Resource exploration plays are off the radar for many investors at the moment. Nonetheless there does appear to be some value in unloved assets with a competent management team. With this remit in mind Shard have been keeping an eye on Galileo Resources PLC (LON:GLR) since their small fundraise at 1.2p in early August.
Current financing problems present opportunities for companies such as Galileo. To which end they acquired 100% of St. Vincent Minerals, a Canadian based company which owns five highly prospective gold/copper properties in the state of Nevada, USA. Nevada provides mining friendly legislation and taxation with plenty of evidence of underlying geology for porphyry systems. The data packages that come with the acquisition are reliable having been the result of work carried out by major mining companies.
The priority development target for the company is the ‘Gabbs’ project which has some 4 million ounces of gold equivalent at international resource regulatory level. The resources are open-pittable so any mining costs are projected to be low. Other complimentary exploration projects of high potential are contained in the St. Vincent portfolio. One such project, Ferber, has been receiving attention with its significant position close to the Kingsley Mountain project with similar geology, where several targets have been discovered. Nevada is attracting attention from some mining majors and these targets bear resemblance to Newmont Mining’s Long Canyon project, which they recently paid $2.3bn for. Major mining companies claim ownership to the North and East of Galileo’s Ferber claims.
Galileo’s rare earth project in the Limpopo Province in South Africa adds to their assets and they benefit from a strong local partner with some of the resources in surface stockpiles.
Colin Bird, Chief Executive Officer and Chairman, has floated several companies in the mining sector and his experience should be invaluable to Galileo. Notably he was on the board of Kiwara Plc which was successfully sold to First Quantum Plc in February 2010 valued at $260.2m. He also serves as Non-executive Chairman of Jubilee Platinum, an AIM listed platinum exploration company with operations in South Africa and Xtract Resources, a gold and copper exploration and development company with projects in Chile and South Africa. Both of these have attracted attention from the investing community following recent news flow.
Investment in small exploration companies is high risk with a number of specific risks that must be considered. Shard notes that Galileo has a tiny market cap and as with many small cap explorers has witnessed apathy from investors recently. The projects are interesting with Galileo’s strategy to advance all of them to a point where significant value add is recognised. From this low valuation it would not take too much positive news to excite investors. Shard looks forward to further news flow.
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