bcf equities report

Thor Mining PLC THR
The cheapest tungsten/molybdenum stock in the market

Trading Data
Share Price 11.5c
12 Mth High/Low 9c-42.5c
Market Cap’n $17.3m
Issued Shares 150 mill. ordinary
Listed Warrants 65 mill. 15/6/09, 8p
Other Warrants 22mill. various
Cash Balance $3.3m (31/3/08)
Largest Shareholder Western Desert 17.7%
Top 20 44%
Investment Perspective
The introduction of a new controlling shareholding group with
mining and related industrial experience opens a new chapter
for THR. It should now be seen as a more focused company
intent on developing, rather than promoting, one of the more
attractive molybdenum/tungsten projects in Australia. It is more
than twice the size of Queensland Ore’s modest operation, but
not so large as to be capital expenditure intimidating, as is the
case with Moly Mines’ Sphinfex Ridge project.
The market doesn’t seem to have appreciated the corporate
changes and financing plans yet, with the result being that the
shares are still trading around the depressed levels emanating
from the bear market in the first few months of the year. We
see room for considerable upwards movement in the near term.
THR shares are selling at half the price that we think would be
reasonable at this juncture, with room to appreciate even further
as project finance and development become more visual.
The Tungsten/Moly Sector
We have been following the sector closely for the last two
years, providing comparative analysis of the sector on an
intermittent basis. Not much has happened since our last
review in October 2007, apart from the volatility in the equity
markets making it more difficult to raise equity funds. The
largest casualty of this was Moly Mines, which has had to defer
it capital raising plans for the +$1bn Spinifex Ridge project.
Heemskirk has been commissioning its project in Spain and
the 85%-owner of the most advanced Australian project
at Wolfram Camp, Queensland Ores, has had to undertake
a sizeable $12m placement, at the very low price of 12¢,
to cover a shortfall in finances as it approaches the
commissioning phase over the next month or two.
Vital Metals has continued with good exploration success as it
is progressing with a project that could supply up to 5% of the
world market for tungsten.
A company that has always looked attractive on the
spreadsheet is Thor Mining, with the Molyhil mine in the
Northern Territory. Given that its shares are still near the lows it
is appropriate to have a quick look to assess the relative value.
Corporate Changes at Thor Mining
There has been a changing of the guard at Thor. Both Mark
Smyth and John Barr have resigned from the board and sold
down their holdings. Western Desert Resources Ltd (“WDR”)
has acquired a 16.7% stake and it has appointed three
directors to the board. The acquisition comprised a placement
of 9 mill. shares at 8¢ in April, injecting $720,000, and a
purchase of 6 mill. shares from retiring directors. WDR and
associates lodged a substantial shareholder notice on 6th
May, disclosing a 17.7% interest.
The new directors are Mick Billings, Norman Gardner and
Michael Ashton. All have previous management experience
in mining operations. John Young continues in his position as
Managing Director.
Molyhil Project Description
The Molyhil tungsten-molybdenum project is located in the
Northern Territory, about 200 km ENE of Alice Springs. The
leases cover the same orebody that was mined in the early
1980s by Nicron(Petrocarb), but that company operated with
limited capital budgets and it never really got into large scale
production.
Molyhil has a open pittable JORC compliant measured and
indicated mining reserve of 2.15 mill. tonnes of 0.47% WO3
and 0.21% MoS2 from a 3.7 mill. tonnes resource base.
There is a two-stage open pit mining plan covering a 5.7 year
mine life, with potential for underground extensions below the
planned 155m depth of the pit.
The 400,000 tpa treatment plant and infrastructure is
estimated to cost $65m and operating costs are estimated
at $78 pt. Using net prices of A$203/mtu, which is a discount
on the quoted tungsten ATP price of US$240/mtu, and
molybdenum at A$33/lb, which is a discount on the current
US$32/lb, THR would generate revenue of $147 pt,
amounting a healthy $54 pt margin