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URU Metals chief Zorbas thinking big


URU Metals’  chief executive, John Zorbas, can’t be faulted for thinking big – even if the market value of the company he runs is anything but.


Quick facts: URU Metals Ltd

Price: 225 GBX

Market: AIM
Market Cap: £1.76 m

URU Metals’ (LON:URU) chief executive, John Zorbas, can’t be faulted for thinking big – even if the market value of the company he runs is anything but.

Don’t let that fool you; if Zorbas and chairman David Subotic enact the transformation planned, URU will grow; probably exponentially.

It has two lead projects: a giant nickel deposit in South Africa and oil shale acreage in Sweden that also contains uranium.

It recently raised just over £800,000 that will help it develop the Zebediela nickel asset in South Africa’s mining-focused Limpopo Province.

At 1.5bn of indicated and inferred resources, the deposit is shaping up to be a world-class asset.

If this low-grade, high tonnage operation was in production today at the 25,000 tonnes of nickel a year forecast in the preliminary economic assessment it would be the world’s 12th largest mine.

There are 485mln tonnes at 0.245% nickel in the higher-confidence indicated category and 1.15bn at 0.248% ‘inferred’.

The project is plugged in to extensive infrastructure and the firm’s preliminary economic assessment (PEA) suggests it would be in the lower quartile of producers.

That report, prepared by MSA Group, also revealed the capital costs of developing an open pit would be around US$700mln and, importantly, assigned a net present value to Zebediela of US$1bn.

The figure was compiled without adding in the benefit from sales of magnetite iron concentrate that would be created as a by-product, or the platinum that lies beneath the planned open pit.

And then there is nearby Burgersfort Project, which has the potential to be the twin site to Zebediela.

The cash that was recently raised will be used to “upgrade the [Zebediela] resource, expand the open-pit and conduct more work on the magnetite concentrate”, reveals Zorbas.

He is bullish on the potential for the project and the nickel market in particular. 

Prices are on the rise, having jumped from US$14,000 a tonne to above US$20,000 since the start of the year.

The ban on exports of unprocessed ore by Indonesia has been at least a partial catalyst for that spike, while the world’s largest producer, Norlisk, is likely to be hit by trade sanctions aimed at Russia.

Zorbas certainly doesn’t see the market getting any easier as Indonesia is unlikely to repeal the embargo quickly, which points to further increases in the value of the metal.

“We believe the current nickel price is still low. We are looking at prices creeping towards $25,000 to $30,000 [a tonne],” he says.

The capital costs are not prohibitive for a nickel mine, the processes outlined in the PEA are “easy and straightforward” and Zebediela’s strategic importance should not be overlooked.

Its sale to one of the current top ten producers would utterly transform their standing in the pecking order.

“This is a very enticing project and when we last had prices where they were today assets like this sold for $200-$500mln,” observes chairman Subotic.

The preferred route would be a sale, Zorbas reveals; however, he and his chairman aren’t afraid to take Zebediela into production.

They had offers, when URU owned 50% of the deposit rather than the 100% they have now, to fund it to production.

And in other fields, notably building the US$700mln Ho Tram beachside hotel and casino in Vietnam, Subotic and Zorbas have successfully raised the quantum of debt required to see a project through to completion.

“We are focused on the operations of the company and increasing the value of the asset. That will include increasing the awareness of the asset,” Zorbas reveals.

“People might think we are out of our minds [developing these assets], but we’ve had experience of doing this: taking a project, adding value.”

Those who’ve followed the history of Zebediela will know there was a dispute with company’s original black empowerment partner, which has since gone on to become a URU shareholder. 

The “issues have been dealt with”, says Zorbas, who is now looking for a new local collaborator.

Moving north from South Africa, the AIM listed mining exploration specialist has a second potential company-maker in its Narke shale oil acreage in Sweden, which is also host to one of the world largest unproven uranium deposits.

It produced oil in the 1940s and ‘50s, but closed when a fall in the price of oil rendered it uneconomic.

It is known to contain 500mln barrels of crude and there may even be gas – although this has yet to be confirmed.

The plan is to drill Narke to amass perhaps 1bn barrels resource before selling it on to a company with the deep pockets required to exploit this sort of oil discovery.

Zorbas said Narke isn’t technically challenging, but will require significant capital expenditure to maximise its returns.

That said, at a cost of around US$2 a barrel, it will still be one of the most economic field developments in the world.

“If we could increase the resource to 1bn barrels this would be a game changer,” says Zorbas.

“We would look to sell it in the ground per barrel with very good economics. RBC is giving values of 80c for oil shale in the ground.

“We would like to sell it, retain a royalty and keep the uranium rich by-product.”

The Finnish nickel producer Talvivaara has enjoyed great success in turning by-product from its mine into a sought after uranium concentrate.

The projected capital costs of such an operation would be far less prohibitive than developing the oil shale at possibly less than US$100mln. 

With two highly prospective, potentially world-class projects on its books, one would expect the company’s market capitalisation to be significantly more than £3mln.

But this is reality for a company that has done little to date to market itself or its assets – and this lowly valuation presents a huge opportunity for those with an appetite for risk.

Zorbas says “awareness and openness will be the catalysts” that increase URU’s worth. 

“In the ideal world David and I would like to do is develop the nickel asset, have someone buy it from us,” adds Zorbas, sticking to that pledge to be open. 

“We would then do a dividend to shareholders while keeping sufficient in the company to develop Narke further.

“The plan then would be to sell the oil shale, pay another dividend and keep the uranium as ongoing dividend play. This is the five year plan and we’d love to do that.”

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