Tertiary Minerals' achievements not reflected in share price, says Seymour Pierce

Tertiary Minerals (LON:TYM) has passed significant development milestones at its Storuman fluorspar project in the last 18 months, says Seymour Pierce analyst Asa Bridle.

In a note to clients today the analyst said that these achievements are not reflected in today’s share price. 

Perhaps more importantly though, the analyst highlights that fluorspar prices have remained strong. He also believes that recent merger and acquisition activity in the sector hints at a disconect between the what investors and major industry players value these companies.

“The fluorspar market has remained robust in 2011 and prices rose strongly in the first half, currently standing in the US$500-600 per tonne range,” Bridle said.

“However, the performance of listed stocks has been weak and the (sector) is trading at just US$5.92 per tonne fluorspar resource, below the average of our 12-year M&A database at US$6.59 per tonne.”

According to Bridle, the group’s existing resource base is worth 11p a share. However he says that calculating the net present value (NPV) implies much greater upside to that value. Bridle upgraded his target price for the stock from 22 to 30p this morning.

The most recent milestone achieved by Tertiary was the release of drill results yesterday. 

On Monday Tertiary shares shot up nearly 70 per cent as it revealed drill results that showed substantial extensions to the fluorspar mineralisation at the Storuman project in Sweden.

The company said that the latest drill results show the discovery of large extensions to the known fluorspar mineralisation as well as new areas of high-grade mineralisation.

The results come from 11 holes that were drilled this summer. They build on the project’s maiden JORC Mineral Resource estimate of 27.8 million tonnes, grading 10.21 percent fluorspar, which was announced in March. 

The existing resource statement estimates that Storuman contains nearly 3 million tonnes of fluorspar. The project is being evaluated as a potential open pit with a 25 year mine life.

Fluorspar is a type of calcium fluoride that is a critical ingredient in the manufacture of acids and chemicals. As such the mineral is in great demand.

“The Storuman project could become the largest mine for this critical mineral in Europe,” Bridle said.

“Our recent trip to the site highlighted the many positive aspects of this project and management’s knowledge of Sweden’s mining sector and minerals policy. 

“Storuman is shaping up to be a straightforward mining operation that is well placed for infrastructure and access to European sales markets.” 

Speaking yesterday Tertiary chairman Patrick Cheetham said: "These are highly significant results and bring a step change in our expectations for the ultimate size of the Storuman deposit.” 

“The discovery of new high-grade areas is especially exciting and highlights the need to include an evaluation of underground mining options in the current preliminary feasibility studies, as well as increased production rates,” Cheetham added.

“The high grade areas are accessible to highly mechanised "in-ore" room and pillar mining methods requiring minimal underground infrastructure development ahead of, or during, production."