FinnAust Mining - Pituffik – ‘the place where they tie their boats’
​FinnAust Mining (FAM LN) 7p, Mkt Cap £35m - Pituffik – ‘the place where they tie their boats’
BUY Target Price 15p
Today we publish a 34 page note on FinnAust Mining, see pdf for full note
FinnAust Mining is advancing toward mining titanium rich, ilmenite mineral sands at its 60% owned Pituffik mineral sands project on the coast of Greenland. The company also has other base metal and mineral licenses in Finland and Greenland which it is evaluating with the support of its major shareholder, Western Areas.
The nature of Pituffik deposit is very different from other mineral sands deposits and experts suggest Pituffik titanium mineral sands grades may rank among world’s highest. Pituffik’s mineralogy is much simpler and the deposit is seen as unusually consistent.
Tonnage, consistency and metallurgical evaluation should help confirm potential value of the in-situ deposit. Quality of mineral sands concentrates is critical with Pituffik appearing suitable for sulphate production. Processing, as with all ilmenite, is required to reduce impurities to acceptable levels.
Simple removal of silicates improves the ilmenite product and optimisation of the process route will further improve the product. A major bulk sample is planned with which to prepare samples for testing by consumers.
Royal IHC, the Dutch dredging company, is supporting work on the dredging of shallow and near shore marine mineral sands. The support of such a major dredging company is a major positive for the company.
Demand for ilmenite concentrates should continue to rise as cost and pollution causes China to cut production of titanium from titano-magnetite iron ores.
Avannaa acquisition gives the FinnAust team more to look at in Greenland and option value over some potentially large exploration projects.
Valuation on 100% of Pituffik: We value the project at an IRR of 43% and a $144m NPV on an 8% discount rate. This give us an NPV per share of 19 pence.
Assumptions: Ilmenite production 332,500tpa. Ilmenite price $130/t less a 10% discount reducing the price to $117/t. Shipping $40/t (>$10/t to Canada). Mining and processing $15/t. Capital cost $60m, though preliminary estimates are significantly lower. Royalty rate 2.5%. Corporate tax 30% starting in year 4.
Climate: The project is located in the high Arctic limiting mining to between 3-5 months per year. The project will be subject to campaign mining through the summer. The ground is subject to permafrost with the top meter or so thawing through the summer months hence the preference for dredge mining.
Location: Greenland should offer relatively simple extraction site with no community to move and relatively few environmental issues. Work continues with the support from Greenland government agencies.
Its near-shore, shallow-marine location on the West coast of Greenland means temperatures fall to a relatively mild -29C for the Arctic through January and February. Ilmenite mineral sands should not freeze below sea ice.
Bluejay Mining is engaged in the exploration and development of precious and base metals. Co. makes investments and/or acquires projects in the natural resources and mineral sectors as a whole. The principle activity of Co. is to implement its mineral exploration strategy to advance projects towards defining a sufficient in-situ mineral resource to support a feasibility study towards mine development and production.
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