IT seems barely conceivable that a year ago shares in Beowulf Mining (LON:BEM) were changing hands at a little over 3 pence each.
Today they are trading at 45 pence, which before you rush for the calculator represents a 1,200 per cent appreciation in just 12 months.
The Beowulf price actually peaked at 57 pence in the middle of last month, and understandably there’s been some profit taking since.
The stratospheric ascent of the stock reflects the company’s stunning success with the drill rig as it has continued to prove up the twin Kallak North and Kallak South iron ore prospects in northern Sweden.
Together they have world class potential with an estimated 600 million tonnes of iron ore.
Every pound that went into the ground last year seemed to add hundreds more to the company’s market valuation.
Chairman Clive Sinclair-Poulton describes it as the race to add value – to put down as many holes as is practicable and affordable in order to add to resource base.
Management hopes to have an indicated resource for the project by the middle of this year. However there has been one bugbear recently: the weather, which stalled drilling at Kallak South.
The mercury plummeted to minus 35 degrees Celsius, rendering it impossible to carry out exploration work, although things are beginning to warm up.
The company has put down just 10 of a planned 32 holes for 951 metres of a 3,500 metre campaign.
However, Sinclair-Poulton is confident the programme will be quickly back on track to deliver assay results at some point in the second quarter of this year. In fact data from the initial phase of drilling is due later this month.
Once Kallak South has been drilled, the team will head north. To cement its position in the area, the group recently bought Iron of Sweden, which adds a potentially significant resource to the southern extension of the Kallaks.
Sinclair-Poulton and his team, including technical director Jan Ola Larsson, and newly appointed consultant Fred Boman must now decide whether to bring in a second rig for the Kallaks, and another besides to explore the Ballek prospect, also in Sweden.
Actually, they are expected to sit down and assess the best way to unlock the value of the Kallaks, Ballek and what Sinclair-Poulton calls a “rainbow of other projects”, including Ruoutavare.
“Where do I want be in six months time? That’s easy. With a decent JORC on Routavare, and a JORC inferred on Kallak North and South - I expect it to be a substantial number,” the chairman told Proactive Investors.
“In the last year every dollar we have put in the ground has been a very worthwhile investment. If you look at the market cap of the company it was worth us doing that.
“We want to get ahead and have a definitive strategy for 2011 pretty soon, which will show us how we best spend our time and money.”
And cash is the key, though unlike with many junior diggers, access to new funds doesn’t seem to be a problem for the company.
There is a demand for Beowulf equity, should it decide to go down that route, though there are other funding options there too.
“We will have to raise money before the end of the year there is no doubt about that,” the chairman reveals. “But there are all sorts of financing variations and we are speaking to people about them.”
In the longer-term Beowulf’s funding needs will depend on just how far down the development route the company goes.
Fast tracking the Kallaks could get them into production in three to our years. But you then have the cost and headache of producing the feasibility studies, gaining the permits and permissions and finding the thick end of US$800 million in project financing.
The company does have the core of expertise needed to take the Kallaks into production, starting with Sinclair-Poulton who has been an investment banker during his career.
The alternative is the find a partner, or sell the Kallak project outright to an established miner or steel producer.
There is a benchmark for transactions in the sector with steel giant ArcelorMittal and Nunavut Iron Ore jointly bidding almost US$600 million for the Baffinland Iron Ore.
The deal would give the pair control of the Mary River project in Canada, which has a measured an indicated resource of around 400 million tonnes. The Kallaks are potentially bigger, but not as far down the road to development as the Baffinland asset.
Sinclair-Poulton is realistic about the options open to Beowulf: “We either progress it or seek an exit or joint venture. I love the stories we have got but I haven’t fallen in love with the story.
“So if someone comes along tomorrow and offered me a certain amount of money I would say let’s go ahead and talk about it.
“We have got net present values we have done internally. So we have a pretty good scope for what the project is now worth.
“The question is do we have the ability, capacity , hunger and desire to go through the process and raise the money (to develop the Kallaks).
“To be honest, I would love to do this as I regard it as an extremely good challenge.
“If we put the effort in and go ahead and enhance the value by doing that ourselves then that would be fantastic.
“However if the dollars make sense we’ll go ahead and sell out. We will then be a cashed up resource story able to develop the remainder of our assets at our leisure and pleasure.”
“So 2011 promises to be just as busy a year as the one we have just seen – and, if all goes to plan, then it could be more exciting than 2010.
Join us February 17 when Clive Sinclair-Poulton addresses the Proactive Investors One2One forum.