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Beaufort Securities – Re-assessing the Tertiary Minerals (TYM) opportunity – Speculative Buy
Strategic fluorspar assets
Tertiary is a fluorspar mine development company with large scale projects in Europe and the U.S. Its two main assets, the MB Project in Nevada and Storuman in Sweden, both have potential to be average to low cost operations with targeted production costs of between $150 and $200/t of acid grade fluorspar. Tertiary’s strategy is to advance both projects during this current down-cycle,so they are construction ready when mine finance conditions improve. Management expects this to also coincide with a shortage of new fluorspar mines and potentially higher fluorspar prices. We have updated our valuation to reflect the current depressed fluorspar price, offset by progress made at MB and Storuman. We calculate a 9.0p target price, 4.5x the current share price.
Critical mineral in Europe, Strategic in the U.S.
Fluorspar is probably the most essential raw material that no one’s heard of. It’s one of 20 raw materials on the European Commission’s critical list, while in the U.S. fluorspar is classified as a Strategic Material. Both regions are in need of a long term, local and reliable source of supply and Tertiary’s two main projects suit this requirement.
MB Project – Nevada
Despite lagging Tertiary’s Storuman project in the mine development process, in our opinion MB is of similar importance and potentially higher value. It is very large scale and located in a stable and mining friendly jurisdiction. Also very important is the U.S’s reliance on imported fluorspar, mainly from Mexico, which makes MB a strategic asset.
Storuman – Exploitation Concession granted
On February 18 2016 Tertiary Minerals was granted a 25 year Mining Concession for Storuman. Although the permitting process is not finished (the next stage is the Environmental Permit) this is a major step forward which adds value to the project and reflects strong support from the Swedish Mining Inspectorate.
Fluorspar prices – positive outlook
Both acid and metallurgical fluorspar prices are at 5 year lows. Although downside risks remain (perhaps from weaker China macro), over the medium to long term the outlook is positive, driven by global demand growth of fluorine containing products. Valuation and recommendation Our Tertiary valuation is based on a sum-of-the-parts approach with values for MB and Storuman, based on conceptual mine models and discounted to reflect funding dilution and other execution risks. We calculate a $26.5m valuation which equates to £19.6m or 9.0p per share, and a BUY recommendation.
Target price – 9p
Full Beaufort Securities research note here Tertiary-Minerals–9-_S
Richard Clemmey, MD at Tertiary Minerals interviewed by Alan Green on TipTV
Richard Clemmey, Managing Director at Tertiary Minerals (TYM) is interviewed by Brand Comms CEO Alan Green on TipTV. The interview covers:
- Fluorspar and its uses.
- Tertiary Minerals (TYM) and the Critical Raw Minerals Alliance.
- Recent developments at Tertiary’s MB Project in Nevada and the Storuman Project in Sweden.
- The current market for fluorspar and cost per tonne.
- The future for Tertiary Minerals.
Critical Raw Material Alliance welcomes call to create an expert network – Tertiary Minerals
The CRM Alliance welcomes the European Commission’s call to create an expert network on critical raw materials. Given the supply risk and economic importance of critical raw materials for the European Union, it is vital that policy-makers from the EU and the member states make better informed decisions regarding the supply of CRMs, as well as work towards developing European standards to optimise the recovery of these materials. An expert network on CRMs will significantly help reduce the current knowledge gaps to foster the supply of EU sources, raise awareness of the importance of CRMs for society, and develop solutions to the various challenges relating to their supply. According to the Commission, this proposed action should develop an expert network or structure of networks covering all CRMs and where possible, include stakeholders to cover as much of the value chains as possible.
The CRM Alliance has been created by industry to advocate the importance of those critical raw materials (CRMs) in Europe and to promote our common interests. The Alliance represents the interests of primary producers, traders and associations. The CRM Alliance supports the creation of a strong critical raw materials policy which will benefit the economic and national security interests of the EU and its leadership in innovation, manufacturing and technology-dependent services which is inextricably linked to reliable access to, and the use of, critical raw materials. Given the high socio-economic importance of those critical materials and using alternative substances while maintaining the same level of performance is often not a viable option. CRM and other policies should thus not be directed in any way towards substitution of those CRMs. Instead, CRM policies should rather look for enhanced raw material supply, allocate more funds to R&D since critical materials are highly important for resource efficiency, strive to have other EU policies such as REACH give special consideration for critical materials; andfinally, trade policies that reflect both free and fair trade.
The CRM Alliance is currently an observer in important European Commission – DG GROW stakeholder groups such as the Raw Materials Supply Group which is comprised of industry representatives, environmental NGOs, trade unions, Member States and the Commission. The CRM Alliance also holds the observer status in the Ad-Hoc Working Group on Defining CRMs which is an expert group tasked to identify the list of critical raw materials. This means that when a particular substance is being discussed by this Working Group, our members representing that substance are allowed to take part in the meeting and provide its members with the most up-to-date information on their substance. The CRM Alliance is supported by a Secretariat located at the core of European decision-making in Brussels. It is operated by Ridens Public Affairs, a business consultancy practice that assists organizations in dealing with regulatory and advocacy issues related to the raw materials sector, provides membership services, raises visibility of the associations and brings additional value to its members.
In 2010, the European Commission identified 14 raw materials critical because they are “economically and strategically important and are subject to a higher risk of supply interruption in the next 10 years”. This list should help incentivize EU production of CRMs, facilitate the launching of new mining and recycling opportunities and support negotiating trade agreements. In 2014, the European Commission analysed 54 substances – including non-energy, non-agricultural materials – and identified 6 more materials as critical, seperated heavy from light rare earth metals and decided to remove tantalum from the list. These 20 materials are antimony, beryllium, chromium, coking coal, fluorspar, gallium, germanium, magnesium, niobium, platinum group metals, heavy rare earth metals, light rare earth metals, silicon metal and tungsten. Since the list is being reviewed every three years, the European Commission is currently refining the methodology used to identify these materials. By early next year – 2016 – the current list of 20 materials will be reviewed and updated which is expected to be finished by late spring 2017. Given the current global state of play in the metals field, the CRM Alliance is expecting the CRM list to also grow with the next review.
The CRM Alliance currently consists of 19 members representing 15 Critical Raw Materials and more than 350 companies globally: Beryllium Science & Technology Association; Etimine (borates); The Cobalt Development Institute; World Coal Association (coking coal); Eurofluor (fluorspar); Tertiary Minerals (Fluorspar); German Engineering Federation (gallium arsenide); EcoPhos (graphite rock); Indium Corporation; International Magnesium Association; Minor Metals Trade Association; Imerys Graphite and Carbon (natural graphite); Beta Technology (niobium); International Precious Metals Institute (PGMs); Great Western Minerals Group (REEs); Tasman Metals (REEs); EuroAlliages (silicon metal); and Commerce Resources Corporation (REEs and former CRM tantalum).
Link here to view the full CRM Alliance paper Fact-Sheets-CRM-Alliance-September-2015