Rio Tinto might finally have taken the plunge into lithium with its $10 billion Arcadium takeover, but two ASX-listed lithium juniors which don’t have the luxury of waiting for the market to turn have decided over-looked North American copper and gold/silver assets are a better bet.
The two lithium juniors – Cygnus (CY5) and James Bay (JBY) – have had a quick payback on their North American plunge too, with their share prices taking off in response to their respective deals.
James Bay got the ball rolling on Monday with its announcement that it had acquired the high-grade Independence gold project near legendary Battle Mountain in Nevada.
It is a low-cost acquisition that comes with an inferred “foreign” resource of 796,200oz grading 6.53g/t which is not compliant with JORC 2012 for ASX reporting requirements.
While James Bay sets about bringing the resource up to code, the global resource looks set to grow given the mineralisation is said to be open in all directions. That came through in a recent high grade hit (including 24.4m at 9.11g/t gold and 24.2g/t silver) outside of the non-JORC resource estimate.
The long and the short of it is that James Bay was a 20c stock based on its lithium interests in Quebec, which still have lots of merit in the long run. The Independence pick-up meanwhile has propelled its share price to 41.5c.
In striking the Independence deal, James Bay travelled what is becoming a well-worn path by Aussie juniors in the North American market where their junior peers either don’t have the people to advance projects, or the money, or both.
Cygnus is another James Bay (region) lithium player that has fired up its market cap by securing an advanced copper/gold project in Quebec by being the lead partner in a merger with the TSX-listed Dore Copper Mining.
Dore delivers the historic (1900s-2008) Chibougamau project which might well still be in production today if it had not been for an inability to get going again after the intervention of the global financial crisis.
Cygnus was an 8c stock ahead of the deal being announced. But by the close of trade on Thursday it had become a 14c stock, a 75% increase. It was swamped in a $11m placement at 7.2c in support of the merger.
Chibougamau comes with a foreign resource estimate of 10.8Mt at 3.5% equivalent. It is high-grade in ASX terms and there is a 900,000tpa processing plant close by which is in good nick. Exploration upside is good as it gets with previous fragmented ownership getting in the way of modern-day exploration techniques in the mining area and regionally.
A cashed-up Cygnus will set out to rectify that with the intention being to add scale and value to the project before eventually bringing it back into production in bigger and better shape.
If it sounds like a familiar playbook, it is. Cygnus is a member company of West Perth’s so-called Richardson Street group, a loose affiliation of like-minded types with Steve Parsons of former Bellevue (ASX:BGL) fame leading the way.
The broad strategy is to find an unloved asset with exploration upside, give the geologists their head by financing their best exploration ideas and then move into scoping studies and eventual development.
Parsons and mates within the Richardson Street group worked the playbook to set up Bellevue on its pathway to the $1.7 billion gold producer it is today, and they have since moved on for repeat performances at FireFly Metals (ASX:FFM) and Andean Silver (ASX:ASL).
FireFly’s “Bellevue” is the Green Bay copper-gold project in Newfoundland, acquired at the end of last year for the bargain price of $65 million.
It came with a 39.2Mt resource grading 2.07% copper equivalent for 811,000t of contained copper, as well as $250m worth of infrastructure left behind by the previous owner when it ran out of working capital.
A resource update is pending, with FireFly’s market cap growth to $576m making it one of the best performing mining stocks this year. A similar story is panning out at Andean and its Cerro Bayo silver-gold project in Chile. It is another winning stock in 2024 with is market cap now sitting at $180m.
There are other companies in the orbit of the Richardson group that have recently flagged that they too are looking to acquire new projects – WA frontier explorer Bellavista (ASX:BVR) and the Sweden-focussed Alicanto (ASX:AQI).
Their current projects are both are okay, it’s just they too could do with their own version of a Bellevue-Firefly-Andean-Cygnus type of playbook.
Bellavista last traded at 28.5c for a market cap of $25m. Alicanto last traded at 2.4c (up 20% on the day) for a market cap of $18 million.
Silver:
Given Andean’s earlier mention, it is worth noting that delegates at the London Bullion Market Association’s annual knees up reckon silver is headed for a breakout year, tipping it was heading to $US45/oz.
That compares with the current $US31.40/oz and would have silver knocking on the door of record pricing, in nominal terms anyway.
Needless to say, a record price of $US2,917/oz for gold was tipped by October next year at the Miami event.
But having said that, the delegates are like the rest of us. Their guess is as good as ours given last October they tipped $US1900 gold by now, and here we are at $US2,684/oz.
Back to silver.
Reporting by Kitco said a panel discussion at the Miami gig noted that industrial demand continues to drive market deficits, with mine supply struggling to keep pace.
“I have never seen a better outlook for silver,” said Mitchell Krebs, CEO of Coeur Mining, during the discussion.
Matt Watson, Founder and President of Precious Metals Commodity Management, shared his bullish stance on silver.
“I don’t see a fundamental downside to silver,” he said. “It’s the do-all metal on the Periodic Table,” Kitco reported.
Like the rest of the silver stocks, such commentary and price tipping is no doubt welcome stuff for Andean.
But it really is a story about major resource growth ahead and the ability to return the project to production from the existing infrastructure base which includes a treatment plant.
Research from the Sprott-spawned SCP says the regional exploration potential at Cerro Bayo provides a potential runway towards 200-300Moz in the long-term.
“Andean (currently) trades at just $US1.11/oz silver equivalent in-situ or less than 5c/net of infrastructure value versus peers at $US3-$US10/oz. Fill your boots,” the SCP note read.
