Beowulf Mining shares bounce 31 per cent

Shares in Swedish minerals explorer Beowulf Mining (LON:BEM) bounced by almost a third today after enduring a long decline that begun from their peak price of 73.25 pence in late February. By 3.30pm the shares were up 31.25 per cent at 31.5 pence each.

The rise comes after a note from stockbroker HB Markets was published on Friday that rated the shares as a ‘speculative buy’ with a recommended target price of 60 pence.

HB Markets pointed out that a new JORC-compliant resource statement is due to be published by Beowulf later this month that is “very likely to generate new valuation data on Beowulf” and “refocus market attention on the shares”.

The broker also said that it sees “substantial intrinsic value” in Beowulf’s “highly promising” iron ore projects and noted that independent consultants, RMG, estimated last year that the firm’s iron ore assets could generate a total net profit, depending on the price of iron ore, ranging from US$2.3 billion to just under US$6 billion over an estimated mine life of 15 years.

Beowulf has a portfolio of copper, gold, uranium, molybdenum and iron ore assets in northern Sweden. Its main focus is on two vast iron ore projects at Ruoutevare and Kallak, which are currently being drilled as the firm explores them further with a view to moving them towards full development and test mining is expected to begin in 2012.

The ongoing drill campaign and assay results have shown that, so far, two deposits at Kallak may together hold more than 600 million tonnes of iron ore, which HB Markets said would represent “some of the largest undeveloped iron ore deposits in Scandinavia”.

It added: “It is anticipated that a pellet feed product can be produced relatively easily from the Kallak iron ores containing approximately 70 per cent iron with low levels of contaminants such as sulphur, phosphorous and titanium. Such a high quality pellet feed product is currently in high demand by potential customers.”

Meanwhile, at Ruoutevare the firm has begun a 4,000-metre drilling campaign from which, said HB Markets, it should be able to demonstrate an inferred resource of more than 200 million tonnes.

As well as highlighting as strengths the impending JORC-compliant resource estimate and the very large potential net profit from Beowulf’s iron ore assets, the broker also highlighted that the firm’s management team appears to be highly qualified and fully committed to developing and maximising the value of the company’s current resources. It added: “Investors at the current depressed share price have the potential to enjoy significant upside if the exploration programme is successful.”

Meanwhile, HB Markets also listed a number of points that wary investors should look out for. These included the usual concerns that are associated with any mining business: the company will need to raise further funds before mining can commence at Kallak or Ruoutevare; the volatility of commodity prices; and that few investment advisers or brokers are actively covering the share. The broker also pointed out that Beowulf is operating within the Arctic Circle, where climactic conditions are hostile.