 31 September this year when the shipping window closes.

The remaining target of 200,000 wmt, planned for production in the last quarter of the calendar year, is targeted for shipping from 1 March 2012 when the shipping window reopens.

Ambrian was correct in expecting the news to be taken positively by the market, which it was, leading to the significant appreciation of the share price. The broker called this a first step in a return to commercial operations “for a company that has lain dormant for some time”.

Ambrian refrained from setting a target price and recommendation for the stock as its analysts are currently on a site visit at Toledo’s assets in the Philippines to get a “better feel” of the developing operations. Still, the broker said that it was confident that the company was worth more than its current market value.

The report noted that most exploration companies on the AIM market of the London Stock Exchange are worth more than this and yet Toledo has announced that DSO production is about to resume.

According to the broker, the appointment of new chief executive Victor Kolesnikov has triggered the mobilisation of the asset. The note drew attention to the fact that Toledo’s new CEO is a director of Raw & Refined Commodities AG.

The principal activity of this Swiss-based trading company is buying raw materials for processing by and selling the finished product of the Skopski Leguri ferroalloy complex located in Macedonia, which is controlled by companies associated with chief executive of FTSE 250 mining company Ferrexpo (LON:FXPO) and 20 percent owner of Toledo Konstantin Zhevago.

“Whilst these associations may not result in any direct form of business integration between Toledo and interests controlled by some of its new owners or managers, it does at least leave us with the conviction that Toledo is now on the right path to commercialise its asset base,” said Hughes.

“This fact clearly has not escaped Mr Zhevago, who acquired an interest in Toledo's voluminous nickel resources at a relative song last year, but apparently it has escaped the rest of the equities market,” he added.

Hughes provided more backup to support his bullish stance on the stock, opining that the market value does not take into account a fair value for the potential of its at-surface resource base to be direct shipped to China, or possibly Macedonia as there are plans to add a ferronickel operation at the Skopski Leguri plant.

The Berong mine is held by the Berong Nickel Corporation, which is a joint venture split as follows: Toledo Mining Corporation plc (56.1 percent), Atlas Consolidated Mining and Development Corporation (25.2 percent) and European Nickel plc (18.7 percent).