Is there a mining bear market?
Not if you’re Alien Metals (LON:UFO) there’s not.
In the space of just a couple of months Alien has managed to cut two deals for the acquisition of sizeable iron ore and silver assets in Australia, and put the lie to any notion that the mining sector in London is dead on its feet and unable to do deals.
That these deals are in Australia, where the sector is somewhat more lively that it is in London at the moment, tells only half the story.
The other half is that new backers with access to new money have arrived on the scene, they’ve installed new management, and most importantly of all, have injected a new sense of energy and purpose to a company that earlier this year was as hidebound as most of the rest of the London junior exploration scene.
What’s more, the latest acquisition, the Elizabeth Hill silver mine in Western Australia, a former producer that, according to broker First Equity, now represents Alien’s most advanced asset.
The broker reckons the market hasn’t fully woken up to how far along Elizabeth Hill really is. Yes, it requires more exploration and evaluation work.
But equally, everything is already in place, and some of the grades that have been encountered historically have been off the chart - almost literally since the native silver unearthed by Legend Mining (ASX:LEG) essentially rang in at 100%.
One nugget, found in 2000, weighed in at an astonishing 180 kilogrammes.
A total of 50,000 metres of historical drilling undertaken by previous owners including Legend is now being assessed as part of the Alien due diligence process. In addition, exploration potential remains outside areas that have previously been drilled, both at depth and to the east and west.
So what’s it going to cost Alien to get in on this action?
The answer, in simple terms is A$322,000 in a combination of shares and warrants, plus the provision of an 8% A$120,000 loan. It’s attractive enough in its own right, yes. But consider the underlying dynamic here.
This is Alien’s second all-share transaction since the summer. In the acquisition of Elizabeth Hill, the Hancock Ranges and the Brockman projects, no cash changed hands whatsoever, with a mere £100,000 due out next year for the iron ore.
And it’s not just some hoary old prospector who understands nothing about markets that’s taking these shares. Tony Sage, the well-known mining entrepreneur and model agency owner, is involved with the seller of Elizabeth Hill, Karratha Metals Group.
And if he’s hitching a ride with Alien, then it’s a sure bet that things are likely to stay interesting for a good while yet.