Average 19% YTD Gain in Key Mining Stocks

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SGX lists four stocks mining industrial minerals including tantalite, phosphate, limestone and marble, four coal mining stocks and three gold mining stocks. These 11 stocks are at different stages in the exploration, development, production cycle and have averaged a 19.0% gain in 2017 YTD.

Of the three segments, mining industrial minerals has been the strongest performer in the 2017 YTD with an average 30.4% gain, led Alliance Minerals Assets. Coal was the next best performer with the four stocks averaging a 20.0% YTD gain. The trio of Gold miners averaged a 2.6% gain in the YTD.

In each of the three Mining segments, the largest capitalised stocks are Alliance Minerals Assets – mining tantalite and lithium in Western Australia, Golden Energy and Resources – mining thermal coal in Indonesia, CNMC Goldmine Holdings – mining gold in Malaysia.

11 SGX listed companies in the exploration of Coal, Gold and Industrial Minerals

The minerals industry operates globally and every country has some form of minerals industry activity. Some countries, such as China, are endowed with a diverse range of mineral commodities, while some countries, such as Singapore, have a very limited endowment and are dependent on other countries.

However, due to its competitive business environment with world class infrastructure, quality regulation and connection to 600 ports in 120 countries, over 70% of top metals & mining companies have a presence in Singapore, which has also become a clearing centre for over 90% of globally-traded iron ore swaps.

SGX also lists 11 companies that are involved in the exploration of minerals – specifically coal, gold and industrial minerals, specifically tantalite, phosphate, limestone and marble.

Industrial minerals have been the strongest performing segment in 2017, with average gains of 30.4%, led by tantalite and lithium miner Alliance Minerals Assets which gained 109.6%. Coal was the next best performer with the four stocks averaging a 20.0% gain in the year thus far. The trio of Gold miners averaged a 2.6% gain over the period. For more details on the 11 mining stocks in SGX StockFacts click on the stock names below.

Name SGX Code Mkt Cap S$M Total Return YTD % Total Return 12M % EV/EBITDA T12M Mineral
Anchor Resources Corp* 43E 32 11 N/A N/A Gold
CNMC Goldmine Holdings * 5TP 163 -9.2 80.7 5.3 Gold
Wilton Resources * 5F7 168 6.1 20.7 N/A Gold
BlackGold Natural Resources * 41H 79 82.4 126.8 N/A Thermal Coal
Geo Energy Resources RE4 333 22.2 121.8 5.2 Thermal Coal
Golden Energy and Resources AUE 1224 8.5 -36.3 5 Thermal Coal
Resources Prima 5MM 44 -33.3 -55.6 4 Thermal Coal
Alliance Minerals Assets * 40F 95 109.9 101.1 N/A Tantalite
AsiaPhos * 5WV 88 -9.4 -22.3 35.4 Phosphate
GCCP Resources* 41T 55 9.3 -68.7 N/A Lime Stone
Terratech 40I 33 11.6 9.1 N/A Marble
Average 19.0 27.7

Source: SGX, Bloomberg & SGX StockFacts (data as of 9 March 2017)* Listed on Catalist

SGX also lists a number of stocks involved in mining through the operation of diversified businesses. Examples include Abterra, China Mining International, Magnus Energy, Malaysia Smelting Corp and Sincap.

Mining Value Chain – Exploration to Production

Exploration

These 11 stocks tabled above are at different stages in the exploration, development, production cycle. The mining process begins with exploration, with the objective of continuing into development, production and eventual mine completion. Mining exploration and production companies may undergo long periods of time without economic realisation, and may return to the market for several rounds of fund raising for further project development. Hence, a specific risk for these companies are that they may not progress to the next stage of development or to a stage where they are able to generate revenue.

Discovery

Once a mining company discovers a new mineral deposit, the next step is to quantify the amount and quality of the mineral in order to assess if it can be profitably extracted. Such feasibility studies can be conducted by an independent qualified person report. Typically these reports will include the technical basis on which statements of reserves, resources or exploration results are made. Mineral deposits can be classified as either resources (potentially valuable, with reasonable prospects for eventual economic extraction) or reserves (valuable, legal and can be economically extracted).

The SGX Listing Rules for Mining plays recognise international best practices in reporting standards – specifically JORC and NI43-101. Investors can find examples of such reports lodged by mining companies with Annual Reports on the SGX Corporate Announcements page here.

Production

Once in the development and production phase, the mining company will seek to maximise commercial opportunities by establishing contracts to supply downstream companies with their minerals. The profitability of the mining producer is a function of the difference between revenue and costs. Mining companies have no control over the prices they receive, hence their performance at this stage of the mining phase can be highly cyclical and in line with the underlying price of the relevant mineral(s).

Consequently, many mining companies have little control over the revenue they receive – they are “price takers”. At the same time the management of these mining companies can explore for new deposits, seek to increase their reserves resources, reduce costs, and pursue mergers and acquisitions.

Segment Leaders

 In each of the three Mining segments, the largest capitalised stocks are Alliance Minerals Assets – mining tantalite and lithium in Western Australia, Golden Energy and Resources – mining thermal coal in Indonesia, CNMC Goldmine Holdings – mining gold in Malaysia.

Alliance Mineral Assets

Alliance Mineral Assets is a mining company headquartered in Perth, Western Australia. The company’s major asset is the Bald Hill Project which covers an area of 59,000 hectares and comprises of four mining leases, eight prospecting licenses, eight exploration licenses, a general purpose license, a retention license and other miscellaneous licenses.

In its recent quarterly reporting, Alliance Mineral Assets (click here) reported:

  • No revenue in 2Q FY2017 as it had not commenced the commercial production and sale of Tantalite concentrate.
  • Tantalum Concentrate spot prices still remain depressed and consequently, the company has decided to postpone commercial mining and production of tantalum and is seeking opportunities to expand into other commodities and not be just a “tantalite producing” operation.
  • Out of the various minerals inherent in their ore, lithium has been the most outstanding mineral with lithium prices increasing exponentially compared to other commodity prices. Lithium prices still remain strong with a number of companies progressing with the development and construction of new lithium mines.

Alliance’s Joint Venture partner has completed 193 Resource RC drill holes since December 28, 2016. Drilling has found numerous high grade Lithium and Tantalum intercepts, including clearly defined near surface spodumene pegmatites, which are rocks that contain a mineral type of lithium, located 800m from process plant site.  A feasibility study scheduled for completion within 5 weeks with the aim of commissioning of the spodumene concentrator in October 2017.  More details can be found here.

Golden Energy and Resources

Golden Energy and Resources which owns 67% of PT Golden Energy Mines Tbk was formed through the a Reverse Takeover (RTO) of SGX Mainboard-listed United Fiber System. The opening price of the shares was S$0.71, following on from a S$0.67 per share placement to institutional investors.

Golden Energy and Resources is principally engaged in the exploration, mining, and marketing of thermal coal sourced from its coal mining concession areas, covering an aggregate of approximately 38,165 hectares in South Kalimantan, Central Kalimantan and Jambi (a province in Sumatra), Indonesia.

Golden Energy and Resources FY2016 results were as follows:

  • The company’s revenue was USD 393.3 million compared with USD 359.8 million a year ago. The increase in revenue was backed by higher sales volume in the Group’s Coal Mining Division, which recorded a 9.7% increase in revenue for the segment to USD 329.5 million from USD 300.4 million in fiscal year 2015.
  • Profit attributable to owners of the company was USD 21.8 million or 0.42 cents per basic and diluted share compared with loss of USD 9.4 million or 0.22 cents per basic and diluted share a year ago.
  • In its outlook, Management noted it continues to maintain a positive outlook for its coal business in view of expectations of a supply shortfall due to strong demand for thermal coal among Asia’s emerging markets such as India.

CNMC Goldmine Holdings

CNMC Goldmine is principally engaged in the business of exploration, mining of gold and the processing of mined ore into gold dores. The Group is currently focused on the development of its flagship project – the Sokor Gold Field Project which is located in the State of Kelantan, Malaysia. CNMC Goldmine reported FY2016 profit attributable to owners of the company was US$9.1 million against US$10.6 million a year ago.

In its 2017 outlook (click here), CNMC Goldmine Continue note priorities included:

  • Expanding production by increasing leaching capacity and enhance gold recovery process with the aim of increasing gold production;
  • Minimising cost by further streamlining production processes and leverage economies of scale from increased production capacity to lower material costs from key suppliers;
  • Accelerate Exploration by increasing gold resources and reserves (as well as silver, lead and zinc resources and reserves) at Sokor; and
  • Expand Portfolio by exploring opportunities to acquire and develop other mines in Malaysia, other parts of Southeast Asia and Australasia.

 Three of the 11 stocks have traded at 12 month highs in 2017

Three of the 11 stocks have traded at 12 month highs in 2017 – Alliance Minerals Asset, BlackGold Natural Resources and Geo Energy Resources. To see more details on each mining stock in SGX StockFacts click on the stock names below.

Name SGX Code Price S$ 12M High S$ 12M Low S$ 12M High Date 12M Low

Date

Alliance Minerals Assets* 40F 0.191 0.215 0.057 03/02/2017 05/16/2016
Anchor Resources Corp* 43E 0.101 0.199 0.083 03/18/2016 04/08/2016
AsiaPhos* 5WV 0.091 0.109 0.072 03/10/2016 10/27/2016
BlackGold Natural Resources* 41H 0.093 0.127 0.023 03/03/2017 07/15/2016
CNMC Goldmine Holdings* 5TP 0.395 0.610 0.205 07/07/2016 03/28/2016
GCCP* 41T 0.047 0.149 0.041 03/10/2016 12/20/2016
Geo Energy Resources RE4 0.275 0.305 0.090 02/23/2017 08/03/2016
Golden Energy and Resources AUE 0.510 0.830 0.395 12/12/2016 12/15/2016
Resources Prima 5MM 0.024 0.063 0.023 04/04/2016 05/10/2016
Terratech 40I 0.048 0.057 0.032 03/29/2016 08/02/2016
Wilton Resources* 5F7 0.070 0.126 0.046 07/11/2016 04/25/2016

Source: SGX, Bloomberg & SGX StockFacts (data as of 9 March 2017) * Listed on Catalist

As noted in the Investor’s Guide to the Minerals Industry (click here), the key sources of risk and reward are exploration, technical, financial, environmental, social, political, and sovereign issues.


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