Markets may be better than they were, but it’s still a tough ask raising £4 mln for drilling and exploration, as Erris Resources plc (LON:ERIS) has done this week.
The company made its debut on Aim on 21 December at 25p per share, giving it a market capitalisation just shy of £8 mln, and the first tranche of shares traded at 26p, although there was some slippage after that.
It’s the culmination of several years’ work by well-known mining entrepreneurs David Hall and Jeremy Martin, the men behind Horizonte Minerals (LON:HZM) amongst others, and more latterly by Merlin Marr-Johnson, who joined as chief executive in April.
WATCH: Erris Resources debut with news on their Irish/Swedish mine assets
Marr-Johnson’s also a man of wide experience in the mining sector, having worked in investment banking at HSBC, in fund management at Blakeney, and as a company director and chief executive during the last mining boom of a variety of companies. More latterly he has acted as a consultant to Ferrum Crescent (LON:FCR), providing in-depth geological appreciation of the Spanish zinc asset at Toral, which, incidentally, was once controlled by a company associated with Jeremy Martin.
And so we come full circle. It was in his capacity as consultant to Ferrum Crescent that Marr-Johnson was first introduced to the opportunity at Erris, and he liked it immediately.
Some time then elapsed, but following a meeting with David Hall at this year’s Indaba, it was decided that Marr-Johnson should take on the lead role. He was appointed in April as chief executive, and work on the listing then began.
Two things in particular attracted him. One was the quality of the assets themselves: previously worked zinc projects in Ireland, up north near Sligo, as well as highly prospective Swedish gold exploration. The way he sees it now, investors have the perfect entry point: whichever way you look at the valuation, one set of these assets is in for free.
People important assets too
But there’s more to a mining company than assets in the ground. There’s also people. Here, Erris scores big. Not only is there the top-level support of Martin and Hall, who have brought in Canadian mining major Osisko (TSE:OR) as a backer, there’s also a high quality team of geologists and consultants already in place on the ground in Ireland.
“Jeremy and David had incubated a very effective team in Ireland,” says Marr-Johnson.
What that means is that now Erris is listed, Marr-Johnson can push the button on a drill campaign almost immediately.
Allowing for Christmas, and the boggy condition of January fields in Ireland, the drilling should start at Erris’s Abbeytown project in February, with an initial 5,000 metres planned, and budget in place for plenty of follow-up, depending on what the assays show.
How good the results will be remains at the discretion of the drillbit, but the early signs are certainly favourable.
“The Abbeytown project contains 15 or 16 kilometres of prospective mineralised rocks,” says Marr-Johnson.
“There is an old mine there. This is an area that’s been mined by monks since medieval times. It was then worked in the nineteenth century and then in the 1940s and 1950s it was mined by and Irish company, and then latterly by JCI.”
But zinc prices in the final part of the twentieth century went into the doldrums and the Abbeytown workings went into abeyance. When the boom in the early part of the twenty-first century came along, they were largely overlooked in favour of the more established areas of Ireland to the south that had already delivered a zinc bonanza, the Waulsortian reef and the great mines of Tara, Lisheen and Galmoy.
Zinc is up
But zinc has been strong once again, and interest has revived. Hall, Martin and Marr-Johnson are working at the more nimble end of the market, and can afford to bide their time and get things going when the time is right.
That time is now. Zinc is up, financing is available, there’s drill crews in place, and appetite in the market.
“The old Abbeytown was high grade, at 9% zinc, 3% lead and 90 grams per tonne silver,” says Marr-Johnson. If he can deliver repeats of grades like that, everyone will be happy.
And while the Irish work gets underway, there’ll also be activity on the Swedish gold, where Erris has established a strategic alliance with Centerra Gold (TSE:CG).
“This deal was struck in the dark days of 2015,” says Marr-Johnson.
“They pay us US$250,000 per year just to do ground exploration. That funds guys with hammers and soil sampling programmes. And Centerra then have the right to earn in to any of the projects. They’ve selected two.”
Drill results from the Swedish work are due quite soon, meaning that Erris is likely to hit the market with some interesting-looking newsflow almost from the get-go. More drilling in Sweden is planned for 2018, so investors are likely to have plenty to keep them interested for a good while yet.
And what will happen later? Strong drill results from Ireland and/or Sweden could boost Erris’s value significantly. We shall have to see.