AIM Resources Now Has Three Projects In Africa With The Perkoa Zinc Project Well Advanced
By Rob Davies
Africa is the focus of all AIM Resources’ activities and, judging by the share price this year, is being rewarded by the market. After spending a lot of time trading at around 2p a share up until February this year it moved up as high as 7p before settling back to around 5p after recent turbulence. This was after raising £2.4m at 4p in March. So what does the £36million market capitalisation of this company buy you after netting out the £3.3million in cash?
Without doubt the biggest goodie in the cupboard is the Perkoa zinc project in Burkina Faso. This country is the sort of place that might appeal to Michael Palin but may not be top of every mining investors list. But miners have to go to where the metals are and this project qualifies in a big way in that regard. A proved and probable reserve of 6.27million tonnes at a grade of 14.5% zinc based on a 9% zinc cut-off means it contains 907,000 tonnes of zinc. That suddenly makes it a whole lot more interesting.
Even better is that AIM owns 100 per cent. AIM Resources already has a bankable feasibility study from Snowdon Mining Consultants and that calculated that the in-ground metal value was US$1,540million giving a net present value of US$148million. But that was worked out in December last year at a zinc price of US$1,815 a tonne. Do the same exercise using a zinc price of US$ 3,359.5/tonne and those numbers rise to US$2,850million and US$405million respectively. It is therefore not surprising that AIM is in discussions with Barclays Capital on debt financing and Seymour Pierce on the equity component of the US$72.5 million establishment cost of this project.
Next on the list is the Mumbwa copper deposit in Zambia. This joint venture with BHP Billiton in which AIM is earning 70 per cent by spending US$1.2million over six months is at a very early stage. It has yet to be drilled so there are no resource estimates. That said, the 5,200 square kilometres it holds within the Central Province does look encouraging because BHP Billiton recognised the potential for an Olympic Dam/Ernest Henry type iron-copper-gold deposit in the clastic and carbonate sediments of the Kundelungu formation which is underlain in the west by a granitic batholith. Diamond drilling in 1998 did encounter low grade copper-gold bearing magnetite-pyrite breccias. AIM has already flown nearly 9,000 kilometres of geophysical survey and is currently examining the gravity, magnetic and radiometric data to define drill targets with a view to drilling 5,500 metres starting this month
Lastly in South Africa AIM owns the Mokopane nickel-platinum project that lies on the northern rim of the Bushveld Igneous Complex. The JORC compliant inferred resource is 39.7million tonnes at 0.146% nickel, 0.085% copper, 0.22 g/t platinum and 0.33 g/t palladium. The last time this resource was assessed it was sub-economic but metal prices are a lot higher now and the story could well be different, especially if the remaining territory yielded good news. Now that ministerial consent has been achieved exploration of the remaining areas is expected to start soon.
Charles Kernot at brokers Seymour Pierce has recently published a major research note on the company which puts a value of 16p on the shares, but sees scope for a further rise to between 24p and 27p as it approaches production. Moreover, if it were in production in today’s market – and this weighty tome was completed just before the recent setback –the share price could be much higher using a peer-group comparison. In the meantime an announcement can be expected on offtake purchase agreements at Perkoa (potentially with associated offers of debt) over the next few months. With three projects all receiving a lot of attention there ought to a reasonable amount of news flow over the next few months and that should maintain the interest in this company over the summer.
AIM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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