Regency Mines is a mineral exploration & development company focused on the exploration of copper and nickel in Western Australia, Queensland and Papua New Guinea. The company has just announced an increased JORC-compliant mineral resource estimate for the Mambare nickel-cobalt project in Papua New Guinea of 162.5 million tonnes grading 0.94% nickel and 0.09% cobalt which equates to 1.53 million tonnes of contained nickel at a 0.60% nickel cut-off grade. This represents a 67% increase in contained nickel compared to the April 2012 estimate.
Ian Warden, the Mambare Project manager, commented that, “These latest results are exciting. Not only do they build the Mambare Project towards its potential to be a nickel laterite of world-class scale, the higher grade zones identified have very positive implications for the economics of a future Mambare operation."
"The continuity of mineralisation delineated in the 2008 and 2011 drill areas shows that the laterite mineralisation consistently blankets the underlying ultramafic bedrock, where not eroded by local drainage. The same ultramafic bedrock extends across the whole tenement area. Given the current resource lies mostly on the steeper and more eroded slopes below the plateau, we expect to find similar or better continuity of mineralisation in future drilling across the plateau surface. The increased Mineral Resource Estimate, and the recent construction completion of Direct Nickel's Stage 1 Test Plant in Perth, which will test a bulk sample from Mambare, are important milestones on the path to bringing Mambare towards development”.
Work is continuing to address future resource definition work together with metallurgical testing and scoping studies.
Regency Mines was conceived as a mineral exploration vehicle with mining finance expertise so that value could be added not just through exploration but also by deal making to allow this created value to be crystallised. Earlier last year the formalities concerning the setting up of a joint-venture between Regency and Direct Nickel Pty Ltd (DNi) were completed. The JV holds the Mambare project and a licence to the DNi nickel treatment technology. The board believes that this technology has the ability to transform the nickel market as it makes more economic the processing of laterite nickel ores.
Regency is also a substantial shareholder in DNi, which is planning to list on the ASX when market conditions allow, a move which would allow DNi to develop more rapidly. In the interims Andrew Bell, Executive Chairman, reconfirmed his belief that 2012 will be a transformational period for Regency commenting that, “…The transformation is well underway.”
To unlock the value at Mambare requires that the Company is able to extract nickel cost effectively. In this respect management is leaving nothing to chance by taking a key stake in Direct Nickel Limited (DNi) and recruiting DNi to become their joint-venture partner in this project, as a possible alternative to conventional processing. The Company believes conventional processing is also potentially an option.
Regency has announced preliminary leach results, using material from the drill samples. Test number 387 from the middle of the minerailsed profile, gave excellent nickel and cobalt extraction of 99.1% and 98.0% from the standard DNi atmospheric leaching test run over five hours. Test number 390 was based on a high iron, low magnesium sample with high cobalt value at 0.23% from the upper limonitic portion of the mineralised laterite profile extracted 92.2% nickel with the majority being leached in the first two hours.
The Mambare nickel-cobalt project looks to be a world class asset. The project is a tropical laterite deposit and forms the 20 kilometre long by 5-7 kilometre wide Mambare Plateau, which rises prominently from the surrounding land. Work by Regency had estimated that this plateau has the potential for 4.75 million tonnes of nickel and 200,000 tonnes of cobalt, but the large resource defined from 28 sq km of drilling that included only 2 sq km of the 80 sq km plateau means that this estimate could prove conservative. The JORC resource announcement may to be the catalyst towards this joint-venture seeking to fund independently, either by listing or by private fundraising.
The recent drilling programme produced the following impressive results. Results from the Plateau (Area 1) and the North Ridge Extension (Area 2) revealed thickness including 20.4 metres at 0.87% Nickel, 0.17% Cobalt from 6.60 metre depth (MAM-KK-0055, Area 1) and 23.35 metres at 1.10% nickel, 0.04% Cobalt from 4.05 metre depth (MAM-KK-0040, Area 2). So the latest results show good thicknesses and grades from both the Plateau and the North Ridge Extension with nickel grades in excess of 1% found in 27 out of the first 32 holes reported so far from a 200-hole program. What is so exciting is that the Plateau area which measures 5 kilometres by 16 kilometres has never been previously drilled. Past exploration had been focused on the North Ridge Extension (Area 2) zone and on the lower southern slopes of the Plateau in 2008 where access is easier. So these results confirm the potential for significant grade and tonnage of the Plateau (Area 1) zone at Mambare as well as at Area 2 which really seems to confirm the potential.
In better market conditions, Regency Mines Australasia looks all set to become a base metal exploration vehicle that could soon be floated under its own identity. The team has made a significant discovery in West Australia (WA) of high grade sulphide, which is also intersected by a high grade Titanium zone. This merits further investigation, as do the geophysical results indicative of extensive graphite potential around a historic high grade graphite mine in Western Australia.
Their geologists could well be opening up a new copper region in Queensland, where Bundarra has been known about for a couple of centuries and it has been the site of several small copper mines. But for the first time Regency has united all the licences. Bundara has been neglected but it is certainly a copper target worth looking at especially using new exploration techniques that are already beginning to hint at the potential that may exist here. Good progress from exploration at Bundarra coupled with and a beefing up the team on the ground down under has created a structure which could allow for Regency Mines Australasia to be spun-off into its own quote.
Sum of the parts valuation of Regency Mines
Interest | Valuation | Per share |
| Mambare nickel/cobalt joint venture project Using an Enterprise Value of £13.68 per tonne JORC-compliant nickel (based on peer comparison with Toledo Mining) and a value of A$25m assigned for the DNi technology in the joint venture company | £18.4m | 2.78p |
| Red Rock Resources Holding 145.755 million shares @ 2.05p | £3.0m | 0.45p |
| Regency Mines Australia Peer comparison with ASX-listed Sirius Resources | £6.1m | 0.92p |
| Direct Nickel Total investment A$6.5m/1.56 | £4.2m | 0.63p |
| Oracle Coalfields 23.600 million shares @ 4p | £0.9m | 0.13p |
| Alba Mineral Resources 17.934 million shares @ 0.50p | £0.1m | 0.02p |
Total | £32.7m | 4.93p |
Source: Growth Equities & Company Research
Regency was created with a twin strategy of being a mining and mining technology finance house alongside its exploration activities. Very early in its history, the firm floated off Red Rock Resources, which has tended to hog the limelight. In well-timed acquisitions and deal making Regency's iron ore interests were spun-off into Red Rock, where the company continues to hold a substantial stake. These iron ore projects are now part of ASX-listed Jupiter Mines Limited (JML), which is being developed into a steel feed business by Pallinghurst Resources - the investment vehicle of ex-BHP CEO Brian Gilbertson. We have employed a sum-of-the-parts valuation to determine a valuation for the company. Our sum-or-the-parts valuation is £32.7 million, which equates to a target price of 4.9p (based on 663.08 million shares). Our recommendation is a Speculative Buy at 1.8p, with a target price of 4.9p.
Financial records & forecast table
Year to 30th June | Sales (£000) | Pre-tax Profit (£000) | Earnings per share (p) | Price Earnings Ratio (x) | Dividend (p) | Yield (%) |
2009A | 58 | (717) | (0.27) | NA | 0 | 0.0 |
2010A | 42 | 515 | 0.13 | 13.8 | 0 | 0.0 |
2011A | 167 | 2,143 | 0.40 | 4.5 | 0 | 0.0 |
2012E | 300 | 3,000 | 0.47 | 3.8 | 0 | 0.0 |
Source: Growth Equities & Company Research
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