What does the company do?
Alien Metals Ltd (LON:UFO) is a mining project generator, which plans to create value for shareholders by identifying and acquiring assets in the base and precious metals space and then adding value and selling them on or joint venturing them out.
What does the company own?
The portfolio includes significant legacy assets from the company’s former life, in the days when it was known as Arian Silver. The assets in Mexico have significant potential, high grade, and are located in well-known mining districts adjacent to some major names in silver mining.
The company also has an interest in two iron ore projects in Australia, which look highly prospective for DSO.
Recent share price strength
The shares in Alien Metals Ltd (LON:UFO) soared by nearly 30% in morning trade on 12 November after the company announced that iron ore grades at two properties it has under option in Australia look likely to support at direct shipping ore (DSO) operation.
Mining industry professionals will know that DSO can be at a premium in the iron ore space, especially for juniors, since it means rock can be mined and shipped directly without any processing, thus saving on potentially huge investment in processing plant and equipment.
Grades taken in sampling as part of an ongoing due diligence process at Alien’s Brockman and Hancock Ranges projects have returned higher than 60% in several cases, and higher than 65% in one case.
It’s all the more significant because of the location of these projects in Australia, right in the heart of a prolific mining district, and not too far away from the famous mining export hub of Port Hedland.
With all that in mind it’s not hard to speculate that the ore from Brockman and Hancock’s Ranges might easily be extracted, trucked to port and exported straight to China, a country which takes a huge amount of Australian iron ore.
What the broker says
Broker First Equity was quick to comment on the news, rating the company a “buy” and arguing that the £2mln market cap didn’t do justice to the potential on offer both from the Australian iron ore and from the company’s portfolio of precious and base metals projects in Mexico.
The broker identified the projects as being in “rich target areas”, given that they are surrounded by major iron-ore deposits or mines, along with infrastructure, which includes blue chip international mining majors BHP Billiton and Rio Tinto, along with Australian iron ore producers Fortescue Metals Group and Hancock Prospecting Pty Ltd.
“In our opinion, one of the key highlights from today, is the high grades obtained from three samples on the ‘Sirius Extension’ prospect in the ‘Hancock Ranges’ project,” said the broker.
“The prospect is on strike with Brockman Mining’s Sirius deposit, upon which a JORC resource of 124mt tonnes at 60.32% iron ore is defined, 85% of which is delineated in the ‘Indicated’ category. Drilling work undertaken by Volta Mining Limited in 2013 confirmed an economic strike extension to the Sirius deposit, and two areas of potential high-grade iron ore mineralisation at both the ‘Sirius Extension’ and ‘Kalgan’ prospects.
Along with the impending prospect of news-flow from a project decision in Western Australia, we also await further exploration results from Alien’s extensive portfolio of silver and gold prospective projects in Mexico, and possible news of JV deals.
The current modest market cap of around £2m does not reflect the expanding story and target rich environment of these licences, which are now a lot nearer to becoming Alien Metal flagship projects. To this end, we recommend the shares as a ‘Buy’.