Shares in AIM-listed metals exploration company Alien Metals (LON:UFO) zig-zagged this week after the company updated on the drilling results from its Elizabeth Hill silver project in Western Australia.
Alien Metals was very positive about the findings from 15 drill holes which included 4,233 grammes of silver per tonne of ore extracted from a depth of 66 metres and 1,550 g/t silver from a depth of 108m. Alien Metals believes the second drill hole represents a potential new mineralised zone 400m south of the historic Elizabeth Hill mine which is located in Australia’s Pilbara region.
Who is Alien Metals?
Alien Metals is an exploration and mining project developer focused on projects containing base and precious metals and iron ore. The company’s strategy is to buy typically brownfield projects, preferably at a low-cost options basis, advance the exploration of those sites and, if the mineralisation is favourable, find a partner to typically finance further exploration up a prefeasibility study.
While drill results from its various projects are showing some promising initial results the projects are unconnected and geographically spread out. Alien Metals has been operating in Mexico for over ten years and has built up long-term relationships with the government and the local communities. The company is involved in mining concessions covering an area of over 1,500 hectares with metal deposits including copper and silver.
In the Pilbara region of Western Australia, Alien Metals has been exploring the high-grade Elizabeth Hill silver project; since the start of this year it has fully acquired the adjacent Munni Munni platinum group metals and gold project from Artemis Resources (ASX: ARV) and has continued to explore the Hancock Ranges iron ore project. The company was also awarded an Exploration Licence in Greenland in late 2020, which surrounds the high grade Citronen zinc-lead deposit.
In 2020, which admittedly was one of the most difficult years in recent history, Alien Metals made an operating loss of $1.2 million, up from $1 million the year before, and a loss per share of 0.052 cents, down from 0.1 cents in 2019.
Platinum projects look most interesting
Prices of all the base and precious metals have been rising this year as the global economy starts to recover from the ravages of Covid. Among the metals being explored by Alien Metals the platinum group projects may be of most interest, particularly if the conflict in Ukraine continues in the long term and sanctions on Russia persist.
Russia is a major supplier of palladium, and a large producer of platinum and current sanctions are likely to continue disrupting the flow of these metals in the medium term. Both are used not only for jewelery but also in catalytic car converters to reduce emissions.
The market that is probably the most at risk in the short term is iron ore. Prices remain very volatile and highly dependent on China, where Covid related lockdowns are threatening to throw the economy off kilter. During 2021 prices rose to the highest level ever not only because of China, which accounts for 70% of the global demand, but also because the US and European Union commissioned relatively near-term infrastructure projects in an attempt to pull their economies out of the Covid-induced slump.
The global supply constraint saw 62% Fe fines imported into Northern China rally to a record high of $230 a tonne. Since then, prices retreated as the Chinese government instructed major steel producers to cap their output at 2020 levels. The rollercoaster ride continued after the Evergrande scandal which triggered the Chinese property companies’ debt crisis. And now, just as the property market has started to recover the resurgence of Covid and the lockdown of Shanghai, a major industrial hub and port city is affecting production across the country.
In terms of Alien Metals, while the long-term profitability of a mining project in Pilbara may not be affected by short term fluctuations in the iron price it may nevertheless make it harder to find investors or potential future buyers at the time when prices are as unpredictable as they are now.
