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Toledo Mining Corporation is a sleeping elephant

Toledo has two other projects: the advanced Celestial project, with a 52% interest, and an exploration property at Ulugan in which it has a 58% interest. These are undergoing exploration and development as part of the conditions of the Toledo earn-ins, and represent future upside to a substantial degree. Celestial already has a defined resource, in spite of being under explored.
Toledo Mining Corporation is a sleeping elephant
Nickel isn't sexy.
It doesn't grab the imagination, or foster dreams of wealth.

There is no better illustration of that than the current share price of Toledo Mining, now a pure nickel play. It's difficult to comprehend when looking at the current market capitalisation that the company owns a significant stake in what is probably the fourth largest nickel resource on earth?.

Toledo (TMC) listed on AIM in April 2004 as Toledo Copper Corporation (TCU) ? bringing with it an option to acquire a 40 per cent interest in the Carmen Copper Project, owned by Atlas Consolidated Mining & Development Corporation.

During June 2004, it also acquired a 44% interest in the Berong nickel laterite project, also part-owned by Atlas, and a 52% interest in the Celestial nickel laterite project, both on the island of Palawan in the Philippines. Toledo has the right to increase its Celestial interest to 71.2% in the future.

Subsequently, in January 2005, Toledo ? now Toledo Mining Corporation - announced that in the interests of increased shareholder value, it had swapped the option on the Carmen Copper Project with Atlas for an additional interest in Berong - bringing it up to 56.1% - and a 58% interest in Ulugan, a nickel laterite exploration property partially adjoining Berong.

These three projects give Toledo a combined resource of 352 million tonnes at a grade of 1.3% - equivalent to an estimated total nickel content of more than 4.6 million tonnes, with 3.5 million tonnes at Berong alone.

Current and future cash commitments following the acquisitions are to spend $2 million each at Berong and Celestial, which will be refundable from profits in the future, and $1 million on Ulugan.

The significance of Toledo's nickel projects is that they are laterite ore ? ore subjected to intense weathering ? from which industry experts expect to see the majority of future growth in nickel output. Nickel sulphide ore, dominant for over 70 years, is not now being replenished as fast as it is being mined, and as processing technologies for laterites improve, capital and operating costs will reduce, particularly on brownfield sites. Berong's ore body contains roughly equal elements of the two main constituents of laterite ore ? saprolite, processed mainly by smelting, and limonite, which is processed by hydrometallurgical systems such as HPAL (high pressure acid leach). Toledo therefore have options denied to many other producers, and can choose the most capex-effective route to production.

The company is now moving forward on two fronts at Berong: direct shipping of laterites, and development of the main resource.

To this end, in mid November, the company announced the appointment of an experienced mining engineer as CEO, George Bujtor, a senior executive with extensive experience of commercialising major mining projects. Chris Kyriakou, the Exec Chairman, will now take a back seat role on a day to day basis, though he remains as Chairman.

Berong Direct shipping

The main resource at Berong comprises some 3.5 million tonnes of contained nickel and Toledo has initially identified sufficient high grade saprolite ore to supply a direct shipping operation for 7 years at a million tonnes of ore per year. Mining will be carried out by contractors and Toledo anticipates the move to production and cash flow without need for further funding.

It already has one five-year contract under its belt, for 350,000 tonnes per annum of saprolite ore grading 2.2% Ni minimum, which will bring in net revenue after costs - based on an LME price of $5 per lb - of approximately $14 million per annum, of which $8 million is attributable to Toledo. This contract commences with a first shipment in March 2006. A further contract of another 300,000 tonnes is under discussion, as is a deal with an Australian customer for 500,000 tonnes of limonite ore grading 1.8%.

Should these additional contracts come good, the net revenue attributable to Toledo after mining costs could amount to around $20 million per annum for the duration of the contracts.

This is significant cash flow by any standards. If further direct shipping reserves are identified, and direct shipping remains a key part of the business, then at a p/e of 15, and using 30% tax rates, a market cap of £100-120 million could be justified. Sustained improvement in the nickel price, beyond $5 per lb, will see Toledo do even better.

On the permitting front, the company has been successful in obtaining the vital Free Prior and Informed Consent (FPIC) from the Indigenous Cultural Community in Quezon, Palawan Province. The consent is the first of two essential steps needed for Toledo to secure an Environmental Compliance Certificate (ECC) and Mineral Production Sharing Agreement (MPSA). The next step will be the endorsement of the Palawan Council for Sustainable Development, which the company expects to receive before the end of 2005.

Berong Large Scale Development

Berong is well advanced due to several years of earlier work ? with approx $10 million having been spent in the past. An early feasibility study led to a full development plan which had to be shelved in 1973 due to an unfavorable market - more recent work has concentrated on delineating direct shipping tonnages. Today the market is again favorable, with nickel prices forecast to remain robust for the foreseeable future.

The Company's plans for the exploitation of Berong are best summarised by Chris Kyriakou in the last set of Final Results:

"Our plans envisage direct shipping of at least 1 million tones of laterite ore per year, and our objective is to use part of the cash flow generated to fund a bankable feasibility study into a subsequent large scale operation which should produce at least 50 million lbs of nickel per annum and for which several development options have been identified. These include a large scale smelter operation and we have throughout the year been involved in continuing discussions with several large corporations interested in working with Toledo through possible joint ventures."

The bankable feasibility study will cost in the region of $20 million.


Toledo has two other projects: the advanced Celestial project, with a 52% interest, and an exploration property at Ulugan in which it has a 58% interest. These are undergoing exploration and development as part of the conditions of the Toledo earn-ins, and represent future upside to a substantial degree. Celestial already has a defined resource, in spite of being under explored.

Further Reading :

An excellent summary of the processing methods available for nickel sulphides and oxides (laterite) with sample costs:

A complete rundown of mining and mining projects ? including the HPAL facility at Coral Bay - in the Philippines.

PDF of Presentation to Minesite Philippines Forum (which can also be listened to):

A description of the HPAL process:

A useful (and very technical) description of nickel laterite ores.

Given the resources in the Toledo portfolio, and the imminence ? subject to completion of permitting ? of significant cash flow, £16 million market cap doesn't seem expensive?.

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Toledo Mining Timeline

December 17 2012

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An upgrade in February boosted the total nickel resource at Kun-Manie to 101.3mln ore tonnes at a grade of 1.03%, which equates to 1.04mln tonnes with a value of US$10.5bn at current prices.

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