“Because of the profits that have been achieved, we have the cash and liquid equity assets providing the working capital we need for the foreseeable future.”
There aren’t too many junior companies in mining investment who can make that sort of statement at the moment – most have been wiped out by four years of pain and remorselessly declining equity and portfolio valuations.
But Metal Tiger (LON:MTR) can.
The company in its current guise has had the virtue of starting late and perhaps missing out on a few years of the painful cyclical sector bear market.
It’s not yet 18 months since the transition that turned Brady Exploration, an oil and gas shell smarting from the failure of a deal in Nigeria, into Metal Tiger, the aspiring mining finance house that now boasts major investments in Spain, Tanzania and Thailand, as well as an actively traded portfolio of junior mining equities.
A tough proposition in markets where metals prices are all a long, long way off their five year highs and in which sentiment has long since gone sour?
Yes. And no.
Metal Tiger missed those first desolate years that followed the mining equity bust, and as a late comer to the party is not sitting on substantial losses.
Indeed, as executive director Paul Johnson says, it’s not sitting on recent trading losses at all.
“We spent some time sorting out the business into the third quarter of 2014,” he says.
“But then we invested £150,000 in Kibo Mining (LON:KIBO) at 1.5p. Within days it was trading up to an intraday price of 12p.”
The team at Metal Tiger live and breathe the markets – and they weren’t going to miss an opportunity like that, even if there had been a strong element of luck in the timing.
So in early January, only a couple of months later, Metal Tiger cashed out of its initial Kibo shares, crystallising what it called a “significant return” much of which was rolled back into Kibo via early conversion of 10mln 3p warrants that were attached to the original placing. As with all the company’s major equity investments it retains a material stake in Kibo.
“The Kibo transaction gave us some working capital,” continues Johnson. “And we wanted to reinvest it quickly and efficiently. We rolled some of the money into an investment in Eurasia Mining (LON:EUA).”
That generated another short-term profit to the tune of £180,000, most of which was then ploughed back into Eurasia through early warrant conversion, after production mining approvals were granted to Eurasia for its West Kytlim platinum mine in Russia.
Since early this year Metal Tiger has also invested £250,000 in Ariana Resources (LON:AAU), which is now breaking ground on the construction of a Turkish gold mine at the Kiziltepe project.
And other moves were also afoot because the above equity investments fall within the Metal Tiger’s Direct Equities division which is there to generate profits for investment of cash into its Direct Projects arm. The company’s aim after all is to be a self funded resource project investor/developer.
Metal Tiger then proceeded to cast its newly funded net across the globe, obtaining significant access to the new, almost untried territory of Thailand.
There, the company has obtained interests over ground that’s prospective for gold, copper and antimony, and although it’s not quite the first mover, it does have the advantage that hardly anybody else in the world is looking at opening up new grassroots exploration anywhere.
In fact, quite the opposite. Almost daily market commentators are talking about “capitulation” in the junior mining markets.
And that applies most especially to exploration.
And yet. Wiser heads know that the point of capitulation is actually the best time of all to invest. When valuations are cheapest, and upside is greatest.
The opportunity that Metal Tiger has of opening up new ground in Thailand could almost be a case study. The company has noted the extensive prospectivity and untapped potential of the country and has a Thai operating team with all the right local knowledge and network.
More prosaically, there’s also now tungsten and gold exploration in Spain, held in joint venture with a partner, and a gold and uranium exploration portfolio in Tanzania run in joint venture with Kibo.
It’s a diverse portfolio, and one that offers hedges in several different ways as certain commodities move in and out of favour, and certain companies pass milestones or hit roadblocks as is always the way in the junior mining space.
Nevertheless, you can’t legislate for sentiment in the wider sector though and many mining investments have drifted in price in the particularly difficult sector conditions over the summer.
But with a longer term view and the experience and strength to hold through into a recovery phase, contrarian resource investors can do particularly well.
To quote Johnson: “We don’t have a crystal ball, and if we did it would be cloudy. But the broad outline is that we are going to invest in resource opportunity aggressively during this sector bottoming phase. The plan is either to develop and sell, develop and drop, develop and partner, or develop then list or spin out.”
It may be contrarian to say so, but there’s probably never been a better time to do it.